Fuel prices vs air fares

With the recent drop in oil prices, travellers across the country are asking valid questions around our plans to decrease flight fares and more specifically, lower surcharges. While this may certainly be ideal, especially for our fans, we’ve had to take another approach. This is all to ensure our flyers get the best out of the current fuel price for the long-term, and not just while the going is good and the fuel price rises again.

The reality is that the rand price of jet fuel at R7.50 remains volatile and has not seen as significant an improvement as the oil price alone would suggest, leaving little room for any scope for a real reduction in fares at this stage. We also need to consider the volatility of the dollar oil price, the exchange rate (48% of our costs are dollar based), as well as the time period over which we sell our air tickets – which stretch out over 12 months – in determining our fares. Added to that, around 30% of our fuel is hedged at above the current fuel price.

We at kulula are however continuously monitoring the impact of the oil price and are passing on the benefits of the reduced fuel prices to our valued customers through increased inventory availability in the lower priced classes as much as possible. In addition to this, we have also passed on extra savings through our various promotional activities. A recent example of this has been our two day January sale, in which we made 1,6 million seats available at a 20% discount through our website as well as our distribution partners and Travel Agents. Our inventory was unrestricted and included all peak periods.

As a sustainably responsible business, we have implemented a comprehensive fuel savings programme according to world best practices while also taking local operating conditions into account. This has resulted in a 32% reduction in our fuel burn per passenger over the past seven years; minimizing the impact on our customers. We will continue to adopt this approach in managing our way through the roller coaster that is a combination of a dollar based oil price and the further impact of the rand dollar exchange.