Qantas raises surcharges as future darkens

3rd Feb 2011
Qantas raises surcharges as future darkens

Continued increases in the cost of aviation fuel have forced Qantas to raise surcharges on international flights.

Prices will increase by between $20 and $50 on February 19th as oil prices pass $100 a barrel for the first time in two years.

Qantas chief executive, Alan Joyce, explained: “Even with a conservative but robust fuel hedging policy, our business will continue to be exposed to this significant cost increase.

“Qantas surcharges will not fully recover this additional cost, and we cannot rule out further changes in the future.”

Joyce added the airline has withstood pressure to raise surcharges for as long as possible.

However, both West Texas Intermediate crude oil and Singapore jet fuel were at their highest price since the 2008 financial year, with further increases expected, he added.

Singapore Airlines and British Airways have also both raised surcharges recently.


Looking Forward

The decision comes at a challenging time for Qantas, with the airline presently facing touch trading conditions on international routes.

In particular Joyce raised concerns about over capacity in the Australian market.

“Our competitors are not growing the market on routes to Australia, but simply taking existing demand,” he explained, citing figures showing a 39 per cent increase in flight capacity into Australia between 2003 and 2009.

At the same time as inbound demand grew only ten per cent.

“In a marketplace flooded with so much capacity that our competitors aren’t even using their full quota, we face severe limits to growth.”

Many have taken the comments as a request to government to take action against airlines – particularly those from the Middle East – from dumping capacity on routes to Australia.

Unions will also be on guard for further cost-saving measures, as the company enters the final stages of wage negotiations with two key unions.

“If we continue on our current path, there will be a real question mark over the viability of Qantas International,” added Joyce.

“And I have no intention of letting our flagship business decay through lack of action.”



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