Qantas ups domestic air fares: blames rising jet fuel prices

written by australianaviation.com.au | February 11, 2011
Qantas aircraft at Sydney's T3. (Rob Finlayson)

Qantas has announced it will increase domestic, regional and trans-Tasman air fares by up to five per cent, as the second part of its response to high oil and jet fuel prices.

The airline cites rising average prices in both West Texas Intermediate Crude Oil (WTICO) and Singapore Jet Fuel (SJF) as the primary reasons for the increase in fares. Qantas claims both WTICO and SJF rates are at their highest since FY08, and higher than first half FY11 prices. SJF has alone increased from an average of US$88 a barrel in September 2010, to US$110 a barrel in January 2011, and currently sits on US$117 a barrel today.

The changes apply to tickets issued on or after February 25, and come after Qantas last week increased its international fuel surcharge on international flights.

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CEO Alan Joyce said that the airline’s hands were tied. “Airlines in Australia and around the world continue to monitor oil and fuel prices very closely, and many have already responded to the current high prices with changes to their surcharges and fares,” he said.

“Domestic, regional and Tasman fares have been under review and, while we have been absorbing higher fuel costs for some time, this increase is an appropriate response to this significant and additional cost to our business.”

Joyce also warned he would not rule out further increases to fares, noting that “after fuel hedging and this change to our fares, Qantas will still not fully recover these higher fuel costs”. Qantas hedged 74 per cent of its remaining fuel requirement in FY11 at a worst-case crude oil price of US$95.48 per barrel, including option premium.

Budget carrier Jetstar will also look to make adjustments to air fares and ancillary revenue (such as baggage charges) as it addresses the impact of higher fuel prices on its own domestic and international operations.

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