Qantas, Emirates under pressure to slash surcharges as oil price hits five-year low

Flying high: Qantas has forecast a pretax profit of up to $350 million in the first half of this financial year. Photo: Joe Armao
Flying high: Qantas has forecast a pretax profit of up to $350 million in the first half of this financial year. Photo: Joe Armao

Pressure is mounting on Qantas, Emirates and Virgin Australia to cut fuel surcharges on international tickets as oil prices hit five-years lows and a fuel monitoring group demands the competition regulator investigate.

In the busiest time of the year for travelling, the global benchmark for oil fell as low as $US58.50 a barrel on Tuesday before recovering to just over $US60 overnight on Wednesday.

Geoff Trotter, from monitoring group FuelTrac, said he would formally ask the competition regulator to investigate airlines such as Qantas for imposing surcharges at a time when fuel prices had slumped.

"This is the biggest and most sustained drop in crude prices ... in five years but apparently its not significant or sustained enough for Qantas or any of these other airlines to make any reduction whatsoever in their fuel surcharges," he said.

The Australian Competition and Consumer Commission said it did not comment on specific complaints.

The spot price of jet fuel in Singapore has also dropped about 40 per cent since June to less than $US74 a barrel.

Qantas reiterated that it would need to see a "much more sustained and significant benefit" from the fall in fuel prices before it would consider lowering the surcharges.

"Fuel prices more than doubled between 2004 and 2014 and Qantas' current surcharges do not come anywhere close to recovering the cost of fuel to our bottom line," a spokesman said.

Last week Qantas forecast a first-half underlying pre-tax profit of up to $350 million, compared with a $252 million loss a year earlier. It has attributed the turnaround largely to its so-called transformation plan which will strip out $2 billion in costs within three years.

While Qantas has said it will reap just $30 million from the fall in fuel prices in the first half, CIMB analysts estimate the benefit could be as much as $325 million in the second half of this financial year. 

Qantas last raised fuel surcharges in July, the second time since the start of this year.

The airline aligned its charges with alliance partner Emirates' earlier this year by charging different fuel fees depending on the class of seat, instead of its previous policy of a flat charge for all passengers.

Qantas charges a fuel fee of $340 for a one-way economy and premium economy ticket to the United States, and $390 for business class.

On flights to Britain and Europe, it charges $285 for economy class, $385 for premium economy and $540 for first and business class.

The airline introduced fuel surcharges in 2004, charging passengers up to $14 a sector on international flights and $6 for domestic services.

Virgin last increased surcharges on flights to the US in August last year, charging $680 in fees for a return flight from Sydney to Los Angeles.

But unlike Qantas and Emirates, Virgin does not charge passengers who use frequent-flyer points to pay for their tickets extra.

This story Qantas, Emirates under pressure to slash surcharges as oil price hits five-year low first appeared on The Sydney Morning Herald.