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BA and Iberia ponder fuel surcharge hikes

By This Is Money
Updated: 09:47 EDT, 25 February 2011

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Rising oil prices could mean higher fuel surcharges for British Airways and Iberia passengers.

British Airways aircraft parked at Heathrow

Fuel costs: IAG is closely monitoring the upheaval in the Middle East

The impact of the current upheaval in the Middle East is being monitored closely, according to Willie Walsh, boss of the newly-merged International Consolidated Airlines Group.

'We are keeping the situation under review and we will adjust the fuel surcharge if we think it's necessary,' he said.

'There has been an increase in the volatility of the fuel prices over the last few weeks. It is likely that increases will be seen in the market and this will affect all airlines and will be a challenge to the industry.'

Mr Walsh, the former boss of BA but now chief executive of IAG, unveiled the merged group's first financial results today.

Despite contending with snowfall and strikes, the combined group generated pre-tax profits of £18m for the final quarter of 2010, compared with a £177m loss the year before.

But the severe weather in the UK and the Spanish air traffic controllers' strike reduced revenues by £60.4m.

Fuel costs were up 5.2% to £841.4m and other operating costs lifted 11.1% to £2.4bn. However, IAG said revenues for the three months rose by 13.4% after capacity growth of 2.7% and improved yields.

Mr Walsh said the IAG annual fuel bill for 2010 was about £3.3bn and this could rise in 2011 to about £4.3bn.

In early February, BA slapped its second fuel surcharge rise on long-haul passengers in less than two months.

It announced a £12 a flight hike for World Traveller passengers and a £17 a flight rise for First and Club passengers.

Meanwhile, BA faces another possible strike in the long-running cabin crew dispute. The Unite union has said voting in a fresh ballot for industrial action will start on March 1, with the result due on March 28.

Depending on the result, BA could face disruption to flights over Easter.

Commenting on the future outlook, IAG said: 'Our long-haul business remains strong, particularly in the premium sector, but the short-haul European market continues to be highly competitive.

'We are monitoring the impact of the current Middle East instability on fuel prices and have the flexibility to change our capacity plans if necessary.'

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