Air NZ confirms fuel surcharge added to fares

Air New Zealand today confirmed it will add a surcharge to air fares to recoup the escalating cost of jet fuel.

Flights on the airline's regional Link services will incur a $6 (inclusive of GST) surcharge per one-way journey (up from $3) and domestic main trunk jet services a $10 (inclusive of GST) per one-way journey surcharge (up from $6).

Trans-Tasman and Pacific Island flights will incur a $22 per sector surcharge (up from $15) and long haul flights a $26 per sector surcharge (up from $20).

Flights from Auckland to London, which Air NZ said are effectively two sectors, will be subject to a $44 surcharge each way.

The surcharge takes effect next Thursday.

Flights booked and paid for before September 2, for travel commencing after this date will not be subject to the increased surcharge.

The surcharge on domestic flights will be incorporated into the cost of the fare. Flights originating in a regional centre and connecting with a domestic main trunk jet service will only incur a $10 fare increase per one-way journey.

Since July last year, the price of Singapore Jet fuel has increased by 77 per cent to US$53 ($82.58) a barrel, Air NZ said. Since introducing the original fuel surcharges on May 12, the price of fuel has risen by US$10 per barrel.

Based on current prices, fuel is expected to cost the airline in excess of $600 million after accounting for hedging and foreign exchange movements this year, up from $480 million in the 2003/4 year.

Marketing manager Norm Thompson said that while Air NZ had absorbed the recent fuel increases until now, "current market conditions have made it necessary to implement the additional surcharge".

"While we certainly hope that fuel prices will ease back to more sustainable levels and we are able to remove the surcharge, if fuel prices remain at their current high levels in early October, Air New Zealand will look to incorporate the fuel surcharges into all of its fares ex New Zealand at that time."

Air NZ signalled the surcharge yesterday when it reported a flat June year net profit of $166 million.

Mr Thompson said that the $120m-plus exposure from increased fuel costs was too large for the airline to absorb.

Qantas, Singapore Airlines, Emirates, Cathay Pacific, Pacific Blue, British Airways, Air France, Lufthansa, Continental Airlines and American Airlines have all recently introduced fuel surcharges.

- NZPA