South Korea: High oil prices deepens woes for air carriers

South Korea’s aviation industry is set to take another hit after years of pandemic losses, as oil prices are soaring amid the escalating Ukraine conflict, driving up their fuel prices and operating costs overall. According to the air industry on Thursday, Brent crude oil jumped $5.93 to $111.19 per barrel on Wednesday night, its highest level since July 2014. The reason behind the price increase is due to the high possibility that Western countries including the US could impose sanctions on oil produced in Russia. Canada, for instance, was on Monday the first in the world to announce it will ban imports of Russian oil on Monday. Sanctions on Russia could cause a permanent shortage of crude oil supply, as Russia is the third-biggest crude oil producer and the second-biggest exporter globally, supplying around 5m barrels a day around the world. Thus, air carriers with around 30% of their operating expenses spent on oil have a new imminent concern on hand. In the case of Korean Air, they use around 33m barrels of oil in a year, which means that a dollar increase per barrel would alter around $33m in profit and loss. Following the increase in crude oil prices, air carriers have decided to increase fuel surcharges on flights. Starting this month, the surcharge for one-way tickets on international routes ranges from 18,000 won ($15) to 138,200 won, depending on the route. The amount is up four levels from the band of 10,800 won to 80,400 won last month. Fuel surcharges have also been raised on domestic routes from 5,500 won to 8,800 won. “International oil prices increasing when we are already not able to operate flights properly due to the prolonged COVID-19 situation is bound to hurt our sales,” said an industry official.<br/>