Airlines slow to cut surcharges

Airlines slow to cut surcharges

QANTAS and Virgin Australia are facing calls to lower their fuel surcharges on tickets after a 25 per cent fall in jet fuel prices over the past three months.

Australia’s largest travel agent, Flight Centre, said airlines had been quick to impose extra charges to cover higher fuel costs but had been slow to respond when they dropped.

Since March, when Qantas last raised its surcharges, jet fuel prices have fallen 25 per cent to just $US103 a barrel, their lowest level since December 2010.

A passenger flying Qantas from Australia to London has to pay $380 for fuel surcharge on a one-way ticket, while on a flight to the US it is $340. Virgin charges $310 in fuel levies for a flight to Los Angeles.

Although low fares spurred by intense competition have shielded travellers from the surcharges to an extent, Flight Centre said it expected airlines to lower the surcharges when fuel prices dropped significantly. ”It is hard to fathom why they don’t decrease as much as they increase,” a spokesman said.

The strong Australian dollar has also provided Virgin and Qantas with a cushion against high fuel prices because they buy it in US dollars.

Airlines cannot dramatically increase overall ticket prices by raising surcharges because travellers would opt for rival carriers which do not impose the extra charges.

But they can boost revenue from people redeeming loyalty points because the schemes often do not cover the fuel surcharges. It means passengers have to fork out for the surcharges.

A High Court ruling in 2010 forced airlines to include fuel surcharges in the commissions they pay to travel agents on international ticket sales. But travel agents complain that some airlines are still paying smaller margins on the fuel component of the ticket than they would if it was part of the full fare.

Qantas said the surcharges on its tickets were ”appropriate” because the fuel bill for the group, which includes Jetstar, reached a record $4.4 billion last financial year, compared with $3.6 billion previously.

”We monitor the jet fuel market closely and whenever we change surcharge levels we make an announcement to the market. However, we do not speculate publicly about what might happen to fuel prices or surcharges in future,” a spokesman said.

Virgin said it monitored fuel prices and considered ”increases or decreases to our fuel surcharges and fares in line with this”. ”We are very conscious of balancing our commitment to providing competitive fares with the operational costs of our business,” a spokeswoman said.

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