Higher fuel prices for Qantas?
Airline profits shrinking with passengers maybe not getting a fair deal
Credit Suisse analysts have reported that Qantas passengers have been paying more than their fair share of the increased cost of aviation fuel.
The report shows some fuel surcharges on Qantas tickets have risen fourfold since they were introduced in May 2004, while the price of jet aviation fuel, which is based on the Singapore fuel markets has risen by 70% in $US and 56% in $A, showing a significant difference between the increased price of fuel and Qantas fuel surcharges.
Credit Suisse analysts explained that there this significant difference between the scale of the increase and the increase in Singapore jet fuel, may be as a result of a reduction in hedging cover by Qantas through the period and the further reduction in hedging through the second half of 2006.
Whatever the reason, Credit Suisse is still of the opinion that Qantas is going to suffer from rising oil prices despite the surcharges and it has downgraded forecasts for Qantas net profit by 8% in 2006, 12% in 2007 and 9% in 2008.
Credit Suisse added that Qantas may now be forced to bring forward $1.5 billion in targeted cost savings to help offset the higher oil bill, which are interpreted as meaning further job cuts at the airline.
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