Customers will see minimal benefit from the airlines’ move to absorb fuel surcharges into baseline fares. Picture: Brendon Thorne/Bloomberg Source: Supplied
AFTER months of pressure to act on plunging jet fuel prices, Qantas has announced it will gradually do away with its fuel surcharge by absorbing the cost into base fares.
The move comes days after Virgin Australia announced it would do the same on its Australia-Los Angeles flights, reducing fares by about $40 each way.
Qantas said its fares will not change as a result of the move, but frequent flyers redeeming points on flights will pay a bit less for fuel.
“Qantas will continue to price competitively with fares moving in line with the broader market,” said a statement issued by Qantas.
“While global fuel prices have fallen in recent months, international airfares are extremely competitive and are significantly lower than when surcharges were first introduced ten years ago.”
Competition between Qantas Airways and Virgin Australia has now stretched to the thorny issue of fuel surcharges. Pic: Brendon Thorne/Bloomberg Source: Supplied
The statement pointed out that given the size of the Qantas International network, the process to absorb fuel surcharges into international base fares for up to 200 destinations will take time.
“As overall fares are not changing, customers will not be disadvantaged.”
The changes by both airlines came within a week of the Australian Competition and Consumer Commission announcing it would examine fuel surcharges that remained unchanged despite the cost of jet fuel falling from $105 a barrel to about $50 in the past seven months.
ACCC chairman Rod Sims said the watchdog would determine whether the airlines had engaged in deceptive or misleading conduct in relation to the surcharges.
Qantas in particular has come in for criticism from FuelTrac director Geoff Trotter for reacting quickly to fuel price increases by upping its surcharge, and then failing to reverse that when prices fell.
The ACCC investigation is expected to continue despite the changes announced by Virgin and Qantas.
The fare restructure by Qantas will deliver greatest benefit to Frequent Flyers who are currently stung by fuel surcharges on redemption bookings.
From tomorrow, fuel related charges that currently apply to Frequent Flyer on Qantas and Jetstar Classic Award redemption bookings, will fall by up to $110 in economy and up to $130 in premium economy on some routes for a return flight.
Alan Joyce ... costs and competition are increasing and fares and margins falling in the airline industry. Picture: Brendon Thorne/Bloomberg. Source: Supplied
“Reductions will vary across the network but average around 14 per cent,” said the statement.
Qantas Group CEO Alan Joyce said across the globe, costs and competition in the aviation industry had been increasing while fares and airline margins fell.
“The dynamics of this market have seen Qantas International post significant losses in the past two years,” said Mr Joyce.
“Even now yields remain significantly below pre-GFC levels and like the rest of the industry our strategy is to keep strengthening them.”
AirAsia has also announced the abolition of fuel costs across its network which CEO Tony Fernandes said would mean lower fares.
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