Virgin removes fuel surcharges, pressure on Qantas to follow

In a move that is likely to put further pressure on rival Qantas, Virgin Australia has completely removed fuel surcharges from all of its flights. The fuel surcharge component will now be included in the base fare.

The move is largely symbolic as Virgin previously only charged a surcharge on two of its routes; Sydney – Los Angeles and Brisbane – Los Angeles. Furthermore, and unlike Qantas, the fuel surcharge was never charged additionally to the points required for award seats. However, Virgin passengers flying to the USA will get a small tangible benefit in the form of slightly reduced fares; $40 will be shaved off the overall price of a return economy ticket to the USA and in business class, fares will drop by $50.

The news has been largely welcomed by our members.

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.

Although a relatively minor change, it has generated some good publicity for Virgin and further added pressure on rival airline Qantas to reduce its fuel surcharges.

It’s good PR I think actually, they didn’t charge the YQ [fuel surcharge] 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.

Qantas had been under fire lately from both customers and the ACCC for continuing to charge high fuel surcharges despite the price of oil recently slumping to a six year low. As it stands, Qantas charges a $330 fuel surcharge on return economy flights to Asia, $680 for a round-trip to the United States and as much as $990 for a return ticket to London in business or first class. These surcharges mainly affect customers booking classic award seats as the surcharge (along with “genuine” fees and taxes) is collected in addition to the points required for the ticket. This is something that has long annoyed frequent flyers as it means they need to pay hundreds of dollars extra in taxes and surcharges when using points for classic award seats.

Looking at a real life example of how these surcharges impact on customers, Qantas currently charges 96,000 points for a return classic award flight from Sydney to Los Angeles. However it additionally slugs passengers with around $865 in “taxes, fees and carrier charges”. Of that, $680 is a fuel surcharge. By comparison, Virgin charges 94,000 points plus around $150 in taxes on the same route. Not only do customers pay over $700 less to redeem their points, but unlike with Qantas they can even use their points to pay the small amount of taxes.

For customers travelling on paid tickets, the surcharge is not noticeable as the base fare is generally reduced to compensate the surcharge. However the airline still benefits as they do not generally pay commission to travel agents on the surcharge component of the fare.

Many of our members are sceptical that Qantas will ever voluntarily remove or significantly reduce the surcharge as it is a “nice little earner”. Only time will tell whether they do – be it by choice or government intervention.

In the meantime, here’s a quick tip for anyone who wants to use points to fly on Qantas but doesn’t want to pay a hefty fuel surcharge: Use American Airlines AAdvantage miles. A return Qantas flight from Sydney to Los Angeles, paid for with AAdvantage miles will cost just 75,000 miles in economy and under $150 in taxes.

What do you think of Virgin’s announcement? Follow the discussion HERE.

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Matt Graham
The editor of Australian Frequent Flyer, Matt's passion for travel has taken him to over 60 countries… with the help of frequent flyer points, of course!
Matt's favourite destinations (so far) are Germany, Brazil, New Zealand & Kazakhstan. His interests include economics, aviation & foreign languages, and he has a soft spot for good food and red wine.

You can contact Matt at [email protected]