Jet Fuel Takes Off Again... September Fuel Surcharges Set to Rebound, Raising Alarm

[Financial News] International fuel surcharges, which had been on a downward and stable trend after peaking in May, are showing signs of turning upward again after three months. As jet fuel prices have jumped in the short term amid renewed geopolitical risks in the Middle East, pressure is expected to mount on autumn travel demand and airline profitability.
According to industry sources on the 22nd, Singapore jet fuel prices, the benchmark for calculating September international fuel surcharges, recently surged to around $140 to $150 per barrel. That level corresponds to roughly the 20th tier for surcharge assessment.
International fuel surcharges had fallen for three straight months from June through August after reaching an all-time high of 33 tiers in May. In particular, the August international surcharge was set at 14 tiers, down five tiers from July. That was even lower than April's 18 tiers, when the war had just begun, reflecting the fact that average Singapore jet fuel prices during the August calculation period, from June 16 to July 15, came to $119.06 per barrel.
However, renewed tensions between the United States and Iran have pushed global oil prices higher again. As of the 20th, Brent crude for September delivery closed at $89.22 per barrel, up 1.27% from the previous session, while West Texas Intermediate crude oil (WTI) for August delivery rose 0.9% to $83.23 per barrel.
As a result, airlines are closely watching the possibility that September fuel surcharges could rise by several tiers from August.
Choi Go-woon, an analyst at Korea Investment & Securities, said, "Since the resumption of the Middle East war, jet fuel prices have risen to around $140 to $150 per barrel, which corresponds to more than the 20th tier for fuel surcharges," and forecast a rebound in September surcharges. Some in the industry are also raising concerns that global oil prices could climb as high as $110 to $120 per barrel.
For airlines, there is concern that higher ticket prices caused by fuel surcharge increases in September, a typically slower season after the summer peak, could lead to lower booking rates.
An industry source said, "It is still too early to determine the exact increase level, as the September calculation period has not ended yet, but the likelihood of a higher fuel surcharge than in August is strong." The source added, "Emergency management measures at Korean airlines are also likely to continue for the time being."
[email protected] Kim Dong-ho Reporter