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Fiji Airways Explains Fares: Half Our Fuel Bought In Advance Under Hedging Policy

Airlines around the world have starting looking at cutting their fuel surcharge in light of the declining fuel costs. Questions are now being asked whether Fiji Airways will be doing
02 Feb 2015 11:09
Fiji Airways Explains Fares: Half Our Fuel Bought In Advance Under Hedging Policy

Airlines around the world have starting looking at cutting their fuel surcharge in light of the declining fuel costs.

Questions are now being asked whether Fiji Airways will be doing the same.

As it stands, Fiji Airways is not immediately looking at reviewing its fuel surcharges.

Airline outgoing managing director/chief executive, Stefan Pichler, explained this is generally because of their fuel hedging policy.

“The fuel price development does not immediately impact the bottom line of airlines as most airlines hedge against fuel price variations,” he explained.

“This means airlines buy some of the needed fuel well in advance, so do not benefit from short time lower prices.

“Over time, a lower fuel price will off course lead to lower fuel surcharges. Same logic works for rising fuel prices.”

Mr Pichler said Fiji Airways follows suit and has a hedging policy, where they have currently bought 50 per cent of their annual fuel consumption at a fixed price.

“Should the price for the remaining 50 per cent fuel consumption in 2015 be significantly below our plans, we will of course review our current fuel surcharges,” he said.

International Air Transport Association has said jet fuel is down 47 per cent on the past year.

Total airline fuel bill picked to fall US$20 billion to US$114 billion over the next year.

Net profit per passenger is expected to rise by US$1 compared with the past year to US$7.

 

Other airlines

Qantas, the second largest shareholder in Fiji Airways, has said overall fares would not be changing and was candid about wanting to improve yields.

Qantas will cut fuel surcharges but will replace them with higher base charges as the airline tries to improve margins.

Virgin Australia has also moved to end surcharges and reduced fares on routes to United States.

Air New Zealand has declined to say whether fares will be lowered, saying only the airline was “entering a strong growth phase and will ensure demand continues to be generated with competitive pricing”.

In its last reference to the benefits of falling fuel prices in operational updates, Air New Zealand in November said: “Should the current level of jet fuel price persist, there will be significant additional improvement in earnings in the second half of the financial year.”

Feedback: rachnal@fijisun.com.fj

 

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