Jet fuel prices will top the list of challenges facing Qantas and Virgin Australia this year as their single biggest expense hovers well above $US120 a barrel, according to the Sydney Morning Herald.
Fears of higher fuel costs rose this week after the International Monetary Fund warned that crude prices could surge 20-30 per cent if Iran halts oil supplies due to trade sanctions by the European Union and the US.
The cost of jet fuel has rarely fallen below $US120 a barrel in trading in Singapore over the past year.
But the strength of the Australian dollar against the greenback has provided a small buffer for Australian airlines.
Airlines have also used fuel surcharges as a way of combating the higher costs.
Jet fuel prices have more than tripled from an average of $US37 a barrel in 2004 to $US125 this year.
Qantas and Virgin also face increased costs from the federal government's tax on carbon from July 1.
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