Qantas and Jetstar want Tiger Airways caged

A Report in the Herald Sun says that Qantas and Jetstar have put off raising fuel surcharges on domestic services because of increased market competition from Singapore-backed Tiger Airways.

BusinessDaily believes both are using the cushioning effect of rising exchange rates and cost savings Jetstar has achieved from a new industrial agreement with cabin crew to curb the effects of the oil surge.

These issues heavily influenced decisions both airline brands took yesterday to leave the fuel levy on domestic flights at present levels.

However, both Qantas and Jetstar will raise the long haul surcharge, with the biggest jump being a $25 increase on one-way London and Frankfurt flights.

The smallest will be a $10 rise in the fuel levy on Qantas and Jetstar services to New Zealand.

Qantas passengers will pay a fuel levy of $70 and Jetstar ticketholders will be charged $55 on top of the normal ticket cost.

The increase will take effect on February 17.

Two weeks ago Virgin Blue raised the fuel levy on its domestic and New Zealand services as well as on various Pacific Islands routes.

But neither Qantas nor Jetstar executives offered an explanation yesterday for leaving the fuel levy on domestic services unchanged.

Jetstar chief executive Alan Joyce indicated in an interview last Thursday that competitive forces had begun to dictate price movements.

“The issue for us is that it is a very competitive market here now,” he told BusinessDaily.  “We always keep fuel surcharges under review and we don’t think it is the approach that should be taken.”

“You look at the market on a fare-by-fare basis and you figure out if you can get fare increases.”  “We keep it on constant review because you don’t know where fuel is going to go,” Mr Joyce added, noting that Jetstar was being helped at present by existing hedging cover and the effect of the rising Australian dollar compared with the greenback.

“We have also been looking at other means to offset the cost of fuel increases.”

One of these measures was a new enterprise bargaining agreement with the Flight Attendants Association of Australia-Domestic/Regional Division.  The new EBA, similar to one Qantas international haul recently negotiated for its long flight crews, allows Jetstar to employ domestic and international cabin crew on more flexible terms and conditions.

A new subsidiary, called Team Jetstar, will recruit and supply flight attendants for Jetstar’s domestic and international operations on terms comparable to those under which crew are employed by Tiger Airways.

Under the Team Jetstar arrangement crew will be paid a lower base rate plus efficiency and productivity benefits for flying more hours.

Mr Joyce said the changed employment arrangement will generate an efficiency gain of up to 20 per cent over existing cabin crew.

“These efficiences will help us offset fuel costs and meet the increased competition we face out there,” Mr Joyce said.

“Some 500 extra cabin crew will be hired under new arrangements this year to service a growing fleet of passenger jets.”

Qantas said yesterday the increase in the long-haul fuel levy was a direct response to high oil prices as long haul operations consume disproportionate volumes of fuel.

“The price of West Texas Intermediate crude passed $US100 a barrel last week, and in Singapore jet fuel was trading at around $US114 a barrel,” the airline’s executive general manager John Borghetti said.

Long haul Qantas passengers will now pay a $210 surcharge, up from $185 at present, on one-way tickets to Britain and Europe.

Flight costs to US, Canada, South America, South Africa and India will rise $20 taking the surcharge on one-way fares to $165. The fuel levy on Qantas flights to Asia and the Pacific Islands will rise $15 to $120.

Qantas shares closed 16c down yesterday at $5.28.

A Report by The Mole