January 2011
Australia
  • Oil prices to force airfare increase?

  • 12 January 2011
  • By Various

  • With the steady increase in the price of crude oil, airfares and/or fuel surcharges are under pressure to increase prices.

    A number of major carriers are waiting to see who moves first before adjusting fares, wary of acting alone and reducing their competitive positioning.

    On January 14, aviation jet fuel was selling at US$111.70 a barrel according to the International Air Transport Association (IATA) website - 4.5 per cent more than a week earlier, 7.1 per cent more than a month earlier and a whopping 27.2 per cent more than a year ago. The higher costs to airlines will at some stage be passed on to passengers.

    Although Australian carriers are experiencing some protection from the high value of the Australian dollar against the US currency, in which oil is traded, they are not immune to the effects of the increased costs nor will they pas by the opportunity to increase revenue should other carriers increase prices.

    Qantas CEO Alan Joyce hinted fuel surcharges were under review in an interview with the Australian Financial Review, published Thursday.

    Joyce has stated the any increases would apply only to future bookings and would be applied only if it did not affect Qantas' competitiveness against rival airlines.

    "If the competitive dynamic is such that all carriers are in the position where they need to increase fares then we'll take advantage of that," he told the newspaper.

    Azran Osman-Rani, CEO of Malaysia-based carrier AirAsia X said his company would raise airfares if competing airlines operating on similar routes did while Malaysia Airlines (MAS) MD and CEO Tengku Datuk Seri Azmil Zahruddin said fuel surcharges are under constant review.

    Some airlines have already raised their fuel surcharges with Singapore airlines making the change in December already. This was their first increase since June 2008. In September and November 2008 and February 2009 the airline had decreased fuel surcharges.

    December's increase equated to US$3 to $25 per sector, depending on the distance and class of travel.

    Two Indian airlines, Kingfisher and Jet Airways, raised their fuel surcharges by up to A$4.40 per ticket on January 1.