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Domestic air carrier planes in Incheon Airport (Yonhap) |
South Korea’s aviation industry is set to take another hit after years of pandemic losses, as oil prices are soaring amid the escalating Ukraine conflict, driving up their fuel prices and operating costs overall.
According to the air industry on Thursday, Brent crude oil jumped $5.93 to $111.19 per barrel on Wednesday night, its highest level since July 2014.
The reason behind the price increase is due to a high possibility that western countries including the US might impose sanctions on oil produced in Russia.
Canada, for instance, was the first in the world to announce that it will ban imports of Russian oil on Monday.
Sanctions on Russia could cause a permanent shortage of crude oil supply as Russia is the third biggest crude oil producer and the second biggest exporter that supplies around 5 million barrels a day around the world.
Thus, air carriers that use around 30 percent of their operating expenses on oil have a new imminent concern on hand.
In the case of Korean Air, they use around 33 million barrels of oil in a year, which means that a dollar increase per barrel would alter around $33 million in profit and loss.
Following the increase of crude oil prices, air carriers decided to increase fuel surcharges on flights.
Starting this month, the surcharge for one-way tickets on international routes ranged from 18,000 won ($14.97) to 138,200 won depending on the routes.
The amount is up four levels from the band of 10,800 won to 80,400 won last month.
The fuel surcharge has also been raised on domestic routes from 5,500 won to 8,800 won.
“International oil prices increasing when we are already not being able to operate flights properly due to the prolonged COVID-19, is bound to hurt our sales,” said an industry official.
By Hong Yoo (
yoohong@heraldcorp.com)
