British Airways passengers face the prospect of further fare increases this new year, after United Airlines set the lead for the industry by raising its prices to cover the soaring cost of fuel.

With oil prices topping $100 a barrel this week, the British airline would say yesterday only that it was keeping the situation under constant review. However, analysts believe that the airline, like others, will need to pass spiralling energy costs on to its customers.

United Airlines, the second-biggest airline in the United States and a big competitor to British Airways on transatlantic routes, said yesterday that it was raising fares to offset “unprecedented fuel costs”.

British Airways, which forecast an annual fuel bill of £2 billion yesterday, last raised its fuel surcharge in November. The surcharge for long-haul flights that are less than nine hours now stands at £96 per return flight. Return flights that are longer than nine hours have a £116 surcharge.

Virgin Atlantic, which raised its surcharge to the same level as BA’s in December, said that it had no plans to raise its surcharge,and would do so only if oil remained at the present level for a sustained period.

Airlines are becoming more exposed to the soaring price of oil because, as the price of aviation fuel has climbed, they have hedged less and less.

BA confirmed yesterday that it had bought only 50 per cent of its fuel for the first quarter, at an average price of $76 per barrel, and 40 per cent of its fuel for the second quarter.

The remaining 60 per cent of its fuel will have to be bought in the open market, where prices are hover around the $99-per-barrel level.

Emirates, the Dubai-based carrier, is 40 per cent hedged for 2008 and Ryanair, Europe’s largest airline, has only 10 per cent of its fuel hedged next year.

Analysts have suggested that some airlines will have difficulty passing on rising costs in the face of a deterioriating economic climate, which could lead to weakening demand for travel.

Traffic figures released by BA yesterday, however, show that traffic in the long-haul premium market, its most profitable business, remains strong, although short-haul premium traffic continued to be weak. Passenger numbers for BA in December were slightly better, up 1.1 per cent to 2.52 million people, than they were in the previous December.

However, the load factor - a measure of how full the aircraft is – declined by 0.7 per cent.

The flag carrier said that it was sticking to its guidance of a 3 to 3.5 per cent increase in revenue for the year.

Restrictions on passenger baggage, which were brought in by the British Government in summer 2006, will be eased from Monday.

BA passengers travelling through Heathrow will be able to take two pieces of baggage into the cabin.

However, BAA, Britain’s largest airport operator, has not lifted the one-bag limit at Gatwick, because of engineering problems.

Borne to the USA

Virgin Atlantic
London to East Coast USA £48
London to West Coast USA £58

British Airways
London to East Coast USA £48
London to West Coast USA £58

United Airlines
London to Washington £50.50

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