The airlines are scrambling today to deal with fuel below the $US 55 parity pricing benchmark, which makes their fuel surcharges look like a blatant rip-off.

This morning AirAsia abolished its surcharges, including on its AirAsia X long haul operations from Australia, and threw in half a million free flights (for the middle of next year) in a PR double whammy.

Earlier today Tiger Airways responded to Plane Talking’s blog entry on their possible abolition in this market with a sarcastic statement of amazement “that other airlines that had no hesitation in immediately increasing their surcharges when fuel went up have not immediately removed them once it has dropped by 60%.”

Tiger has never imposed a fuel surcharge. Its low cost rival Jetstar only started charging them after Qantas ordered it to fall into line with its policy of extrapolating fuel spikes into estimated extra full year costs and then setting a levy which was always described as failing to recover the total increase.

Qantas and Singapore Airlines recently, and Virgin Blue yesterday, have slashed their surcharges, but the reality is that the collapsed oil price will make their customers feel just as cheated as motorists are when service stations take forever to follow the benchmark down, but always put it up the moment oil goes up.

Of course there was a bit of sweet sorrow for other airlines and travellers this week when Cathay Pacific revealed that it had been ripped off by a hedge fund, sources say it is Lehman Bros, which is said to have taken close to half a billion dollars off it in a contract for fuel it won’t deliver because it went broke.

Qantas is insured against the consequences of a fuel price collapse just as it is hedged against higher prices. But all of this costs additional fees, and a spokesman this morning said that “at current prices and after hedging and fuel saving measures, the Qantas Group’s 2008/09 fuel bill will still be more than $1billion higher than in 2007/08.”

Maybe the airlines should have ditched fuel surcharges a long time ago and just varied the fares to cope with fluctuations, which is what Tiger really does and Jetstar once did.

It really does take up to three months for fuel price changes to make it into the tanks of airliners, but after four years of immediate increases and reluctant, drawn out decreases to levies, the punters aren’t likely to listen to “reason”.

Peter Fray

Get your first 12 weeks of Crikey for $12.

Without subscribers, Crikey can’t do what it does. Fortunately, our support base is growing.

Every day, Crikey aims to bring new and challenging insights into politics, business, national affairs, media and society. We lift up the rocks that other news media largely ignore. Without your support, more of those rocks – and the secrets beneath them — will remain lodged in the dirt.

Join today and get your first 12 weeks of Crikey for just $12.

 

Peter Fray
Editor-in-chief of Crikey

JOIN NOW