Qantas hikes fuel surcharges, says oil price a major threat

By NARAYANAN SOMASUNDARAM and BALAZS KORANYI
April 19, 2011, 3:16pm

SYDNEY, Australia (Reuters) – Australia's Qantas Airways on Tuesday announced hefty increases in fuel surcharges on international routes in response to surging fuel prices, adding A$100 ($105) to the cost of one-way fares from Australia to Europe and North America.

The increases, the third such move in calendar 2011, were accompanied by fare rises and higher fuel surcharges on domestic routes and followed recently announced plans to scale back some flights and cut management jobs.

''The cost of jet fuel at the moment is the single biggest threat to our business since the global financial crisis,'' Qantas Chief Executive Alan Joyce told a business lunch after announcing the surcharge and fuel hikes in a statement.

Qantas is not only struggling with rising jet fuel prices; its business has also been disrupted by natural disasters in key markets this year, including the Japan earthquake and tsunami, floods in Australia and an earthquake in New Zealand.

Qantas shares traded 0.5 percent lower at A$2.11 in mid-afternoon trade, outperforming a 1.3 percent fall for the broader market.

Joyce said Qantas would spend A$3.7 billion on fuel in 2010/11 (July/June), noting that additional fuel costs would not be recovered by the airline even after surcharges, hedging and fare hikes.

''If these (fuel) prices are sustained, next year's fuel bill will be hundreds of millions of dollars more,'' he said.

Qantas said its fuel bill for the second half of 2010/11 alone would be A$2 billion.

The airline has also estimated that the recent disasters will hurt its earnings by A$140 million.

Many carriers have been steadily raising fares this year as $100-a-barrel oil threatens profits just as airlines are recovering from the global credit crisis.