Fuel Levy Cuts

[FMC]

A few carriers based in the Far East have passed on the benefit of fuel price reduction to their customers. We may now see a 'war fare' soon. Reduction in fares won't please PIA although AirBlue might be taking the lead in this respect.

[zerbaer]

Air fare relief as jet fuel price falls


Chen Shiyin and Chan Sue Ling
January 30, 2007

Other related coverage

* Qantas cuts fuel levy as petrol set to rise, then fall
* Qantas reduces fuel surcharge


SINGAPORE Airlines, the world's largest carrier by market value, plans to cut fuel surcharges by as much as 11 per cent, the second reduction in less than four months, after jet fuel prices declined.

The carrier plans to lower the levy for flights between Singapore and South-East Asian countries to $US16 ($A20) from $US18 for tickets bought from today, it said in a statement.

Singapore Airlines, Cathay Pacific and Qantas have started cutting surcharges as the price of jet fuel has fallen more than a quarter from a record high in August.

Fuel is the Singapore carrier's single largest cost, accounting for almost 40 per cent of expenses in the three months to September 30.

Other carriers "may also follow suit, at least for goodwill toward the customers", said Rohan Suppiah, an analyst at Kim Eng Securities in Singapore. "Surcharges have been based on higher fuel prices and if prices come down, then it is right for them to adjust the surcharges accordingly."

The carrier's shares were unchanged at $S17.20 ($A14.45) during trade in Singapore yesterday. The stock gained 41 per cent last year, compared with the 16 per cent advance in the nine-member Bloomberg Asia Pacific Airlines Index.

Credit Suisse upgraded Singapore Airlines to "outperform" from "neutral", partly because of lower fuel costs. It revised its price target to $S19.

The cuts in surcharges were not likely to affect earnings by much because the levies only covered part of the rise in fuel costs, Mr Suppiah said.

Thai Airways International, Thailand's biggest airline, said it would cut fuel surcharges following Singapore Airlines' announcement.

"Even though we are slow in cutting the surcharges as Singapore already cut once before today, demand for our flights remains very strong," Thai executive vice-president Wallop Bhukkanasut said.

SilkAir, the regional unit of Singapore Airlines, also said it was lowering surcharges for tickets issued from January 30. It's the carrier's second cut in fuel levies since October.

The levy for flights to India and China would be reduced to $US52 from $US54, while those on all other regional services would be cut to $US16 from $US18, SilkAir said.

The decline in jet fuel prices is expected to result in better than expected airlines earnings, the International Air Transport Association said in December.

The group, which represents 260 carriers, forecasts a net income of $US2.5 billion in 2007, the first profit in six years for the $US450 billion industry.

Singapore Airlines was forecast to report a profit of $S1.79 billion in the year ending March, boosted mainly by the sale of its stake in its leasing unit, Credit Suisse said. That is 44 per cent more than the $S1.24 billion it made in the previous year.

For the next two financial years, the airline may report profits of $S1.89 billion and $S1.93 billion respectively.

Singapore Airlines "will hold most of its passenger surcharge returns through raising average effective fares", Credit Suisse said.

BLOOMBERG.

http://www.theage.com.au/news/business/ ... 74124.html

[DC10]

PIA cannot pass on the fuel price relief mainly due to the fact that it's block hour cost is increasing exponentially with every addition of a new plane. PIA will never make profit, ever.