Monday, April 26, 2010

Volcano ash: airfares to rise.

The crisis caused by the volcanic ash cloud and soaring oil prices are likely to add more than £30 to transatlantic air tickets this year, according to a think tank.

By Harry Wallop, Consumer Affairs Editor | TELEGRAPH.CO.UK - 26 Apr 2010

Fares could go up by 5.2 per cent as airlines, already hit hard by the recession, attempt to recoup the multi-million pound losses incurred during this month's crisis, which saw the biggest grounding of aircraft since the Second World War.

This would add £31 to an economy flight to New York on British Airways, taking it to £545, and £12 to the cost of a flight to Italy, taking it up to £239.

And fares could go up by a further 2.9 per cent in 2011, and another 3.4 per cent the following year, sending the average cost of a London to New York economy class ticket up by £62 over the next three years.

The figures came from a report by the Centre for Economics and Business Research, an economic forecasting house, produced for shopping website Kelkoo.

It put the cost to airlines of the ash-induced northern European airports' shutdown at around £1.3 billion by the end of last week, and factored in rocketing air fuel prices. Oil prices – the main cost factor for carriers, and representing a third of total operating costs – are up by more than 74 per cent in the first three months of the year compared with the same period in 2009.

Though it is expected that the airlines will ask for some European aid as a result of the volcano ash crisis, any money is likely to cover just a fraction of the cost.

Bruce Fair, the managing director of Kelkoo in Britain, said: "Most airlines were already struggling prior to the crisis, but this, combined with soaring oil prices, will have a knock-on effect on consumers as carriers are forced to pass on rising operational costs to passengers."

The forecast rise in fares of 3.83 per cent over the next three years is substantially higher than the 2.83 per cent average annual rise in fares over the last six years.

Meanwhile, a survey by hotel price comparison site trivago.co.uk showed that overnight accommodation prices rose sharply during the ash cloud crisis, as hoteliers profited from stranded travellers forced to stay longer than expected.

The average price of a hotel night stay in London during the week starting on April 15 was £205 a night compared with an expected average of £138. This equated to a 49 per cent rise on the expected price. Rooms in Madrid were up up 46 per cent, Paris rose 27 per cent and Amsterdam increased 26 per cent.