Air New Zealand increasing charges for excess bags checked in at airports

Air New Zealand has put up charges for excess bags by as much as $50, the latest in a series of price increases this year to cover higher operating costs.

While there is no change to pre-paid excess baggage rates, which are much lower, passengers who turn up at the airport for domestic flights with unbooked bags will be charged an extra 33 per cent for them.

International charges are up $50, apart from the long-haul rate for three excess bags.

The changes introduced this week push up the price of the first excess bag on domestic flights to $80 (more than twice the price of pre-booked ones), another $120 for the second and another $170 for the third.

Excess bags checked in on short-haul international flights are $170 for the first, $250 for the second and $300 for the third.

For long-haul it is $250 (compared to $105-$165 if pre-booked), $300 for the second and $350 for the third.

The airline is battling higher fuel costs, which show no sign of easing, and has pushed up fares and other bag charges in the six months leading up to the end of the financial year on June 30.

In mid-May it increased domestic prices by 5 per cent, citing higher costs for labour, fuel and other goods and services.

A month later it increased international fares by up to 5 per cent, including a $10 surcharge on many routes.

And in February the airline increased seat-plus-bag fares by $5 on many domestic routes.

In its interim result to December 31, operating spending increased by $142m on the prior period, a rise of 7.5 per cent. Labour costs edged up, aircraft operations, passenger services and maintenance costs were up 8.4 per cent while fuel was up 18 per cent or $72m.

In a briefing to analysts last month, Air New Zealand outlined steadily rising fuel costs which mean it will face extra costs of $100m.

Last August it expected an $880m fuel cost with jet fuel prices of US$60 ($NZ88) a barrel. This rose to $975m in February with jet fuel at US$71 a barrel and by the middle of last month that had ballooned to $990m, with fuel at US$75 a barrel.

Despite the increased fuel price, the airline has maintained its guidance for the current year's earnings, before taxation, to exceed last year's $663m.

It told investors that pricing, capacity, productivity initiatives and hedging were among the measures it would use to maintain the ''strategic advantages we have spent years building".

The airline said it was too early to predict the impact of fuel in the current financial year.

The International Air Transport Association forecast that airlines' fuel bill would rise to US$188 billion this year, well up on the US$156b forecast at the end of last year.

Across the industry, fuel makes up 24.2 per cent of operating costs, but for airlines such as Air New Zealand, which flies a high proportion of long-haul routes, it is more than a third of expenses.

Air New Zealand has about 80 per cent of the domestic market and with its alliance partners has 40 per cent of inbound international traffic. It will release its full-year result late next month.

In the financial year just finished, it also faced fallout from the jet fuel pipeline rupture, significant weather events and disruption to long-haul services caused by compulsory checks and some repairs to Rolls-Royce engines on nine of its Dreamliners.