US carriers may have best deals as oil prices push up fares

Rising fuel prices have begun to bump up air fares - but the worst is yet to come, according to American Express.

Rising fuel prices have begun to bump up air fares - but the worst is yet to come, according to American Express.

The company's European Corporate Travel Index shows a much higher than usual increase from the first to the second quarter this year. Transatlantic air fares from Britain increased by 3.6 per cent in first class and 35.5 per cent on discounted economy tickets. Fares within Britain rose by 3.3 per cent in first class and 6.4 per cent in discounted economy.

In the past two weeks, most of the major European carriers have raised prices by 2 to 3 per cent. But that may not be the end of it, according to Matthew Davis, director of consulting services at American Express, who predicted that fares would continue to increase through the first half of 2001, resulting in a 10 per cent overall rise on most routes.

Most airlines hedge against rising fuel costs by buying forward, usually by three to six months, but they would have to pay much more for fuel once those contracts expire, said Mr Davis. Those costs would be passed on to the traveller.

Higher prices were probably here to stay, even if the price of fuel dropped, he added. "Historically, we've found that when fuel prices rise, air fares rise, but when fuel prices fall, fares don't."

Mr Davis believes budget travel may be hit the hardest. Since fuel represents a higher proportion of the costs of a no-frills airline - 14-16 per cent, compared with 7-8 per cent for most major carriers - he said that any change in fuel prices "will impact on their margins much more".

Britain's low-cost carriers said they had not been affected by the rise in fuel prices so far. A spokeswoman for Go said that economising in other areas - such as running its planes more frequently than major carriers - has allowed it to sustain fuel price increases without passing the cost on to its customers. EasyJet said that any increase would probably add no more than 50p to the cost of its fares. And Ryanair said that it was "fully hedged until June 2001".

For now, some of the best transatlantic deals may be on US-based carriers. Most of the major American airlines tried to impose a $20 (£14) fuel surcharge on each ticket last month, but competition is so fierce that the increases were quickly dropped.