Airlines Lift Fuel Surcharge as Rising Kerosene Cost Clip Profit
Lufthansa is adding 50 euros ($66) to existing surcharges on intercontinental routes in business and first class from Aug. 7, the company said today. Qantas is adding as much as A$75 ($68) per leg on tickets for international flights issued after Aug. 14, the same day Emirates will increase its fuel surcharges, without providing details.
Kerosene costs are eating into carrier’s profits, as rising jet fuel prices doubled Lufthansa’s 2012 fuel bill to 7.4 billion euros ($9.8 billion) in just three years. Qantas and Emirates are blaming currency fluctuations for higher fuel costs, while Ryanair Holdings Plc (RYA), Europe’s largest discount carrier, yesterday said profit dropped 21 percent on higher fuel costs
“Due to the variance in exchange rates in recent weeks and the associated impact on our fuel costs, Emirates is increasing its fuel surcharge,” the company said. The surcharge was a faster way of responding to rising prices than incorporating the cost into fares, according to the carrier.
The higher charges for premium customers are a novelty for Lufthansa, which had previously rolled out higher fees for all passenger classes. Fuel costs typically represent the highest expense at an airline, often making up at least 40 percent of the total.
Airlines usually pay their fuel bills in U.S. dollars, adding a potential source of cost if currencies fluctuate. The Australian dollar today declined to within 0.2 percent of its lowest level in almost three years, raising the price of U.S.- dollar denominated products.
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