Qantas defends Fuel Surcharge

Qantas announced Monday that the imposition of fuel surcharges on its international and domestic fares was a legitimate and prudent response to unprecedented increases in the cost of oil.

The Chief Financial Officer of Qantas, Mr Peter Gregg, said an article in Saturday’s Sydney Morning Herald and comments in that article and previous articles suggesting that Qantas did not require the surcharge were totally wrong.

“The statement by ABN Amro analyst Anthony Srom that surcharges are ‘money for jam’ and ‘largely unnecessary’ are malicious as well as stupid,” he said.

Mr Gregg said that while Qantas had paid heavily to hedge itself against the rise in the price of oil it was still exposed to price movements, particularly for jet fuel.

“Fuel represents around 20 per cent of our operating expenditure. No amount of fuel hedging could cover the recent price increases,” he said.

Mr Gregg said Qantas had decided to release details of its cost of fuel to counter these unfounded claims.

Mr Gregg said:

- Qantas’ fuel bill for 2004/05 was now $560 million ahead of the bill for 2003/04, not allowing for any increase in capacity;

- hedging and the three fuel surcharges would recover $360 million of this; and

- the airline still faced an increase of $196 million over last year which was not budgeted for in the 2004/05 financial year.

Mr Gregg said that just about every airline in the world, hedged or unhedged against these increases, had found it necessary to impose multiple surcharges.

“Qantas is an efficient airline relative to most of its peers, but it is not immune to the rapidly escalating price of oil, which also shows early signs of dampening the demand in the wider community.

“Indeed, despite our efficiencies, hedging and surcharges, we will now have some difficulty in meeting our budget requirements for 2004/05,” he said.

Qantas first announced a fuel surcharge of $6 per sector for domestic travel and $15 a sector for international travel in May. Qantas increased the surcharge in August, to $10 a sector for domestic and $22 a sector for international travel. Last week, the airline announced a further increase as a result of continued escalation in the price of oil, with the domestic surcharge going to $12 a sector and the international to $29 a sector from 20 October.

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