Air Chathams Braces for Fuel Cost Surge as Demand Softens in Some Regions

The airline is preparing for a significant increase in fuel costs, with the financial impact expected to begin hitting from next month.

Air Chathams chief executive Duane Emeny said the company has been alerted to a significant increase in the price of jet fuel, due to the ongoing conflict in the Middle East.

“So far, a lot of the hard cost hasn’t sort of baked in, and by that I mean we haven’t had to pay any of this, but it’s coming,” Emeny said.

“From next month, effectively all of the cost escalations that have been incurred as a result of the conflict and that we’ve been notified from our fuel suppliers this month, that’s when that money’s due.”

To help offset the rising costs, the airline has introduced a fuel surcharge.

“We’ve put a $20 per person per sector fuel surcharge in place. So that went on last week, but that doesn’t cover the full cost of the escalation, but it means that we’re not absorbing 100% of that cost increase,” he said.

Emeny said the airline is also reviewing its flight schedules in response to both higher costs and shifting demand.

“We’re also going to be looking at our flight schedules and just checking to see how demand’s looking and whether there’s an opportunity to potentially reduce some frequency, that way we’re obviously not flying as much, we’re not burning as much fuel, so we can limit some of the damage of that cost escalation,” he explained.

The potential financial impact is substantial, particularly for a smaller regional airline.

“It could be costing us an additional $250,000 in fuel costs every month, which is really significant,” said Emeny.

“And we’re going to have to absorb some of that, quite a lot of that.”

Early indicators suggest demand may already be shifting in response to rising travel costs, though trends vary by region.

“We monitor our weekly sales quite closely. We’ve seen some signs, different markets, different signs,” he said.

Emeny said the Eastern Bay has taken a real hit, and the “demand seems to have dropped more than other places that we operate in.”

Despite this, Emeny said it was too early to draw firm conclusions.

“I’m hopeful that that’s just a short-term flip, but we’ll keep monitoring it and looking at those load factors on the flights that we’ve already got in the system,” he said.

“Ultimately, if we feel that it’s more prudent to consolidate and operate these flights, then that’s what we have to do.”

Amid the cost pressures, the airline is moving ahead with a long-planned interline agreement, which Emeny described as a major milestone.

“It’s been over 10 years in the making, actually,” he said.

“When we took on the Whakatāne air service back in 2015, that was the first time that was really put on the table, so the fact that we’re less than a week away now from it actually starting is quite incredible.”

The agreement will allow passengers travelling from regional centres such as Whakatāne to connect more easily through Auckland to other destinations, including Queenstown.

Emeny said the airline is not letting current financial pressures dampen this special time.

Looking ahead, he said the partnership will improve access to global travel for regional communities.

“That’s what the Eastern Bay needs because when you don’t have those things, you lose that visibility, so it’s a really great way of opening up the Eastern Bay of Plenty to the world again.”