Air France-KLM to raise ticket prices again as fuel costs surge

Air France-KLM is expected to raise ticket prices further as fuel costs surge due to the war involving Iran. At the same time, the airline group cannot fully pass these higher kerosene expenses on to travelers, as doing so would risk driving away too many customers.

Fuel prices have risen sharply amid the war involving Iran and the shutdown of the strategically crucial Strait of Hormuz, a key route for global energy supplies. Disruptions to oil transport through the strait have pushed prices significantly higher, with jet fuel now costing around 190 dollars per barrel, more than twice as much as a year ago.

Air France-KLM has partially shielded itself from rising fuel prices through hedging contracts, but still expects an additional 2.4 billion dollars in costs this year. The airline group says it can pass roughly 60% of that increase on to passengers through higher fares.

According to CFO Steven Zaat, fuel-related costs are pushing ticket prices up by about 50%, as he outlined in the company’s quarterly results.

He stressed that ticket prices are also driven by supply and demand, making it difficult to estimate how much fares will ultimately rise. In March, Air France and KLM saw increased demand for Asia-bound flights after major Gulf airlines cut services due to the conflict in the Middle East, pushing prices higher.

The Franco-Dutch group hopes to absorb the remaining share of the additional fuel costs through cost-cutting measures. For example, KLM and Air France are hiring fewer new support staff, cutting around 500 million euros in non-essential spending, and scrapping unprofitable flights.

“But if the situation remains as it is now, we may have to go even further,” Zaat said. He emphasized that staff involved in operating flights are still very much needed for the time being. “We have a full operation to run in the summer, as that is, of course, a very profitable season.”

The blockade of the Strait of Hormuz has sparked concerns about jet fuel supplies, but Air France-KLM CEO Ben Smith said there are currently no shortages at the group’s main hubs in the Netherlands and France. He added that supply remains stable globally for now.

The only restrictions the airline has encountered are at a few Asian destinations, including Singapore and Tokyo’s Haneda Airport, where authorities have asked airlines not to increase flight frequencies.