Airlines to enjoy low fuel in 2016, costs under spotlight

Airlines can look forward to continuing low oil prices for at least this year, helping to boost profits and drive demand for travel, but need to be wary of a swift rebound and focus on staff costs, experts said Monday. Low oil brings non-fuel costs at airlines into the spotlight, and highlights the difference between legacy carriers such as Lufthansa and Air France-KLM and low-cost airlines like Ryanair, analysts said. Oil prices hit their lowest since 2003 on Monday, as the market braced for additional Iranian exports after sanctions against the country were lifted over the weekend. Mike Corley, head of Mercatus Energy Advisors, said at the Airline Economics conference in Dublin he would not be surprised to see oil prices drop by another US$5-US$10 a barrel, but cautioned that prices could bounce back quicker than people expect. IAG CEO Willie Walsh said the group would continue to focus on costs in 2016 and labor would probably be the biggest part of its cost base this year as fuel comes down. "We compete with the likes of Ryanair, the most aggressive low-cost airline in Europe. We've got to have a cost base that enables us to compete in an effective manner," he said. Low prices are also prompting more airlines to look into their fuel hedging strategies, with some wanting to hedge and others scaling back existing programs, Mercatus' Corley said.<br/>