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.
Calls to drop all COVID-19 testing requirements for travel
To enter the country, Canada now requires travellers to provide a rapid antigen COVID-19 test instead of a PCR test, but many travellers and experts say it might be time to drop testing requirements entirely. 1:49
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.”
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
