All airlines bar Air Malta substantially reduce surcharge
Major airlines contacted by Business Today have reduced their fuel surcharge by various degrees as the price of oil has plummeted by more than three-quarters since last July.
In fact, the price of crude oil has gone down from a historic high of $147 per barrel to $36 per barrel last Friday, a reduction of more than 75.5 per cent in price over a seven-month period.
But national carrier Air Malta has not reduced its fuel surcharge despite the fact that the price of oil had continued to plummet since November.
Asked about the matter, a spokesperson for the national airline told Business Today yesterday that “following the decrease in price of crude oil, Air Malta has and still is closely monitoring the situation”.
He repeated the same claims made last November to justify the airline’s decision to keep the fuel surcharge at a high level despite the slump in the price of crude oil.
In a media statement issued in June last year, the airline explained that a surcharge increase was due to cover less than 15 per cent of the higher fuel costs and that it was the practice adopted by the airline that the surcharge increase would cover only a small portion of the cost.
“The rest,” the airline said, “would be covered by further cost savings from the airline’s operations including fuel hedges. Consequently, the current fuel surcharge levied by Air Malta, covered only a fraction of the airline’s fuel costs.”
In its reply, Air Malta had claimed the fact that there was “a substantial difference between the price of crude and aviation fuel which includes refinery costs, transportation and in-aircraft charges to reflect storage and logistics.
“These costs have increased at an even higher rate than the price of crude and this has also had a substantial impact on our fuel costs, independently of the price of crude,” the Air Malta spokesperson claimed.
“Another issue we had not discussed last November – since we are feeling the effect now – is the dollar effect which has increased costs of the fuel for airlines since aviation fuel is bought in dollars,” the national airline’s spokesperson claimed.
On 1 July 2008, the surcharge on all Air Malta scheduled routes increased by €5 per sector, with the exception of flights to Catania, Palermo, Reggio and Tunis which saw an increase of €2. The surcharge on flights to Rome, Milan, Bologna, Venice, Naples and Tripoli increased by €3.
Nicolas Petteau, a spokesperson from the Air France Press Office, told Business Today that the €15 fuel surcharge on the domestic network of Air France had been abolished since 3 February 2009.
“Besides, since the decrease of the oil barrel, Air France has decreased its surcharge three times.
On 5 September 2008, Air France reduced its fuel surcharge by €4 for medium haul flights, by €10 for long haul flights of less than 9 hours, and by €14 for long haul flights of more than 9 hours long.
A month later, on 7 October 2008, the French airline reduced its fuel surcharge again by €3 for medium haul flights, by €15 for long haul flights of less than 9 hours, and by €15 for long haul flights more than 9 hours long.
The following month, on 7 November 2008, Air France reduced its fuel surcharge again for a third time, this time by €2 for medium haul flights, by €10 for long haul flights of less than 9 hours, and by €10 for long haul flights more than 9 hours long.
“Today, for a medium haul flight, it amounts to €26 per flight, for a long haul flight of less than 9 hours, it amounts to €86 per flight, and for a long haul flight of more than 9 hours long, it amounts to €96 per flight,” Petteau told Business Today.
“For passengers travelling on its domestic network Air France has lowered all its fares inclusive of fees and taxes to make them more accessible,” Petteau added.
The new range of fares offers a reduction on a return flight of between €2 and €60.
Another major European airline, British Airways, announced further reductions in its fuel surcharge by as much as a third on long haul services last December.
The reduction came into effect on Thursday 18 December 2009. “This reduction reflected the reduction in the price of oil and the airline’s fuel hedging policy for 2009/2010,” a spokesperson for British Airways told Business Today.
The reduction in fuel surcharge meant that World Traveller (Economy Class) flights over nine hours were reduced by €33 per sector and flights under nine hours were reduced by €17 per sector.
The World Traveller Plus (Upgraded economy) flights over nine hours were reduced by €33 per sector, whilst flights under nine hours were reduced by €22 per sector.
The First and Club World flights over nine hours were reduced by €39 per sector and shorter flights were reduced by €22. The fuel surcharge on domestic and European services was also reduced by €4 per sector. Club Europe was also reduced by €5 per sector.
“This was not the only reduction made in 2008, British Airways announced another fuel surcharge reduction in October 2008 on all World Traveller and World Traveller Plus tickets,” the BA spokesperson told Business Today.
British Airways first introduced a fuel surcharge on their flights in May 2004 due to the rising prices in oil. “Although fuel prices continue to be volatile, British Airways is committed to support their customers by ensuring fair market prices for their flights,” the BA spokesperson added.
Oil remained the largest cost for British Airways and it now represented about 35 per cent of the cost base. “Five years ago, BA’s fuel bill amounted to around 10 per cent of its cost base.
“At current fuel prices and exchange rate, fuel costs are still expected to be up GBP 1 billion at around GBP 3 billion for the year 2008/09,” the BA spokesperson told Business Today.
SN Brussels Airlines also decreased the fuel surcharge in November last year, without stating by how much.
“We will not hesitate to lower it further if we can do so financially,” Geert Sciot, Vice President Communication – External Communication, SN Brussels Airlines, told Business Today.
“We have been stimulating tourism very actively with sales promotion actions recently. We plan several more actions in the future to stimulate sales,” he added.
Sciot said the fuel surcharge was “just one element of the final ticket price a client pays. It makes no sense to look at it ‘apart’. What counts is the final price the consumer pays.
“At Brussels Airlines we have done several efforts to lower that final ticket price. So, you can’t conclude that the fuel surcharge has a detrimental effect on inbound tourism,” he told Business Today.
“It is the final ticket price that will or will not seduce the client and not the fuel surcharge,” Sciot insisted.
Another international airline that operates to Malta, Emirates Airline, have also reduced their fuel surcharge substantially as a result of the result of the reduction in oil prices, however they did not state by how much.
Paul Fleri Soler, Emirates Manager for Malta, told Business Today: “Since the reduction in fuel prices towards the end of last year, Emirates in Malta reduced fares across the board.
“At the beginning of this year, Emirates launched numerous cheaper fares to destinations frequently visited by Maltese nationals to places such as Cyprus, Australia, Dubai, Thailand, India, South Africa and others,” Soler added.
On the other hand, low-cost airline Ryanair does not charge a fuel surcharge at all, although its no-frills services does charge for other amenities that traditional airlines do not traditionally charge for.
“Ryanair does not impose any fuel surcharge and also guarantees that no fee will be added in future as a guarantee to all Ryanair’s passengers in order to secure our lowest fares available in all the markets where we operate,” Luis Fernández-Mellado, Sales & Marketing Executive Spain & Portugal, Ryanair, told Business Today.