Qantas Airways Ltd, Australia's biggest airline, yesterday raised ticket prices by as much as A$31 (US$24) to cover increased jet-fuel costs, following smaller competitor Virgin Blue Holdings Ltd.
The fuel surcharge, introduced last May and increased twice before yesterday, rose to A$20 from A$12 on domestic flights in Australia and New Zealand and to A$40 from A$29 on travel between Australia and New Zealand, the Sydney-based airline said in a statement to the Australian Stock Exchange yesterday. The surcharge on international flights jumped to A$60 from A$29.
Soaring fuel costs may result in combined losses of US$5.5 billion this year for airlines worldwide, based on an average price for crude oil of US$43 a barrel, the International Air Transport Association said on April 4. Qantas is facing an A$1 billion increase in its fuel bill, based on current prices for jet kerosene, according to Chief Executive Geoff Dixon.
"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," Dixon said, without elaborating.
The price of jet kerosene traded in Singapore, the world's biggest market for the fuel, has surged 88 percent in the past year and closed at US$73.57 on Thursday, according to oil-pricing service Platts. Crude oil for May delivery fell 5.5 percent to US$54.11 a barrel in the week through on Thursday on the New York Mercantile Exchange, having reached US$58.28 on April 4.
Fuel is the third-biggest expense for Qantas after labor and aircraft operating costs. The latest increases will take effect on April 20, the airline said.
The fuel surcharge on tickets for Jetstar, the discount fare unit of Qantas, will rise to A$19 from A$10, Qantas said.
Qantas hedged, or contractually fixed, 100 percent of its fuel costs at an average price of US$38 a barrel for the year to June 30, chief financial officer Peter Gregg said on Feb. 17, when the company released its half-year earnings.
The airline has hedged 35 percent of its fuel requirements for the following year at about US$43 a barrel, Gregg said.
Hedging and fuel surcharges will still leave Qantas A$400 million short of covering the cost of higher fuel prices, Dixon said.
Virgin Blue on Thursday increased its fuel surcharge to A$19 from A$10 on domestic sectors and to A$35 from A$20 on international sectors. A sector is a single journey including refueling stops.
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