[Article] Emergency fuel levy to lift air fares

Victor

http://www.timesonline.co.uk/article/0,,2-1102224,00.html

Emergency fuel levy to lift air fares
By Russell Hotten, Carl Mortished and Helen Nugent

Soaring oil price will hit holidaymakers and motorists

SOARING oil prices are forcing airlines to consider imposing an emergency surcharge on holiday airfares and petrol companies to give warning of spiralling costs at the pumps.

British Airways suggested that it will soon increase fares as it seeks to reduce its fuel bill, which is expected to reach £1 billion this year after oil prices climbed above levels last seen during the 1991 Gulf War. The last big round of surcharges was in 2000, when oil prices hit $30 a barrel. Yesterday in New York they reached $40.

The International Air Transport Association said that airlines faced at least an extra $8 billion (£4.5 billion) on fuel bills this year. Giovanni Bisignani, its director-general, described the higher oil prices as the “fifth horseman of the apocalypse”.

Consumers were also warned of increasing supermarket prices when freight companies pass on the extra costs of delivery. The average price of a litre of petrol rose yesterday to above 80p, the level that sparked nationwide protests over fuel tax in 2000 and saw the Government’s popularity plummet to its lowest point during Labour’s first term.

There is worse to come for motorists in September, however, when the Treasury implements a rise of 1.4p per litre on sulphur-free petrol, delayed from April to allow stations to bring in the cleaner fuel. Regular lead-free fuel will go up by 1.9p per litre.

A summer of turmoil on the oil markets and the threat of another popular revolt will put pressure on Gordon Brown to reconsider, but the Treasury said that the Chancellor was standing firm.

Senior sources at British Airways admitted that the struggling airline was monitoring the rise in oil prices day by day and it may soon have to slap an emergency surcharge on fares. One said: “We are following developments closely and looking at all options.” It was unable to put a figure on the charge or to say how soon it was likely to be imposed.

Virgin Atlantic said that if oil prices continued to rise it would have to be reflected in the ticket prices. “But we do not have any firm plans at the moment,” it added.

Motorists can expect further increases in the price of petrol when oil companies pass on the 60 per cent increase in the cost of wholesale fuel since the beginning of the year. Industry experts said that the current level of pump prices was no longer sustainable after a

20 per cent rise in a fortnight in the cost of unleaded petrol in the Rotterdam spot market.

BP said it was watching the cost of oil and refined products but would not say when it would make its move. It said its prices had moved up sporadically over the past week.

Shell confirmed that the cost of wholesale petrol had gone up sharply and would need to be reflected in pump prices. “Our average price over last week has only moved by a penny,” he said.

Fear of attacks on Iraqi oil facilities and anxiety about short stocks of petrol in the United States sent the price of a barrel of crude oil rocketing above $40 in New York yesterday. In London, the price of Brent crude oil crept above $37 per barrel, a gain of $7 since the beginning of the year.

Terrorist attacks on oil facilities in the Middle East have given the jitters to an oil market already under pressure from rising demand in China for fuel and a new determination by Opec, the oil producers’ cartel, to maintain prices at a high level.

A failed attempt by suicide bombers to knock out the main terminal at Iraq’s Gulf port of Basra, worried traders a fortnight ago and on May 1 terrorists attacked a Saudi petrochemical plant, killing seven people.

Opec continues to blame US refiners and speculative hedge funds for the strength of the oil price. Petrol stocks are low in the US when refiners should be building up supplies for the summer driving season, which typically starts at the end of May. America suffers from a shortage of refinery capacity and during shortages imports road fuel from Europe.

Richard Turner, the chief executive of the Freight Transport Association, said that every 1p increase on a litre of diesel added almost £500 per year to the cost of running a lorry. “Increases in fuel prices impact quickly on the whole economy and raise the cost of both industrial production and shop prices to consumers,” he said Fuel is an airline’s second biggest expense after labour, and price rises threaten the industry’s slow emergence from recession. When BA reports annual profits in two weeks it is expected to reveal that its fuel cost rose £100 million to about £950 million last year. Analysts at the investment bank Goldman Sachs forecast that the bill for this year will be up by a further £128 million.

American Airlines, the world’s second largest carrier, has already imposed a $4 surcharge on US domestic fares, and several carriers have imposed levies on cargo.

The impact of the oil price is seen as more damaging to BA than to other major airlines because the company did not fully insure itself against a large rise, a process call hedging.

John R

The AerLingus chief Exec and Ryanair deputy chief were on agenda today and both said that they were covered for several months.

Victor

http://home.eircom.net/content/reuters/uNews/3176123?view=Standard

BA passengers face fuel surcharge
From:Reuters
Tuesday, 11 May, 2004

LONDON (Reuters) - British Airways has become the latest in a growing list of airlines to impose a fuel surcharge to ticket prices because of surging oil prices.

Europe's second-biggest airline said on Tuesday it would add a fuel surcharge of 2.50 pounds for every single flight from May 13, and would review the charge on a regular basis.

Political tensions in the Middle East and rising demand from China have pushed oil prices over $40 a barrel for the first time in 13 years.

Although prices slipped back on Tuesday after Saudi Arabia called on OPEC to increase production, they remain near record highs.

British Airways' decision comes on the same day that Australia's biggest airline, Qantas, announced fuel surcharges between A$6 (2.4 pounds) and A$15 to tickets.

German airline Lufthansa this week raised its jet fuel surcharge for its cargo business, while Scandinavian airline SAS has said it is considering a surcharge.

BA's fuel surcharge applies to all fares sold across its global network. In all markets outside of the UK, a surcharge of $4 per single flight will be added.

Fuel costs account for about 11 percent of BA's total costs, and a company spokesman said earlier this month that costs were likely to be 100 million pounds higher in the year to March 2004 than the year before.

Victor

http://www.rte.ie/business/2004/0517/klm.html

Now KLM adds extra oil charge
May 17, 2004 14:58

Dutch carrier KLM, acquired by Air France in early May, is to impose a surcharge of €4 per flight leg on passenger tickets due to exceptionally high fuel prices.

The surcharge applies to all KLM flights worldwide and comes into effect on Wednesday, the company said in a statement.

For a direct return ticket the KLM will charge €8. The extra charge for flights with intermediate stops will rise
even more as each intermediate stop will count as one leg.

Last week British Airways also imposed a £5 tariff on return tickets to counter the impact of the high oil prices.