Qantas drops fuel surcharges, flags positive outlook

Qantas said on Tuesday it would remove fuel surcharges from its international flights but keep overall ticket prices the same, as chief executive Alan Joyce added that the fall in petrol prices was helping the airline's bottom line.
The move means base prices will rise to absorb the surcharges, although the Australian flag carrier's frequent flyer passengers will benefit from the restructured fares when they redeemed points for flights.
The focus on global fuel surcharges comes as oil prices sit near six-year lows after plunging more than 50 percent since June owing to weak demand, a global supply glut and tepid growth in the key markets of China and Europe. Fuel costs can account for 30-50 percent of some airlines operating expenses.
Pressure had been mounting on Qantas after fierce rival Virgin Australia last week scrapped such fees for its flights to the United States.
The Australian Competition and Consumer Commission (ACCC) watchdog also said this month it was investigating the reasons cited for fuel surcharges and whether airlines were making misleading, deceptive or false representations about the costs.
"We are seeing significant benefit coming through on fuel and that will help our international business get back into profits and it will help Qantas invest in the customer," Joyce said Tuesday.
He stressed that the highly competitive nature of the aviation market, rather than plunging oil prices, was behind the decline in fares in recent years.
"If you look at the trends in global aviation over the past decade, costs and competition have been increasing while fares and airline margins have been falling," Joyce said in a statement earlier Tuesday.
"In a highly competitive environment where customers are already paying less than they were several years ago, lower oil prices can help put the industry on a more sustainable footing."
Several international carriers have started to wind back fuel surcharges -- among them Japan Airlines and Qatar Airways.
Qantas frequent flyer customers will benefit from the price restructure, which means they pay a reduced fee for some routes for the fuel surcharges on top of the points they use to redeem flights.
Economy passengers could save Aus$110 (US$87) on return flights to the US and premium economy passengers Aus$130 on return fares to South Africa.
Despite the fare restructure, ACCC head Rod Sims told The Australian Financial Review the regulator would still be querying Qantas about the surcharges.
"We are talking about a serious amount of money," Mr Sims said of the frequent flyer fuel surcharges. "I think there are some questions here that remain to be answered."