Not all Gulf airlines to hike prices

Gulf airlines such as Air Arabia and flydubai do not intend to increase ticket prices in the wake of rising oil prices even though Emirates said it would add a fuel surcharge as high as Dh610 on all tickets starting Thursday. The rising price of oil, which touched a 10-month high of $125 (Dh459.14) a barrel during the week, have traditionally compelled carriers to increase ticket prices in order to offset the impact. And as per the International Air Transport Association fuel monitor, the global airline industry will have fuel bills of over $32 billion in 2012, with the fuel price averaging $129.70 per barrel. The global aviation body's latest jet fuel price monitor also reveals that the cost of fuel globally rose to $134 approximately for the week ending February 10 against $130.59 the week before. Surcharges to vary "Due to the current volatility of oil prices, Emirates is introducing a fuel surcharge for all tickets issued on or after March 1, 2012, to reflect the substantial recent increases in our fuel costs," an Emirates spokesperson told Gulf News in a statement, adding that the increase will differ by markets and routes. Asked if flydubai was planning to add a fuel surcharge, an airline spokesperson told Gulf News: "We are not immune to price fluctuations but do take every step we can to keep our fares as low as possible to encourage more people to fly to more places more often," adding that the budget carrier constantly monitors its fares. "And these can go up or down depending on many external factors, including the price of fuel, currency fluctuations or market forces. Fuel is the single biggest cost for airlines," the budget carrier's spokesperson said. Similarly, Air Arabia, which has 25 per cent of its fuels costs hedged for 2012, has no immediate plans to increase fares. "As of today, we have no plans to introduce such a surcharge. But, we will continue to monitor the fuel price movement closely. And if it continues to escalate, then the whole air transport industry will add the surcharge," Air Arabia CEO Adel Ali told Gulf News earlier this week. "The fuel price has been very unstable. One has to wait and watch for it to somewhat stabilise in order to make those judgments. "Naturally, if it continues to rise, then airlines will have no choice but to put a special fuel surcharge in," he added. Emirates, meanwhile, said that while the fuel surcharge would go up to as much as Dh610 for first and business class on routes from the UAE to the Americas, the economy class increase will be Dh170 on the route. "All surcharges are one-way," a spokesperson said. Listing other increases, Emirates said the fuel surcharge on routes from Dubai to Africa, Europe, the Far East and Australasia is Dh120 in economy class and Dh500 in first and business classes. On the routes from the UAE to the GCC, Middle East and Asian subcontinent, the increase will be Dh60 in economy class and Dh390 on first and business class tickets. Levy will be reviewed "Emirates has already incurred substantial costs by absorbing the recent price rises, but the surcharge gives us the ability to respond faster to market conditions, rather than a lengthier process of incorporating them into fares," the Emirates spokesperson said, adding that the changes will also give the airline the ability to "decrease prices quickly, where appropriate". An Etihad spokesman, said: "Etihad Airways constantly monitors the cost of jet fuel and reviews ticket prices accordingly. Sustained high jet fuel prices will inevitably impact ticket prices, although sound hedging policies ensure Etihad Airways passengers are buffered from sudden oil market fluctuations. "We will review the level of the surcharge on an ongoing basis." Qatar Airways, meanwhile, did not respond to the questions sent by Gulf News. Carriers will follow suit Market experts, however, see other carriers following suit. As Saj Ahmad, chief analyst at Strategic-Aero Research, said: "Oil costs have hurt many carriers and with Emirates increasing fuel surcharges, some of which will no doubt cover the costs for the EU's ETS (emissions trading scheme) as well, it is likely that Qatar Airways and Etihad Airways will follow suit if oil price rises continue. They can't afford their costs to rise and miss out on increasing revenue through additional fees." Peter Morris, chief economist at UK-based aviation consultancy Ascend, said it is "an intelligent marketing ploy" for the low-cost carriers, Qatar Airways and Etihad to do the same thing, "that is to announce they will not charge a fuel surcharge, but just align their fares with the Emirates equivalent fares, including a surcharge." Andrew Charlton, managing director of Aviation Advocacy, said: "The fare is ultimately a question of what the market will accept. "There is a disconnect between the fare charged and the cost of production. How the airlines choose to present that fare amount is up to them." Dubai Emirates has yet to start charging Europe-bound passengers additional carbon tax costs, even as Etihad Airways' surcharge of $3 (Dh11.02) per person for flights into and out of Europe comes into effect today. The move is aimed at offsetting the costs being imposed on the Abu Dhabi carrier (as well as those globally) by the European Union (EU) Emissions Trading Scheme (ETS). Emirates, however, has not introduced this charge yet. "The charges have not started and we don't have a time period yet either," an Emirates spokesperson told Gulf News yesterday in a statement, adding that the additional costs of the EU ETS programme will almost certainly have to be passed on to customers. "But how this will be done has not yet been determined," the spokesperson said. Emirates estimates that the ETS will cost the airline over €40 million (Dh196.22 million) in 2012 and well over half-a-billion euros in the nine-year period to 2020. According to analyst Saj Ahmad, Emirates will likely account for the ETS fees "through this new fuel surcharge". "The last thing it will want to do is to sting passengers with another fee and drive business away," he said, adding that about 85 per cent of Emirates ETS credits is already covered by EU permits. "So, there's no real need to implement a secondary fee as Etihad Airways has done," he added. "ETS is a significant cost. Coupled with a fluctuating carbon market, Emirates seeks to manage these cost increases in our total pricing as competitively as possible, but we have no fixed per ticket amount," the airline's spokesperson said.