Air NZ increases fuel levies

Air New Zealand intends increasing its controversial fuel surcharges on airfares, again blaming rising international oil costs.

Domestic airfares will rise by an average of $6 - or 4.5 per cent - from next week and the surcharge for international passengers will soar to $152 for flights from here to Britain or Europe, from $132 now.

Flights to Australia and Pacific destinations will incur a $52 per sector surcharge, up from $42, and passengers to Japan and the United States will pay $92 more than their base airfares after a $20 rise.

Chief financial officer Rob McDonald said the cost of benchmark Singapore jet fuel had kept rising in recent months to the point the airline could no longer sustain the extra cost. He said jet fuel was 42 per cent higher than a year ago, and had increased by around 25 per cent in three months.

"Given that jet fuel is currently around 30 per cent of our total operating costs, we can't absorb those prices and need to reflect such increases in the cost of travel," Mr McDonald said. But although the price of a barrel of jet fuel has risen from US$60 to US$77.40c since mid-May, it is not much higher than the last time Air NZ lifted its surcharge, early in April.

At that time, the airline bemoaned an increase to around US$74 a barrel, from US$41 a year earlier.

Mr McDonald said yesterday that even after the surcharge increase, Air NZ would not fully recover the extra cost of jet fuel.

Substantial growth in domestic and international bookings over the past couple of years reflected low real costs for air fares despite the surcharge, he said. Flights booked and paid for before September 1, for travel beginning after that date, will not be subject to the increase.

- STAFF REPORTER, NZPA