Qantas moves to recoup rising costs of jet fuel

By CHRIS DANIELS aviation

Air NZ price rises have become much more likely, now its supposed competitor Qantas has imposed a "fuel surcharge" on all its fares.

This fare increase adds $30 to a Qantas return trip between New Zealand and Australia. Fares on Qantas' New Zealand domestic flights will increase by $6 on each one-way trip. Air NZ and Qantas already closely match each other's fares - both the airlines' internet sites are offering $169 one-way fares between Auckland and Sydney, travelling next month.

The cheapest Air NZ fare from Auckland to Wellington next month is $75, while Qantas offers a big saving with a special $74.99 fare.

Between them, Air NZ and Qantas account for 80 per cent of flights across the Tasman and are seeking regulatory approval to form an anti-competitive alliance.

Qantas is protected by its Government from outside competition on many of its international routes.

As the major competitive risk to Air NZ of imposing a fuel surcharge has now been removed, it has become much more likely to follow suit.

The new surcharge is also being applied to the new budget carrier arm of Qantas, Jetstar, set up to compete at the lower end of the market with Virgin Blue, which has claimed market share of up to 30 per cent since the collapse of the Air NZ-owned Ansett.

Announcing the increase in fares, Qantas chief executive Geoff Dixon said all tickets sold after midnight on May 17 would be hit by the new charge.

He said fuel accounted for around 15 per cent of all the airlines' costs last year, second only to labour costs.

"The US dollar price of jet fuel today is almost 60 per cent higher that it was 12 months ago - US$44 a barrel compared with US$28 a barrel - and this has significantly increased the cost to our business," said Dixon.

The last time Qantas lifted its fares due to high fuel prices was in late 2000, after jet fuel prices went up to US$43 a barrel.

Although prices of Singapore Jet - the benchmark price of aircraft fuel in this part of the world - have increased by 30 per cent in the past four weeks, they have dropped in the past two days.

Qantas turned a record first-half A$358 million ($411 million) profit for the six months ended December 31, after posting a A$9 million loss the previous half.

Air NZ expects its profits for the current year to remain stable at $220 million.