Asia-Pacific airlines have begun raising fuel surcharges as crude prices soar towards the US$50 level, threatening profits just as the carriers are rebounding from last year's SARS crisis.
Singapore Airlines and its regional wing SilkAir said on Thursday they will increase their current fuel surcharge of US$5 to as high as US$12s from next month.
For flights to Southeast Asian cities, passengers will have to pay a levy of US$7, while the surcharge on all other flights outside of the region will increase to US$12.
Qantas Airways Ltd. followed suit yesterday, citing rising fuel costs, which have been advancing to record highs almost daily.
Chief executive Geoff Dixon said Qantas would increase next week its domestic fuel surcharge from the current US$4.34 per sector to US$7.25. On international sectors, the surcharge would rise US$5.07 to US$15.95.
Smaller carriers could suffer even more than the industry giants.
A struggling Thai budget carrier, Air Andaman, is further scaling down its plans after being forced to suspend operations last month due to mounting costs and cut-throat competition.
Its chief executive was quoted as saying in the Nation newspaper yesterday the carrier had scrapped plans for its Bangkok-Singapore flights.
The Philippine Civil Aeronautics Board said starting in June, it already granted permission to Philippine Airlines and Cebu Pacific to impose fuel surcharges.
From June to this month, it also approved such surcharges for 12 foreign carriers.
Other Asian carriers said they had no immediate plans to further raise charges after imposing increases earlier in the year.
But analysts said this could change after oil prices broke the US$48 a barrel barrier on Thursday and soared towards US$50.
"Yes, I do see them increasing fuel surcharges," said Chris Sanda, a regional transportation analyst with DBS Vickers Securities.
"Airline pricing is a typical oligopolistic pricing model because generally when you see one raise its fares ... others will follow suit," he said.
The advancing oil prices also threaten to dampen airline profits, which are rebounding after last year's turbulence generated by the SARS outbreak.
"Higher fuel prices without prudent hedging and fuel surcharges naturally will impact on the bottom line of airlines," Sanda said.
"While the airline industry is enjoying a cyclical recovery, the higher fuel prices mute earnings growth compared to if fuel prices were not near record levels," he said.
Richard Stirland, director general of the Association of Asia-Pacific Airlines, said Thursday robust load factors should put regional carriers in a strong position to maintain yields, but added surging fuel prices were "an increasing concern."
A spokesman for Malaysia Airlines said there was no immediate plan to further increase the fuel surcharge of US$13.20 imposed in June.
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