Brazil's Petrobras to hike jet fuel prices by 55%, airline says

SAO PAULO, March 31 (Reuters) - Abra Group, the holding company that controls airline Gol GOLL54.SA, said on Tuesday that Brazilian state-run oil firm Petrobras PETR3.SA will raise jet fuel prices by about 55% starting April 1.

The move follows higher global oil prices linked to the U.S.-Israeli war on Iran and could add pressure to Brazil's airline industry just as two of its largest players, Gol and Azul AZUL53.SA, recover from debt restructurings.

Fuel accounts for more than 30% of airlines' operating costs in the South American country, where Petrobras is the largest oil producer and responsible for most refining activity.

The oil giant adjusts jet fuel prices at the beginning of each month based on factors such as global oil prices and foreign exchange rates.

Petrobras did not immediately respond to a request for comment.

HIGHER FARES

The surge in jet fuel prices driven by the Middle East conflict has upended the global aviation industry , forcing airlines to raise fares and revise financial outlooks.

Abra Chief Financial Officer Manuel Irarrazaval said that Petrobras' April hike will be "moderate" compared with the surge in global prices, adding that the oil firm's strategy of monthly price tweaks helps airlines manage higher costs.

Still, he acknowledged on a call with analysts that Abra - which also controls Colombia's Avianca - needs to raise prices by about 10% for every $1-per-gallon increase in jet fuel prices.

Rival Azul said last week that it had increased average booked fares by more than 20% in the course of three weeks and would limit growth to mitigate higher fuel prices, cutting its domestic capacity by 1% in the second quarter.

GOVERNMENT REACTION

Newspaper Folha de S.Paulo reported on Monday that Brazil's government would announce a package of measures to soften the impact of higher oil prices on local carriers, including a credit line for fuel purchases and tax cuts.

Brazil's Ports and Airports Ministry did not immediately respond to a request for comment.