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Oil prices down but the traveller is still footing the bill

Friday December 19, 2008

FRIDAY REFLECTIONS BY B.K.SIDHU

THE price of crude oil is edging towards US$37 a barrel. That is the level when airlines globally began adding fuel surcharges to fares way back in 2004.

At 3.30pm on Thursday, crude oil was traded at US$40.08 a barrel for January delivery, which is US$3.08 short of US$37.

Given the volatility in the oil price, experts believe US$30 a barrel is within reach.

The question to ask is: why are some airlines still burdening customers with high fuel surcharges when the cost of oil is 72% lower than its July 11 peak of US$147.27 a barrel?

If the Malaysian Government can be proactive in bringing petrol pump prices from RM2.70 a litre mid this year for RON 97 to RM1.80 a litre this week, why are players like Malaysia Airlines (MAS), Singapore Airlines (SIA) and Thai International still reluctant to let go of their grip on fuel surcharges?

In turbulent times, it was the traveller who was forced to help airlines foot their fuel bills. Then travellers did not have a choice. But now, when oil prices have collapsed, why is the traveller still footing the fuel bills for airlines? What is that justification?

Airlines have to wake up to the reality that passengers cannot continue to pay for their fuel bills when they themselves are feeling the pinch in an economic slowdown. Airlines cannot continue to remain greedy to grow profits when travellers have for nearly four years been helping airlines pay their fuel bills. This should stop now.

The real heroes of the industry are some of the low-cost carriers. They have either abolished it or capped it at very reasonable levels to allow consumers to fly with them.

AirAsia was first in the world to scrap its fuel levy on Nov 11 even though the airline stands to lose at least RM940mil in fuel surcharge revenues in 2009.

On Tuesday, rival Firefly stepped in that direction to do away with the fuel levy. Kudos to Firefly even though it is a budding airline; at least it has the customer’s interest at heart.

British Bmi removed fuel surcharges on all its short-haul flights on Wednesday, and rival British Airways (BA) jumped in to say it would slash fuel levies by a third. This is BA’s second cut since October. Many airlines made token reductions of fuel surcharges in October and they include Qantas, Lufthansa, KLM-Air France, Virgin and even Virgin Blue.

Sri Lanka Airlines also said yesterday it was removing its fuel surcharge on all flights to short- and medium-haul destinations by Jan 1.

Even the Indian carriers such as Jet Airways, JetLite, Air India, Kingfisher Airlines and IndiGo have done the same for some routes. Regional player Cathay Pacific adjusted its fuel surcharge for short- and long-haul routes recently.

SIA only made a token reduction of 10% and MAS keeps saying it will look into the issue of reducing fuel surcharges. The question is, how long a window does MAS need to think before it acts?

If other airlines can make sacrifices to keep the loyal consumers with them, MAS should seriously be acting rather than “thinking.” It is no point giving discounts to base fares that are already high. Adding the fuel surcharge does not make fares attractive.

One should not run away from the main issue that fuel surcharges need to be reduced or abolished. The time to act is now, not wait and be at the short end of the stick.

•StarBiz deputy news editor B.K. Sidhu believes compromise is key in any relationship and airlines should not just think of profits but their relationship with consumers.

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