Qantas shares hardly moved yesterday after the airline boosted its fuel surcharge for a 5th time this financial year to where the extra cost is more than some domestic and international routes to NZ.
The shares were off one cent at $2.11 as investors pondered the impact of the continuing surge in fuel prices and the surcharge on passenger numbers.
There are fears the airline will join rivals Virgin Blue and Air New Zealand in reporting a loss for the six month to June 30.
The latest surcharge increases will also cut some international and domestic holiday travel by making the cheap fares on offer less attractive.
But we have yet to see a surcharge statement from Jetstar, which is where Qantas if focusing its discount counter to Virgin Blue and Tiger in the domestic market and a slew of cheap operators in the international markets in Asia.
In some cases, the Qantas surcharge is considerable, more than some of the cheap one-off fares on domestic routes and between 20% and 70% or more of some international special offers, such as the ones Qantas is now promoting on its website.
And it won’t rule out increasing the surcharge further, a prospect that remained under review, Qantas chief executive Alan Joyce said in yesterday’s statement.
"Further increases will be considered if necessary," he warned.
For tickets purchased on or after April 28, the fuel surcharge on long-haul routes will rise $100 each way, from $190 to $290 each way on flights on the UK and Europe routes, while flights on the US and Canada routes will rise to $250 from $150 each way.
Currently Qantas has a special return fare to Los Angeles for $1615. But the surcharge is $500, or well over a third of the basic fare and raising the cost to $2115.
Similarly the airline is offering a full economy fare to London for $1998 return, but the surcharge boosts that by a huge $580, a boost to the traveller’s cost of more than 25%.
The airline’s fuel surcharge for European and North American flights has roughly tripled since the start of the year.
Flights on the South American, South African and Indian routes will rise by $50 to $200 each way.
Domestic and trans-Tasman fares will rise 5%.
In the case of NZ, Qantas has a special $199 one way fare to Christchurch, but the surcharge is $145, or more than 70% of the offered fare. The basic fare is really $344 or $688 return.
Qantas says it will also increase the fuel surcharge on domestic flights redeemed using Frequent Flyer points by $10 on domestic flights and by $20 on trans-Tasman flights.
Even then, Mr Joyce says the increases won’t offset its higher fuel costs, which have seen the Singapore price of jet fuel rise from $US88 in September to $US136 now.
"The revised fuel surcharges cover less than half the increase in fuel costs for the Qantas international business for next year," Mr Joyce said.
And, he warned, even if the price of oil falls, the surcharges will remain at the higher levels for some time.
"With fuel prices at record highs, even if the fuel price begins to decrease it will be some time before we will be able to decrease the fuel surcharge," he said in the statement.
The upwardly spiralling price has added $300 million to Qantas’s fuel bill in the current half of the 2011 financial year to $2 billion, Mr Joyce said.
Qantas last month slashed a planned increase in domestic capacity from 14% to 8% and also trimmed the proposed expansion of its international capacity from 10% to 7% in response to the impact of the escalating fuel costs on demand already affected by floods, earthquakes and tsunamis.
It also revealed plans to ground a number of planes and sell off 10 old 737-200 models.
