Drivers are very much aware of the higher price to fill up as of late, and experts say air travellers should expect a similar sticker shock soon.
The cost of jet fuel is subject to the same forces that have caused gasoline prices to rise to their highest price in years.
A Bloomberg index of U.S. jet fuel prices shows the price of jet fuel has risen to top $4 US a gallon ($1.35 Cdn per litre) this week — more than twice what it went for as recently as December, and four times the cost prior to the pandemic.
Jet fuel is one of the biggest costs that airlines bear, so experts say that surge will affect the price that travellers pay to fly, if it hasn’t already.
“In terms of airfares, I can’t say that I’ve seen any impact yet [but] I’m sure it’s coming,” said Christine Latremoille with Uniglobe travel agency in Dorval, Que.
Latremoille said airfares have been ticking higher for a while, as 2022 was setting up to be one of the biggest years for travel on record after two years of delayed vacations during the pandemic.
Anyone who hasn’t booked a flight in a while may be in for a surprise, she said. Canadians are no doubt well aware of high inflation pushing up their cost of living, but record-setting demand for travel has pushed prices up even higher than they might otherwise be.
“The airline industry has suffered such losses over the last year and a half,” she said.
“At some point or another, they were going to recoup their losses.”
And that was before Russia’s invasion of Ukraine caused the price of oil to skyrocket. Because airlines are so vulnerable to the highly volatile oil price, they often try to limit that risk by what’s known as hedging — locking in a dependable supply of jet fuel in advance, for an agreed-upon price.
That strategy cost them in the pandemic, when demand for all the jet fuel they had purchased plummeted. “Coronavirus-driven lockdowns taught airlines why over-hedging can be dangerous,” Bloomberg Intelligence analyst Conroy Gaynor said, so many of them stopped doing it.
A traveller walks past a sign about COVID-19 testing at Pearson airport in Toronto last year. After two years of suppressed demand for travel, vacation plans have come roaring back, say experts. (Carlo Allegri/Reuters)
While it used to do it frequently, Air Canada hasn’t hedged itself on jet fuel for the past two years, company filings show, which makes the airline vulnerable to price spikes such as this one. But a spokesperson for the airline said it has no immediate plans to add new fuel surcharges, or adjust its pricing due to the conflict.
“There are a number of factors that go into airline pricing apart from fuel costs, including … competition, demand, marketing considerations and the type of traffic that a route serves,” Peter Fitzpatrick said.
“We always say ticket pricing is dynamic and that fares can change frequently, both up and down, for these and other reasons [so] one cannot assign any price movements that may occur to any one particular cause.”
A spokesperson for WestJet said it has not “made any deliberate change to our systems in response to the rising cost of fuel,” and added that it currently does not levy any fuel surcharges.
“We are of course monitoring conditions but have made no decisions at this time,” the airline said.
Re-routing around Russia
Latremoille said fuel surcharges are especially problematic in Europe, where they can be double or triple the base price.
“I expect that to go up,” she said, adding that the issue, compounded by airspace restrictions, is likely going to impact summer travel plans.
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Many routes from Europe and North America bound for Asia would typically fly over Russian airspace as the most efficient way around the globe. But after Russia closed its airspace, not being able to do that is adding costs in the form of excess fuel needed for less efficient routes. Finnish carrier Finnair warned of exactly that this week, with CEO Topi Manner saying virtually all of the airline’s flights to Asia are no longer feasible.
“Bypassing the Russian airspace lengthens flight times to Asia considerably and, thus, the operation of most our passenger and cargo flights to Asia is not economically sustainable or competitive,” he said.
Air Canada recently rerouted a flight to Delhi so that it would no longer fly over Russian airspace, a move that added more time in air and fuel use to a flight that was already 14 hours, Latremoille said. “I’m starting to see a lack of interest in planning anything too far ahead,” she said.
Analyst Tim James with TD Bank said in a note to clients he thinks Canadian airlines are in a good position to weather the current uncertainty because “pent-up travel demand from Canadians will allow airlines to pass through most of the higher fuel costs.”
Latremoille said that pent-up demand is unlikely to dissipate, even if travellers have to pay a bit more to scratch that itch.
“I’ve been doing this for 40 years and I’ve never seen anything like this demand,” Latremoille said.
“The constant calls … people need to just literally get away.”
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
