More Airlines Dropping Fuel Surcharges
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The two largest Japanese airlines will do away with fuel surcharges now that the price of jet fuel has dropped below a predetermined threshold. Oil is now well under $30 per barrel and has reached its lowest price since 2003. A better measure, especially for airlines in the Asia Pacific, is the price of Singapore jet kerosene. It was trading at $35.22 on Monday, which is below the threshold set by Japanese airlines for dropping their surcharges.
Japanese carriers to drop fuel surcharges
This has become a trend since oil prices began to fall last year. JAL has already dropped surcharges for flights originating outside of Japan. If the price of Singapore kerosene stays low, it will do the same for flights taking off from inside Japan. The surcharge drop will be announced in the coming weeks and will take effect by the middle of April. ANA will follow suit.
Oil prices should continue to fall, especially since Iran can now officially put its operations back online and add to the world’s already-brimming supply. Before last year, fuel prices had been high since 2004. Most airlines began instituting surcharges in 2005, so they have been in place for more than a decade.
A trend that is gaining momentum
The new fee-dropping trend should mean that the overall cost of travel will be lower in 2016. This is especially good news for people who fly internationally. Surcharges for trans-ocean flights can sometimes add hundreds of dollars onto the cost of a ticket.
More airlines are opting to do away with surcharges, but each seems to have a different set of variables that they are looking at when deciding on their next move. As mentioned, ANA and JAL have been watching the price of Singapore jet kerosene. South Korea, whose major airlines dropped fuel surcharges for international flights last September, has a government-imposed threshold for crude oil prices. When the price drops below a certain level, airlines have to nix their fuel fees. Oil prices are revisited once per month, so hypothetically South Korean carriers could reinstitute fees in the future (though that doesn’t seem likely given crude’s downward trend).
AirAsia was one of the first carriers in the region to do away with fuel surcharges. The Malaysia-based airline dropped its gas fees early last year. Qantas rolled the surcharges up in the price of its tickets, but claimed that its fares would not change. Singapore Airlines, meanwhile, lowered its surcharges last February, but it did not drop them altogether.
Cathay Pacific is one of the last remaining airlines is the Asia Pacific that still has fuel surcharges (as of Dec. 29, 2015). The airline has to file with the Hong Kong Civil Aviation Department each month to get approval for the fees.
The overall result of this move to nix fuel surcharges should be a lower cost of travel across the board. Airlines who hold on to their fuel charges through the early months of 2016 may be forced to eventually drop the fees in order to compete with carriers who have already done so. Hopefully, for travelers, by the end of 2016 fuel surcharges will be a thing of the past.
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