SIA to lower fuel surcharges from Feb 26

Singapore

SINGAPORE Airlines (SIA) will cut its fuel surcharges for tickets issued from Feb 26 onwards, joining a list of carriers that have already done so in light of sharply lower jet fuel prices.

The revisions will see fuel surcharges for SIA and regional wing SilkAir ease by US$5 to US$83 per sector, depending on the distance and cabin.

For instance, fuel surcharges for South-east Asian destinations will come to US$31 per sector for economy/premium economy, US$45 for business class and US$50 for first class/suites.

Meanwhile, flights between Singapore and the Americas will have fuel surcharges of US$215 per sector for economy/premium economy, US$225 for business class and US$235 for first.

"Fuel prices have declined in recent months, although jet fuel continues to account for a significant percentage of SIA group expenditure," the airline said in an announcement on Thursday.

Crude oil is hovering around the US$55 per barrel mark, bringing down the price of jet fuel significantly vis-a-vis a year ago.

But SIA, which hedged 65 per cent of its fuel needs at US$116 per barrel for the six months to March 2015, ended up posting a hedging loss of S$216 million for the third quarter ended Dec 31, 2014. Fuel costs made up nearly 40 per cent of the group's operating expenses for the quarter under review.

"Holding the view that fuel prices remain lower for longer, we think that SIA will be likely to ensure significant fuel cost savings as it enters into FY2016," a Morgan Stanley research report said this week.

At least nine airlines removed fuel surcharges in January, including Qantas, AirAsia and Firefly. Other carriers which plan to or have already done so include Japan Airlines (JAL), Cathay Pacific, Qatar Airways and Virgin Australia.

JAL also announced on Thursday that it has applied to the Japanese Ministry of Land, Infrastructure, Transport and Tourism to revise its international cargo fuel surcharge for JAL Cargo flights from March 1.

The International Air Transport Association (Iata) is projecting a banner year for the industry, with collective profits of a record US$25 billion this year on the back of cheaper jet fuel.

Still, some analysts say that airfares for passengers are unlikely to go into free fall after fuel surcharges are lifted, as carriers are expected to raise base ticket prices to protect margins.

Qantas, for instance, has already cited plans to do so on international routes, pointing to weak yields amid stiff competition.

Shares of SIA closed at S$12.03 on Thursday, down 17 cents.