Japan Airlines (JAL) requested approval from the Japanese Ministry of Land, Infrastructure and Transport (MLIT), to increase the fuel surcharge placed on all international passenger tickets issued on or after October 1st, 2006. JAL originally introduced the fuel surcharge on international tickets in February 2005 in response to unprecedented rises in the cost of fuel. Since then continuing fuel cost increases have forced JAL to review the amount of fuel surcharges. This will be the third increase in international surcharges since their introduction.

Based on ticket sales in Japan, the new surcharges range from 2,000 yen on a Seoul-Tokyo ticket (up from 1,300 yen) to 17,100 yen on a Japan- Brazil ticket (up from 11,500 yen). The surcharge on a Japan-Europe ticket or a Japan- North America ticket is 13,600 yen up from 8,000 yen. (See chart below).

In the first quarter of FY2006 (the year-ending March 31, 2007) fuel costs rose to an average of US$82.0 per barrel of Singapore Kerosene, compared to an average price of US$66.7 in the same period last year. As a result, the fuel bill for the quarter was 97.4 billion yen (US$846 million), an increase of 10.1 billion yen (US$80 million), up 11.6% on the same period last year.

The airline expects high fuel prices to continue into the future. In fiscal year FY2005 (the year ending March 31, 2006), the group’s fuel bill was 88.2 billion yen higher than that of the FY2004. In FY2006, JAL forecasts that its fuel bill will be 117 billion yen (US$975 million) higher than that of FY2004.

JAL has taken a wide range of countermeasures to limit the full impact of the price increase including fuel hedging, fuel consumption reductions, and the introduction of more fuel-efficient small and medium-sized aircraft to its fleet. The JAL Group’s medium term corporate plan for the period FY2006 through FY2010 also includes reform of structural costs by 81.5 billion yen (US$679 million) during FY2006.

Despite these measures, the company is again reluctantly obliged to ask its international passengers to bear part of the burden caused by the unprecedented increase in the price of fuel over the past few years.

The revised surcharge will be reduced once the price of Singapore kerosene stays below the benchmark of US$80.00 per barrel for 30 consecutive working days.ÁÁThe surcharge will be progressively reduced as the price of fuel decreases, and will be cancelled completely when the price of Singapore kerosene stays below the benchmark of US$40.00 per barrel for 30 consecutive working days.

JAL has also been nominated this year for a

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World Travel Award as Asia’s Leading Airline.
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