Jet fuel is one of the most expensive costs for global airlines. It comprises 50 per cent of total expenses for low-cost carries and 35 per cent for full service players.
But those costs are coming down according to Peter Harbison, Chairman of the Centre for Aviation.
"What we're seeing now is probably a halving of those percentages."
That's as the oil price fell by 50 per cent over the last six months.
Those savings have been passed onto consumers in the form of lower petrol prices at the bowser, but airline travellers are yet to see a reduction.
Global airlines continue to hold onto their fuel surcharge, a strategy that will see global airline profit margins expand significantly this year, according to ratings agency Moodys.
The ACCC has currently set up a team to investigate passenger surcharges.
A Cathay Pacific spokesperson told SBS, "Fuel remains our biggest single cost. Additional fuel surcharges over time were only able to offset about half of the incremental fuel costs. That means, we continue to absorb part of the additional fuel costs."
Similarly, Singapore Airlines added, "It should be noted that while fuel prices have come down in recent months, the fuel surcharge continues to provide only partial relief against high operating costs from the price of jet fuel."
Locally, both Qantas and Virgin Australia don't apply a fuel surchage to domestic tickets, but do for some international routes.
"Several factors mitigate the impact that lower fuel prices have on airlines, including the US dollar and the fact fuel is often bought well in advance," Qantas told SBS in a statement."For instance, we’ve told the market the benefit from lower fuel prices in the first half for Qantas was only around $30 million, which is in the context of an annual fuel bill of around $4.5 billion. "
In a sign that a cut to the fuel surcharge is imminent, Virgin Australia said, "As a significant portion of the price Virgin Australia pays for fuel is locked in ahead of time, there is a delay in realising benefits from the decline in global oil prices."
Peter Harbison is convinced prices will come down soon.
Watch what Peter Harbison has to say about why and when fuel surcharges will fall:
Official statements from airlines to SBS World News
Qantas
"The trend of falling global oil prices is obviously a positive sign for all industries that are big consumers of fuel, however fuel is just one component of the overall price of an airfare.
Several factors mitigate the impact that lower fuel prices have on airlines, including the US dollar and the fact fuel is often bought well in advance. For instance, we’ve told the market the benefit from lower fuel prices in the first half for Qantas was only around $30 million, which is in the context of an annual fuel bill of around $4.5 billion.
We will continue to monitor and make adjustments where appropriate, but it’s important to note that fuel surcharges are included in the overall sticker price for fares, and these fares currently represent excellent value and reflect intense competitive pressures in the market. For instance, a fare from Australia to London now is about 30 per cent cheaper than it was 10 years ago, adjusted for inflation."
Virgin Australia
"Virgin Australia does not charge fuel surcharges on our domestic airfares or our international airfares from Australia, with the exception of the United States.
Virgin Australia protects consumers from short-term volatility in airfares due to changes in oil prices through an advanced fuel hedging program. As a significant portion of the price Virgin Australia pays for fuel is locked in ahead of time, there is a delay in realising benefits from the decline in global oil prices. The fall in oil prices has also coincided with a weakening Australian Dollar, which mitigates some of the effect of the drop in oil prices.
Virgin Australia continually reviews its fuel surcharges on the United States routes, however we have no announcements to make at this time."
Cathay Pacific
"Airlines operating from Hong Kong, including Cathay Pacific, are required to apply for adjustments to fuel surcharges every month and obtain approval from Hong Kong Civil Aviation Department.
Fuel remains our biggest single cost. Additional fuel surcharges over time were only able to offset about half of the incremental fuel costs. That means, we continue to absorb part of the additional fuel costs.
While crude commodity prices have dropped, jet fuel prices and our into-plane prices have not been falling as much and remain high. Jet fuel prices are usually higher than crude oil due to additional refinery costs, limited refinery capacity and market demand.
There is also a time lag factor to the fuel surcharges because of the application and approval process. In general, the fuel surcharges for Cathay Pacific flights flying between Hong Kong and other destinations are lower than those of other international airlines on comparable routes outside Hong Kong."
Singapore Airlines
"We keep the application of fuel surcharges under constant review, and any changes to surcharges are announced as soon as they are decided. It should be noted that while fuel prices have come down in recent months, the fuel surcharge continues to provide only partial relief against high operating costs from the price of jet fuel."
Emirates
"We closely monitor the price of jet fuel and review our fuel supplements on an on-going basis. Our fares are considered extremely competitive by travel agents and our customers, and we remain committed to providing our customers with excellent service and a strong value-for-money proposition. Like all airlines, Emirates offers a variety of fares throughout the year depending on market forces. From time to time we introduce special prices to specific destinations..."
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