Qantas Raises Fuel Surcharges as Lower Aussie Increases Costs

Qantas Airways Ltd. (QAN), Australia’s largest carrier, will increase fuel surcharges by as much as A$75 ($68) per leg on international flights as the decline in the Australian dollar lifts the cost of jet fuel.

Domestic fares will rise by between 2 percent and 3 percent in lieu of a surcharge increase, while the surcharges on international routes will vary according to cabin class and destination, according to a statement on the Sydney-based company’s website. The charges will apply for tickets issued after Aug. 14 and are the first such increases since April 2012, it said.

Qantas pays U.S. dollars for a fuel bill that ran to A$4.33 billion during 2012, exposing it to higher costs as the Aussie’s 13 percent fall against the greenback since April raises the price of U.S.-dollar denominated products. As the U.S. economy recovers and China slows, a traditional correlation between fuel prices and the Aussie has frayed, with Singapore jet fuel prices rising 5.7 percent over the same period, according to data compiled by Bloomberg.

Fuel prices are a natural hedge against the Australian dollar and fall in tandem with the commodity-linked local currency, Chief Executive Officer Alan Joyce said in a May 21 interview.

Qantas’s “ideal spot” is an exchange rate of between 80 U.S. cents and 90 U.S. cents to the Australian dollar, Joyce said, “as long as our price maintains that correlation” between oil and the currency.

The local currency traded at 90.66 U.S. cents as of 9:13 a.m. in Sydney.

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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