London (IFN) Airline passengers in Europe and Asia Wednesday faced a new round of price hikes, as airlines mulled surcharges after oil prices hit new highs Tuesday.
Spanish airline Iberia, or Lineas Aereas de Espana SA, isn't ruling out surcharge increases if oil prices keep rising, a spokesman said. Australia's Qantas Airways Ltd. said it was considering an increase in its surcharge, and Singapore Airlines Ltd. said it regularly reviews surcharges.
Deutsche Lufthansa AG also said it is keeping the matter under review, as is Italy's Alitalia Spa, although Alitalia said Wednesday it isn't planning to raise its surcharge. Lufthansa Cargo said Tuesday it will raise surcharges if the price of oil surpasses a certain margin by Monday.
The airlines' deliberations come after British Airways PLC said Tuesday it would raise its surcharge on long-haul flights to GBP35 from GBP30, starting Friday. The charge on short flights remains at GBP8.
Virgin Atlantic and KLM, the Dutch subsidiary of Air France-KLM, announced fuel surcharges last month.
"This oil shock could cause more damage to the industry than 9/11," Joe Gill, an analyst at Goodbody Stockbrokers in Dublin, said in a note to clients. "That was a one-day tragedy that knocked airline demand and oil prices for six months. This oil price move is more sustained, and could trigger a slowing in consumer demand, the nightmare scenario for most airlines."
Crude oil futures for May delivery closed 95 cents higher on the New York Mercantile Exchange Tuesday, at a record $71.35 per barrel, up 41.7% on the year and up 16.9% since the start of this year.
Crude was below $50 in May 2005, under $40 in July 2004 and below $30 in December 2003.
Some observers are even thinking about oil rising above $90 a barrel because of supply problems in Nigeria and potential supply problems in Iran. Along with the imminent start of what is known as the driving season in the U.S., the factors add to upward pressure.
Robert Heberger, an analyst at Merck Finck, said it was almost inevitable that all major airlines would raise surcharges if oil prices continue to rise.
The rise in prices has pushed up the estimated bill for fuel at BA to GBP2.2 billion for 2006-7 from a previous estimate of GBP2 billion, said BA commercial director Martin George.
Air France-KLM declined to comment Wednesday on its plans. Air France last increased its fuel surcharges on Oct. 4, 2005, lifting the charge to EUR8 for domestic services, EUR12 for mid-range services and EUR44 on long-haul fares. The policy will end when the price of crude oil falls below $55/bbl for 30 consecutive days, the company said.
Budget airline Ryanair Holdings PLC has avoided extra charges, saying that doing so helps win customers from other airlines.
Iberia is refusing to rule out more charges despite adding a EUR10 surcharge on domestic flights as recently as April 6. It had already been charging EUR20 on European flights, EUR60 on intercontinental fights and EUR15 for connections between European and intercontinental flights.
In Scandinavia, FL Group HF and Finnair OYJ said they had already hedged a large part of their estimated fuel costs.
Qantas Chief Executive Geoff Dixon said earlier this month that the company has hedged its entire fuel bill for fiscal 2006 at $60/bbl to $64/bbl, but it's still expected to be over A$1 billion higher than last year.
The company last increased its fuel surcharge in September, lifting the fee on international flights by A$15 to A$75 and across its mainline domestic flights by A$6 to A$26.
Singapore Airlines, which says its fuel costs account for about a third of total costs, has increased the fuel surcharge on tickets a number of times since imposing it in mid-2004, when oil prices started to rise.
By Martina Cruz
Source: Dow Jones Newswires
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