00:01Global airlines are fighting to cope with a sudden surge in oil prices.
00:07Carriers like United Airlines and Air New Zealand have announced higher fares and lower capacity.
00:13But the industry's ability to stay profitable may depend on whether consumers pull back on flying to save money.
00:20The airline industry had forecast record profits of $41 billion this year.
00:25But then came the US-Israeli conflict with Iran, which began last month.
00:30Jet fuel prices have since doubled and forced carriers to rethink their strategies.
00:36It's a blow to the industry after last year's record global passenger numbers.
00:41They'd reached about 9% above pre-pandemic levels despite supply chain challenges.
00:47Those factors had held back capacity growth and given airlines strong pricing power as they filled more seats on each
00:54plane.
00:55But the scale of the rises needed to make up for the jet fuel price surge is huge.
01:01Particularly at a time when consumers face pressure from higher gasoline prices which could hit their spending.
01:07One analyst argued the only way to get prices up is to lower capacity.
01:11United Airlines CEO Scott Kirby told ABC News last week fares would need to rise 20% for the airline
01:19to cover the higher fuel costs.
01:21Hong Kong's Cathay Pacific has lifted fuel surcharges twice in the last month.
01:27From Wednesday, a return trip from Sydney to London will have an $800 fuel surcharge.
01:33Analysts believe low-cost carriers could struggle the most.
01:36Their passengers are more price sensitive than the corporate and wealthy consumers who have been targeted by premium rivals like
01:43Delta and United Airlines.
01:45The Middle East conflict is the fourth oil shock for the airline industry since the turn of the century.
01:51Though it's the first where some carriers have spoken of concern about securing physical supplies of fuel due to the
01:58effective Strait of Hormuz closure.
02:00One leading analyst has argued the current oil shock is expected to widen the gap between financially strong and weaker
02:07airlines.
02:08They believe carriers with strong balance sheets, pricing power and reliable access to capital are better positioned to deal with
02:15ongoing pressures.
02:16And they argue airlines with low profitability and limited funding options may face more financial stress.
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