Qantas raising fares to tackle high fuel cost

Monday, 2 April 2012 00:05 - - {{hitsCtrl.values.hits}}

SYDNEY (Reuters): Australia’s Qantas Airways Ltd said on Friday it was raising domestic and international fares for the second time in as many months to partially offset high jet fuel prices.

Domestic fares and international fuel surcharge will increase by between A$7 and A$30 ($7.2 to $30.1) a ticket depending on the sector, Qantas said in a statement. Domestic fares will go up on April 5 and international fuel surcharges on April 12, the airline said.

Jet fuel is the largest operational cost for an airline and fuel prices quoting at the highest level in nearly 3 years has forced airlines to raise fares to protect profits.

Rising fuel costs are another thorn for global airlines, which are already seeing slowing air travel due to a soft global economy.

The International Air Transport Association (IATA) in December cut its forecast for airline industry profits by a quarter to $3.5 billion for 2012 and warned the industry could plunge to an $8.3 billion loss if Europe’s debt problems trigger another banking crisis.

“While fuel surcharges, price increases and hedging are being used to mitigate the impact of fuel prices, they will not fully recover the cost impact,” Qantas said.

Qantas said it has hedged all its remaining fuel requirements in 2011/12 at worst case crude oil price of $123.59 per barrel compared with current trading price of Singapore jet fuel at $136.95 a barrel.

At current prices Qantas said it expects underlying fuel costs to increase to A$2.25 billion in the second half from A$1.95 billion a year ago.

Qantas announced its last fare hike in February, citing higher fuel costs and the European Union’s carbon pricing scheme.