Qantas to Increase Fuel Surcharge

[no1patto]

Sydney, 08 April 2005
Qantas said today that it would increase its fuel surcharge because of the continued escalation in the price of crude oil and jet fuel.

* For domestic travel in Australia and New Zealand the surcharge will increase by $8, from $12 to $20 (including GST) per sector;
* For trans-Tasman travel the surcharge will increase by $11, from $29 to $40 per sector;
* For other international travel (including Australian Airlines) the surcharge will increase by $31, from $29 to $60 per sector; and
* Jetstar will increase its surcharge from $10 to $19 (including GST) per sector.

The surcharges will be effective on tickets issued on or after Wednesday 20 April.

The Chief Executive Officer of Qantas, Geoff Dixon, said fuel was always a significant cost to an airline.

"The price of both oil and jet fuel are at historic highs and remain extremely volatile," Mr Dixon said.

"Based on current prices the Qantas Group will spend approximately $1 billion more on fuel in 2005/06 compared to the current financial year. The increased surcharge, together with the existing surcharges and our hedging activities will, taking into account the effects on demand, fall short by approximately $400 million.

"Consequently, in an environment of historically low airfares, we are looking very closely at all aspects of our business to find ways in which we can achieve further efficiencies."

Note: The surcharge applies to each flight/sector shown on a ticket or itinerary.


Issued by Qantas Corporate Communication (3252)
Email: qantasmedia@qantas.com.au

It will only be a matter of time before the rest follow

[djaust]

I have to say it is remarkable how quick they are in putting up the surcharge yet when the prices stabilise or go down the surcharge never has. The other thing to note is that every airline should be affected yet not all have implemented a surcharge, and others it is absorbed in the cost of the ticket. When you look at the fact that the surcharge on an international flight now costs more than the whole return flight from bangkok to phuket with airasia it shows that it is possible to leave the prices as they were. The cost of the surcharge on aa Australian demostic flight is even more than the whole ticket for a flight from bangkok to phuket. Getting to expensive to travel and will have a big affect as the prices increase even further.

[stevem]

Originally Posted by djaust

The other thing to note is that every airline should be affected yet not all have implemented a surcharge, and others it is absorbed in the cost of the ticket.

Not defending Qantas in anyway as I'm anti Qantas, but Air New Zealand increased its fuel surcharge before Qantas did.

[river]

Yeah mate but Emirates is moving in with super cheap fares and obviously no talk of fuel surcharge.

Air NZ is my countries airline and I'm sure Aussies feel attached to Qantas but at the end of the day it comes down to price and if the Arabs are cheap well that's me sorted.

[steve@thaib]

I heard an interview with the boss of Ryanair, a low cost airline over here, and he said that fuel prices are not an issue to them yet as they buy the stuff a year and upwards in advance. Surely an Irish bloke has not out-thought Australia's national carrier?


I think that they are just not making enough money at the moment and are looking for ways to squeeze a little extra out of us without breaking ranks and raising ticket prices.

I tried to book a BA\Qantas flight in March, to travel in October. The usual routine is a small deposit and balance 30 days before departure. This time it was balance in full on booking, they wanted me to pay six months in advance.

Maybe the really good deals are coming to an end? I hope not.

[Hep]

There are several factors and issues when it comes to fuel surcharges for airlines.

First of all - How big a quantity of fuel has the airline "hedged"? Hedging means buying say 60% of the yearly fuel consumption at a fixed price. If you hedge when prices are low then you are not that affected by increases in fuel prices.

This is most likely why Ryanair can avoid a fuel surcharge right now - If they bought the majority of their fuel for say $40 per barrel then they have a big advantage.

Secondly there is the aspect of unfair business. Some airlines get illegal government subsidies which makes it possible for them to suffer a loss on the fuel account.

If you have a number of airlines operating in the same market and all but two add a fuel surcharge then the remaining two have a big advantage but they are also bound to suffer a big financial loss. If this loss gets “paid” by their government then that it not only unfair to other airlines but also illegal.

Emirates is a fantastic airlines to fly with but they are also heavily state subsidized – that could be why they haven’t put on a fuel surcharge yet. Alitalia is another example – don’t know if they have a fuel surcharge but they have extremely cheap tickets even though the company is near financial collapse.

I think that pretty soon if the fuel prices continue at this level you will see most major airlines add fuel surcharges. I know that Lufthansa, Air France/KLM, Austrian Airlines, British Airways and Scandinavian Airlines are thinking of it.

The prices for air tickets are at an historical low. This is due to a shift in the market but also lowcost carriers only flying the attractive routes have had an impact. In my opinion this wont hold out for long – Many airlines are flying around with big financial loss due to the low airfares. If you take the 15 largest airlines in the U.S only 1 airline have actually succeeded in making a profit in the last five years – That is Southwest. In Europe you see Alitalia on the brink of closure and Swiss being bought up by Lufthansa. Earlier there was the big Air France and KLM merger. I think that in the next 2-3 years we will see a number of rather big airlines either shut down completely or being bought up by other more financially sound airlines.

By the way. It costs $5 to produce a barrel of oil in the Middle East – they are being sold for $58 at the moment. One of the main reasons for the fuel prices being this high is big investment companies speculating in oil prices and buying up huge quantities on the fuel exchanges in London and New York. Even though the prices are high now they have actually been higher. Back in the 80’ies the real price was twice what we have now because people earned less money back then. The price back in then would be $100 per barrel today.. Talk about fuel surcharge then…

[djaust]

I would agree with everything you said Hep, my problem with all this is the fact that once upon a time your ticket when purchased was just that your ticket for everything. You bought your ticket and that cost got you there, the food, drinks the pilot, the crew, the plane and f"" fuel. These days nearly all use things like this to beef up the cost for no other reason. When you consider that you are paying an extra 120aust dollars for fuel what is it that your actual ticket is paying for. All these airlines are advertising prices for tickets that exclude taxes, exclude security surcharges, exclude fuel surcharges, so you buy the ticket and then have to pay another third to get on the plane it is becoming a joke. A 100% increase in the fuel surcharge is unnecessary and there is no wonder now that here in Australia the ACCC are getting involved with how these plonkers promote the prices and display there fares, the only reason there is a fuel surcharge increase here is to maintain profits. Ah well as River said "at the end of the day it comes down to price and if the Arabs are cheap well that's me sorted". I can jump off the soap box now!