Singapore Airlines and SilkAir cut fuel surcharges

The cuts, effective for SIA and SilkAir tickets issued on or after Feb 26, range from US$5 (S$6.80) to US$83, depending on distance and class of travel. -- PHOTO: SIA
The cuts, effective for SIA and SilkAir tickets issued on or after Feb 26, range from US$5 (S$6.80) to US$83, depending on distance and class of travel. -- PHOTO: SIA

Reductions depend on distance, class of travel, range from US$5 to US$83

Singapore Airlines (SIA) has joined a growing list of carriers that have cut or removed their fuel surcharges amid a sharp fall in oil prices in recent months.

The cuts, effective for SIA and SilkAir tickets issued on or after Feb 26, range from US$5 (S$6.80) to US$83, depending on distance and class of travel.

Economy and premium economy passengers will pay a fuel surcharge of US$31 for short flights and US$229 for longer sectors, for example, on the kangaroo route from Sydney to London via Singapore.

Other carriers that have recently cut or removed their fuel surcharges include Virgin Australia, Qantas, AirAsia and Firefly.

But this does not necessarily mean fares, which ultimately depend on supply and demand, will fall by the same quantum, industry analysts cautioned.

Qantas, for example, has said it intends to raise base ticket prices to offset the removal of fuel surcharges. The airline cited weak yields amid stiff competition on international routes as the reason.

While fuel prices have declined in recent months, jet fuel continues to account for a significant percentage of airlines' expenditure, analysts said.

To reduce their exposure to volatile and potentially rising fuel costs, airlines have traditionally turned to hedging, which involves locking in a guaranteed amount of fuel for future consumption at a fixed price.

This provides stability, but the flip side is that when prices fall, as they have in recent months, carriers end up paying more than the current market price.

SIA, for example, has hedged about 65 per cent of its fuel requirements for the six months to the end of March at US$116 per barrel - about double the current price.

For many other airlines locked in similar unfavourable deals, relief will come as current hedges expire and new contracts are signed at lower prices.

In a recent interview with The Straits Times, the chief economist of the International Air Transport Association said the plunge in oil prices should bring airfares down in a few months.

"After the middle of the year, we should see some of the benefits from lower oil prices being passed on to the consumer," said Mr Brian Pearce.

That bottom line is what matters to travellers. Said freelance tutor Alvin Wong, 22: "As long as overall fares come down, it does not matter to me how much of that goes into the fuel surcharge or other charges and taxes."

karam@sph.com.sg