Free Float

SriLankan Airlines is contemplating moving into a floating rate fare regime to beat off galloping fuel prices that is burning a hole in its bottomline, a top official said Tuesday. The national carrier raised fares between US$ 15-50 from April 1, as jet fuel prices are showing no signs of abating. For instance, a round trip to London from Colombo costs US$ 50 more. It’s the same from Colombo to Delhi or Bombay.

“We have to re-adjust the fares, the airline can no longer absorb this increase anymore,” the airlines Head of Corporate Communications Chandana de Silva said commenting on record breaking oil prices.

On Monday, prices of Brent crude reached a new record of US$ 57.65 barrel in London. The price shift has pushed jet fuel up to US$ 1.81 per gallon from US$ 1.51 in March. In July 2004, jet fuel prices stood at US$ 0.97.

Fuel accounts for 22 percent of SriLankan’s costs. SriLankan consumes around 100 gallons of jet fuel a year, and each one US cent increase adds US$ 1 mn to the airline’s fuel bills.

Most airlines hedge fuel prices between three to twelve months ahead, but SriLankan opted out of forward buying following three months of losses, and the costs ar