Qantas cuts surcharges by only $5 when fuel has plumetted by 25%

Qantas has announced a reduction in domestic fuel surcharges and a further reduction of some of its international surcharges for tickets issued on or after Tuesday 23 January 2007.

Executive General Manager of Qantas, Mr John Borghetti, said yesterday that the new fuel surcharges would be: –

International

* From Australia to UK, Europe – No change, remaining at $170 each way. Remaining $340 round trip;

* From Australia to Mainland USA, Canada, South America, South Africa and India: No change, remaining at $133 each way.  Remaining $266 round trip;

* From Australia to Asia, Pacific, Honolulu: New Surcharge – $100.  Previous surcharge – $105.  Reduction $5.  Now $200 round trip.

* From Australia to New Zealand: New Surcharge – $55.  Previous surcharge – $60.  Reduction – $5.  Now $110 round trip.

Domestic (per sector)

* Qantas Australian and New Zealand Domestic: New Surcharge – $26 incl GST.  Previous surcharge – $31. Reduction – $5.

* QantasLink (jet services) New Surcharge – $26 incl GST.  Previous surcharge – $31. Reduction – $5.

* QantasLink (turboprop services) New Surcharge – $24 incl GST. Previous surcharge – $29. Reduction – $5.

Mr Borghetti said “We reduced international surcharges in October and we have been monitoring oil prices closely since then,” adding, “With the more recent fall in the price of jet fuel, we can now extend the surcharge reduction to domestic fares, as well as make further reductions on a number of our international routes.”

He added that Qantas would continue to monitor oil prices and refining costs, which remained a major issue for Qantas and the wider aviation industry, “Despite hedging and surcharges, we are still under-recovering the cost of fuel price increases by hundreds of millions of dollars, even with the recent drop in jet fuel prices”.

Mr Borghetti said Qantas would also reduce its Frequent Flyer points option, for Frequent Flyers electing to use their points to pay for taxes, levies and charges on domestic Australian and New Zealand Award flights, by 500 points from 23 January.

Unfortunately, others are not so happy with the reductions with a report in the Telegraph this morning saying:  

“No doubt Qantas management will feel a congratulatory pat on the back is warranted after the airline’s decision to reduce fuel surcharges on all domestic and some international routes following recent crude oil price cuts.”

“OK, congratulations. Qantas has led the way in reducing fuel-related retail add-ons, but in reality, the old adage of little fish being sweet is apt.”

“For despite the fact that jet fuel costs have fallen by almost 25%, the generosity runs only to a $5 reduction.”  “Whoopee! “

“Now, Qantas claims it is still “under-recovering” the cost of fuel price increases, so it may be able to make an economic case in support of the meagre reduction in this surcharge to passengers, but the simple mathematics of the differential between the 25% fall in fuel costs and the $5 dip in the $105 surcharge on trips to Asia and across the Pacific may still leave travellers feeling short-changed.”

The Tele closes with:

“Credit where credit is due – and Qantas has shown the lead, which other businesses should follow.”  

“Let’s hope this is just a beginning.”

In Townsville, the Townsville Bulletin said this morning:  

“Further to our report yesterday that airlines were turning a blind eye to the fact that petrol prices had fallen, it seems their (Qantas) generous offer overnight to cut $5 from fares in light of that is the best they can do.”

“Yesterday we, among others, were disgusted that airline companies had failed to pass on fuel savings to their customers in light of falling prices.”

“We all remember that a fuel surcharge was introduced in the first place to take account of the blowout in fuel prices.”

“Now it seems Qantas is willing to let its passengers ‘benefit’ from recent falls in oil prices, with the airline announcing it will reduce Australian and New Zealand domestic fuel surcharges by $5.”

“Qantas will pass on recent fuel savings to its customers on Australian and New Zealand domestic flights, and some international flights, from January 23, the move following a sharp drop in jet fuel prices, which have fallen 25% in the past five months.”  “The reduction means all Australian and New Zealand domestic flight surcharges will be reduced from $31 to $26.”

The Townsville Bulletin closes with: “Do the good people running Qantas expect Australians to forget their multibillion-dollar profit margins, announced with great fanfare each year?”

“They can do better than $5 and it’s about time they, and all other airlines did.”

Qantas had said on Monday that it was waiting for more consistent fuel pricing to emerge before reviewing the surcharges, which were first introduced in 2004 and have since been raised to more than 10 times their original level on some international routes, but they were forced to back down yesterday after analysts at Macquarie Bank, (yes, I said Macquarie Bank),  said lower fuel prices would add $140 million, (yes, I said $104million) to Qantas’s pre-tax profits in the current financial year, even if income from the fuel surcharge were reduced by $50million!

You will recall that Macquarie Bank is leading the consortium that has offered to buy Qantas for $11.1billion.

Mr Borghetti said that despite the surcharges, Qantas’s earnings were still being squeezed by fuel prices.

Virgin Blue and Jetstar have not been so generous or perhaps they did not want to be seen as what might be called rather miserly by reducing surcharges by only $5 with their fuel levy of $19 for domestic flights remaining unchanged – for now!

At the same time, Emirates Airlines today announced that from 1 February 2007 its fuel surcharges will be incorporated fully into the published airfares, adding that Emirates is the first commercial airline to introduce the measure, a move which will ensure Australian agents continue benefiting from generous commissions. 

The said that the move has been introduced to ensure greater transparency for the customer, to make it easier for travel agents to sell Emirates, and to ensure the airline is compliant with International Air Transport Association guidelines.

In April 2006 Emirates commenced paying commissions on fuel surcharges, as the first major step towards full incorporation into fares.

Emirates Vice President Australia Stephen Pearse said the policy is in line with industry best practice as well as IATA’s recommendation of incorporating fuel levies into published fares, adding, “Fuel cost is part of the operating cost of the airline, unlike airport taxes or security levies, and we feel that it makes more sense to our customers and to our travel trade partners, to make it a part of the fare.”  “Australia is a key destination for Emirates and Australian travel agents are important partners and allies to us, and we value their business.” 

“Emirates is committed to ensuring best practice across all facets of our business and this measure is designed to assist agents in conveniently securing their fair share of commissions.”

Report by The Mole with material from The Daily Telegraph and the Townsville Bulletin.