Airfare cuts tipped after advert ruling

Travel agents say air travellers could be in for a new wave of fare cuts, thanks to the successful prosecution of Air New Zealand for misleading advertising.

Auckland District Court judge Stan Thorburn this week found Air New Zealand broke the law when it advertised fares that did not include costs such as a fuel surcharge.

John McGuinness, spokesman for the Flight Centre, yesterday that being forced to include fuel surcharges in fares, while fuel prices were dropping, should put pressure on the airlines to cut them.

"It's going to be very interesting to see how the airlines cope with it," he said. "I think you're going to find they change their fuel surcharges pretty quickly. There's going to be competition on them now."

At present, two airlines can advertise similar fares but have different fuel surcharges listed in the fine print, making one airline's total fare higher. However, Judge Thorburn said an operating cost, such as fuel, must be included in the main price, so prices will be easier to compare.

Airlines will want the "headline" fare they advertise to appear competitive, so if they have to include the fuel surcharges, some might drop these to remain competitive.

Air NZ has not moved to cut its fuel surcharge, which it last increased on September 1. Since September, the price of benchmark Singapore jet fuel has fallen 22.8 per cent, but it has been volatile. The airline has said it will not change the surcharge until jet fuel prices are stable for at least 28 days.

The fall has prompted Air NZ to lift its profit forecast by $40 million.

The Government, which owns 80 per cent of Air NZ, yesterday said it welcomed the court decision.