UK airlines are facing mounting cost pressures as jet fuel prices surge, with the sector bracing for potential fare rises to protect profit margins. International Airlines Group (IAG), which owns British Airways, said its fuel costs jumped by nearly a third, or 30.4%, costing an extra 570 million euros (£471.9 million) in the third quarter. IAG indicated it was aiming to pass on close to 100% of British Airways' higher fuel costs to customers over the full year, though it did not specify how much fares would increase.
Package holiday firm and airline operator Jet2 will come under close scrutiny when it reports half-year results on Wednesday for signs that it will raise ticket prices to offset rising fuel costs. The company had previously reported that summer passenger numbers jumped 8.8% in September despite disruption from the Iran war, suggesting bookings remained resilient. However, Jet2 has hedged against higher jet fuel costs for the current financial year, which provides what the company called 'cost certainty', meaning the real test will come with its outlook for prices beyond the current year.
Ryanair has already warned of a double-digit rise in fares next year across Europe as it grapples with a surge in fuel costs. The airline said it was considering pay freezes and increased use of technology to help offset the pressure. These moves underscore how widespread the challenge has become across the sector, as oil prices remain elevated.
Jet2's results are arriving at a pivotal moment for the airline. The company is preparing to move its listing to the main market of the London Stock Exchange from the Alternative Investment Market in December, with expectations it will be added to the FTSE 250 in the next quarterly review. Chief executive Steve Heapy said in September that the upgrade reflected 'the scale of the business we have built, our proven track record of delivery and the opportunities that lie ahead'. Richard Hunter, head of markets at Interactive Investor, noted that Jet2 is the UK's third largest airline behind British Airways and easyJet.
Hunter warned that while September's update was robust and expectations for the interim results are high, 'the macro environment remains cloudy'. He added that the group faced challenges from customers booking late and from broader macroeconomic and geopolitical concerns. These factors, he suggested, underscore 'some of the potential hazards of investing in the airline sector'.