Jet Fuel Spike Puts Pressure on Air Chathams Ahead of Interline Launch

A sudden spike in fuel prices, caused by the United States-Israel conflict with Iran, could have a crippling effect on smaller regional airlines.

Chief Executive of Air Chathams, Duane Emeny, said the airline has been warned by fuel supplier Air BP of a sharp increase in the cost of jet fuel, with the price of Jet A-1 set to rise by 96 cents per litre.

He said the increase was “incredible,” estimating it could add millions to the airline’s annual operating costs.

“Every 10 cent increase in price is about $300,000 per year in extra fuel costs,” he said. “So if it stayed at this level, that’s roughly $3,000,000 a year in additional cost for us.”

Emeny said while the increase was expected to be temporary, it could still mean an extra $200,000 to $300,000 per month in expenses for the regional airline.

“We didn’t have that cost last month, so we’ve got to find a way to cover it.”

According to the International Air Transport Association, fuel can account for around 25-30% of an airline's total expenses.

Airlines have limited options to respond to rising fuel prices.

One option is the introduction of a fuel surcharge on tickets, but Emeny warned that higher fares could affect passenger demand.

“If prices get too high, people simply won’t travel,” he said.

The impact will likely be felt locally, with Air Chathams operating regular services between Auckland and Whakatāne via Whakatāne Airport, the main airport serving the Eastern Bay of Plenty.

The timing is particularly difficult for the airline as it prepares to launch a new interline trial on the Auckland-Whakatāne route on March 24.

The arrangement will allow passengers to book connecting tickets for journeys that include both Air Chathams and Air New Zealand flights.

“We should be encouraged and celebrating that, but instead we’re looking at these incredible cost escalations and the impact they could have on our ability to operate essential services,” explained Emeny.

He added that the impact on the smaller airline is huge, but “multiply that by 100 when you're dealing with the national carrier and the costs that are going to incur, it's seriously crippling.”

“Anything that impacts them ultimately impacts us.”

For now, Air Chathams says it will do everything it can to keep services running as they are, although a short-term solution might be necessary.

“We’re going to do our best to make sure everything stays the same,” Emeny said. “But if costs continue to escalate, we may have to make changes.”

He highlighted that the situation ultimately affects consumers beyond air travel.

“It’s going to impact not just flights, but what people pay at the pump, road transport, freight costs, everything. It’s going to be pretty tough.”

Emeny said it was too early to say whether the price spike would significantly affect flights, but the airline would be monitoring passenger bookings and operating costs closely.

“We’ll keep monitoring the loads on those flights and whether the airline can justify operating some of those services,” he said.