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Virgin removes fuel surcharges

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gwynne

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Virgin to remove fuel surcharges; puts pressure on Qantas to follow suit

Virgin Australia will remove fuel surcharges on flights to the US and reduce fares on the trans-Pacific route by up to $50, in a move that will put pressure on rivals Qantas and Emirates to slash their own fuel fees.After months of criticism from consumer groups about airlines refusing to cut fuel surcharges despite a halving in oil prices since October, Virgin on Wednesday announced that it would restructure its fares for flights to the US, which would result in it incorporating fuel costs into the base fare.
Virgin previously increased fuel surcharges on flights to the US in August last year. It is the only route on which it imposes the fee.
As part of the changes, Virgin said it would reduce the overall cost of an economy and premium economy return ticket to the US by $40 from Friday. Business class fares will fall by $50.
The airline said the cuts were based on it anticipating that fuel costs would continue to remain at low levels.Virgin had previously charged $680 for fuel on a return flight between Australia and Los Angeles.
"These reductions reflect the benefits of the decline in global oil prices along with the negative impact of the depreciating Australian dollar," Virgin said.
The surcharges are mostly an expensive irritant for Qantas frequent flyer holders because they cannot use their points to pay for the surcharge. Unlike Qantas, Virgin has allowed passengers to use frequent-flyer points to pay for the fuel fee.
Travel agents have also long complained about the surcharges, because they often don't earn a commission on the surcharge component of the total fare.
Analysts have said that a move by any of the airlines to reduce surcharges would put pressure on others to follow suit.
The Australian Competition and Consumer Commission has also set up a team to investigate passenger surcharges.
The regulator has said it is trying to determine whether the airlines have engaged in deceptive and misleading conduct, and expected the results to be known within several months.
Oil prices have slumped almost 60 per cent since June. Last week they hit their lowest level in almost six years.
Hong Kong regulators have cut substantially the fuel fees airlines can charge in response to the drop in oil prices. Unlike the Chinese territory, fuel fees are not regulated here, allowing airlines to determine what they will slug passengers.
The surcharges Qantas is able to impose on long-haul flights from the Chinese territory have fallen 38 per cent to $HK566 ($89) since January last year.
Qantas last raised fuel surcharges in July, the second time since the start of 2014.
Last year, Qantas aligned its surcharges with alliance partner Emirates by charging fuel fees depending on the class of seat, instead of its previous policy of a flat charge for all passengers.
It resulted in Qantas charging a fuel fee of $340 for a one-way economy and premium economy ticket to the US, and $390 for business class.
On flights to Britain and Europe, it charges $285 for economy class, $385 for premium economy and $540 for first and business class.
The surcharges are mostly an expensive irritant for Qantas' frequent flyer members beause they cannot use their loyalty points to pay for the extra fees.
Japan Airlines will also reduce fuel surcharges on all international fares from February 1. Qatar Airways recently said it will cut surcharges but has not said by how much or when.
However, Singapore Airlines and its regional offshoot, SilkAir, have not budged on their surcharges.


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bismarck

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Virgin to remove fuel surcharges

Virgin Australia will remove fuel surcharges on flights to the US and reduce fares on the trans-Pacific route by up to $50, in a move that will put pressure on rivals Qantas and Emirates to slash their own fuel fees.
After months of criticism from consumer groups about airlines refusing to cut fuel surcharges despite a halving in oil prices since October, Virgin on Wednesday announced that it would restructure its fares for flights to the US, which would result in it incorporating fuel costs into the base fare.


Read more: Virgin to remove fuel surcharges; puts pressure on Qantas to follow suit
 
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serfty

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Re: Virgin to remove fuel surcharges

Of course, given the net reduction is $20/$25 each way Transpacific; it is not as big a hit as it would be if Qantas dropping their YQ, currently from $340 transpacific economy & PE one way (It's $390 for Business and First).
 
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I just wish airlines would stop this charade, to me fuel is a key part of their cost input, and saying part of a ticket price is covers some of the fuel and a fuel surcharge covers the rest is very strange.

They should simply adjust their prices to reflect all the fuel input costs.
 

turtlemichael

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Re: Virgin to remove fuel surcharges

Of course, given the VA YQ was $25 each way Transpacific; it is not as big a hit as it would be if Qantas dropping theirs, currently from $340 transpacific economy & PE one way (It's $390 for Business and First).
I appreciate the point. I can almost hear the Qantas argument: "We can't reduce/remove ours as we were ripping a whole lot more off you and it would cost us too much profit." :)
 

RooFlyer

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Re: Virgin to remove fuel surcharges

I appreciate the point. I can almost hear the Qantas argument: "We can't reduce/remove ours as we were ripping a whole lot more off you and it would cost us too much profit." :)
... and ... "Its a nice little earner with Award seats..."
 

NM

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Re: Virgin to remove fuel surcharges

And of course those QFF members who used their FF points to book an award flight 300+ days before travel (as is often required to secure FF reward seat availability) have already paid the fuel fines, and even if the surcharges were to be reduced, I very much doubt anyone is going to get a refund of the difference between what was paid to the airline and what reflects the airline's fuel costs now that the fuel costs have dropped so dramatically - just as they do not charge people more for an already-purchased fare when the costs and surcharges go up.

But I really fail to understand how any airline can justify separating out fuel costs as a separate surcharge in the cost of an airfare. The ONLY reasons I can see is so they can collect this additional cash revenue from FF redemptions and to reduce the commissions they pay to travel agents.

Good on ya Virgin for starting the ball rolling, even if only to apply some pressure on your major competitor to make a change that will hurt them. A great strategic move in my opinion and I await with anticipation to see how other airlines try to justify their current position of imposing huge fuel fines on their passengers and loyal FF members.
 

NM

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Re: Virgin to remove fuel surcharges

... and ... "Its a nice little earner with Award seats..."
A very nice little earning indeed. Based on some simple assumptions, lets see what it might entail:
  • Just considering awards to USA and Europe
  • Assume (conservatively) 3 award seats across F/J cabins, 8 award seats across W/Y cabins (2 + 6)
  • Assume 4 flights per day to/from USA
  • Assume 4 flights per day to/from Europe (includes QF and EK services as QF earns fuel fines on partner flights for award bookings)
So the earning based on these conservative award seat estimates would be:
USA Economy and Premium Economy ($340 one-way) $21,760 (8 seats on 4 flights in each direction)
USA Business and First ($390 one-way) $9,360 (3 seats on 4 flights in each direction)
Europe Economy ($285 one-way) $13,680 (6 seats on 4 flights in each direction)
Europe Premium Economy ($385 one-way) $6,160 (2 seats on 4 flights in each direction)
Europe Business and First ($540 one-way) $12,960 (3 seats on 4 flights in each direction)

Total = $63,920 per day.

So it seems reasonable to conclude that for all routes, the fuel surcharge revenue for QFF redemption is likely to exceed $100K per day, or more than $36M annually. Personally, I expect this number is considerably higher as my flights volumes above are very conservatively low). There is a good incentive for QF to not want to change the status quo.

And of course, if they do remove or even reduce the fuel fines from FF award redemption bookings, there will be an argument to increase the FF points required for award bookings to compensate.

Of course I have absolutely no inside knowledge of information about the actual volumes or revenue. These are just my own personal guesses at how many FF award seats may be used each day on routes on which QFF imposes fuel surcharges on FF award redemptions. But I doubt QF will actually make any such volumes public.
 

Linnet

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Re: Virgin to remove fuel surcharges

Good on VA for being first with this ... so will any airline now remove (or significantly reduce) the currently obscene credit card surcharges imposed at ticket purchase?
(Is it likely we'll see pigs winging their way through our sunny skies?)
 

Aussie_flyer

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Re: Virgin to remove fuel surcharges

Of course, given the net reduction is $20/$25 each way Transpacific; it is not as big a hit as it would be if Qantas dropping their YQ, currently from $340 transpacific economy & PE one way (It's $390 for Business and First).
VA YQ in the article was $680, but AFAIK they didn't charge that on award tickets. What they are doing here is removing that $680 but increasing the base fare by say $630, resulting in a discount of $50
 

serfty

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Re: Virgin to remove fuel surcharges

VA YQ in the article was $680, but AFAIK they didn't charge that on award tickets. What they are doing here is removing that $680 but increasing the base fare by say $630, resulting in a discount of $50
Yeah, I recently saw that.
 

pythonisman

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Re: Virgin to remove fuel surcharges

VA YQ in the article was $680, but AFAIK they didn't charge that on award tickets. What they are doing here is removing that $680 but increasing the base fare by say $630, resulting in a discount of $50
Maybe they were worried about their tickets being issued by Expedia Brazil :D
 

Aussie_flyer

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Re: Virgin to remove fuel surcharges

Maybe they were worried about their tickets being issued by Expedia Brazil :D
It's good PR I think actually, they didn't charge the YQ on award tickets anyway and they now look like the 'good guys' compared to the evil Qantas. Also, with possible government intervention in the future regarding fuel surcharges I think they are making a very clever move.
 
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