Aussie Carriers Reject to Cut Fuel Surcharge
News.com.au | Sep. 24, 2006
Australia's main airlines have rejected Treasurer Peter Costello's call to reduce fuel surcharges passed on to passengers, as the price of oil continues to fall.
The companies said surcharges would be maintained while oil prices were volatile and would not be dropped until the market stabilised significantly.
The charge that is passed on to passengers to cover the cost of jet fuel has been rising steadily until recent months and Mr Costello today called on the carriers to reduce it.
Over the past two months the price of crude oil has fallen sharply from a peak of about US$78 a barrel to close Friday on the New York Mercantile Exchange at just over US$60 a barrel.
When Qantas first introduced a fuel surcharge in May 2004, oil was priced at about US$44 a barrel.
"I think those airlines that said they had to have surcharges because the oil price was going up should now be saying, 'well they can take off their surcharges because it is coming down again'," Mr Costello told Sky News.
"And I wouldn't expect airlines to hold temporary surcharges, which were put in place in relation to temporary conditions, to hold those surcharges once those conditions have passed."
Just last month Qantas increased its fuel surcharge on international flights by up to 88 per cent on some destinations.
Domestic Qantas passengers currently pay a fuel surcharge of $31, while on Jetstar it is $24.
Qantas chief financial officer Peter Gregg today said there were no plans to cut those charges.
"While the spot price may have fallen briefly, fuel prices remain volatile," he said.
"On top of the crude oil situation, jet fuel refining margins have increased significantly and are currently 30 per cent above their 2005/06 averages.
"Even after hedging and surcharges we still face a significant shortfall in terms of recovering fuel cost increases."
Mr Gregg also said the forward cost of hedging - which provided airlines with some protection against unexpected price rises - was at a premium and without hedging the surcharge would need to be even higher.
"We would need to see a sustained reduction in fuel prices before we could even consider reducing our fuel surcharges," he said.
Virgin Blue charges its passengers a fuel surcharge of $19 per sector but has not increased the charge since April 2005.
International passengers on Pacific Blue pay a surcharge of $35 per sector.
Virgin Blue spokeswoman Amanda Bolger said the company was "continually reviewing" the surcharge and had resisted increasing it for some time.
"The market remains volatile so until we see some stability in the market the fuel surcharge will remain," she said.
"We'd love to be able to remove it because that would mean the market would regain some stability but at this time it'll remain in place until we see that stability." (Australian dollar is the currency used in this report)