Rising international oil prices amid prolonged Middle East tensions are expected to trigger sharp increases in airline fuel surcharges next month. Industry observers warn that ticket prices for the same international routes could rise by more than 100,000 won ($75) compared to this month.
According to aviation industry sources on the 15th, Korean airlines are scheduled to announce April international fuel surcharges on the 16th. Industry experts anticipate significant increases from current levels.
The surge stems from a sharp rise in Singapore jet fuel prices (MOPS), the benchmark for calculating fuel surcharges. The average price from February 16 to March 15 is expected to exceed 300 cents per gallon (3.785 liters). This represents more than 1.5 times the pre-Middle East crisis average of 204.40 cents recorded between January 16 and February 15.
Fuel surcharges are additional fees airlines impose on ticket prices to offset rising fuel costs. Airlines set monthly rates based on the Ministry of Land, Infrastructure and Transport's distance-based standards. For international flights, surcharges apply across 33 tiers when Singapore jet fuel prices exceed 150 cents per gallon.
This month's surcharges fell under tier 6 (200-209 cents). However, if average prices reach 300 cents, next month would jump to tier 16 (300-309 cents)—a 10-tier increase in one month.
Further price increases could push surcharges even higher. If average prices rise above 370 cents, surcharges would reach tier 23 (370-379 cents), surpassing the previous record of tier 22 set in July-August 2022. At that time, surcharges jumped eight tiers in three months due to soaring oil prices following the Russia-Ukraine war.
Higher surcharge tiers translate directly to increased ticket costs. Korean Air's current international fuel surcharges range from 13,500 won to 99,000 won, but next month's maximum could rise by tens of thousands of won. In July-August 2022, surcharges ranged from 42,900 won to 325,000 won.
Foreign carriers have already begun raising fuel surcharges. According to Reuters and Bloomberg, Hong Kong Airlines increased surcharges by up to 35.2% starting March 12. Air India added 399 rupees (approximately 6,000 won) to domestic and Middle East routes, and will raise North American route surcharges by $50 to $200 starting March 18.
Korean airlines are employing fuel hedging strategies to manage rising costs. Korean Air hedges up to 50% of its projected annual fuel consumption, while Asiana Airlines has hedged approximately 30% through derivative contracts.
However, analysts note that low-cost carriers face greater challenges. Unlike major airlines, they struggle to implement large-scale hedging strategies using financial instruments. Pre-purchasing and stockpiling fuel also becomes burdensome when prices are surging rapidly.
"Predicting exact average prices is difficult given extreme oil price volatility," an aviation industry official said. "However, considering the sharp rise in Singapore jet fuel prices since the Middle East crisis began, fuel surcharges could increase by at least 10 tiers next month."
