Analysts announce recent fears that airlines will loose customer demand as oil prices and therefore fare prices steadily rise. Qantas and Virgin Blue have both increased their ticket prices in the last month in response to oil costs being at an all time high. Virgin Blue has raised fares once and Qantas twice, the second took place this week.

According to chief operating officer of the Centre for Asia-Pacific aviation, Derek Sadubin, crude oil at $US134 a barrel and fuel at $US166 a barrel is the most expensive the airlines have seen it and fuel costs within the aviation industry is severe.

Mr Sadubin has said “If fuel prices stay high, we will see carriers take a close look at networks,” he said. “Logic would suggest that the worst-performing routes, the ones with lowest margins, will be cut first.” He also expects that older aircrafts that consume greater volumes of fuel will be grounded. Mr Sabudin reported that both airlines are being cautious with their fare increases, understanding that prices going too high may jeopardize demand.

Qantas quoted this week that the extortionate fuel prices will add $2billion to its fuel bill next year. Virgin has also predicted a huge increase on their fuel budget; they’ve predicted their bill will increase by $300 million in 2009.

Qantas is in a better position than Virgin Blue in the ticket price battle, thanks to Jetstar they are still able provide cheap fares, and as the leading airline in Australia, have an advantage in demand.

www.qantas.com.au