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May 09, 2008 05:08 PM
THE CANADIAN PRESS
MONTREAL–Air Canada
(TSX:
AC.A) has quietly
imposed domestic fuel
charges for the first
time in four years that
could cost Canadians
flying across the
country an extra $120
for a round-trip ticket.
The price increases,
imposed Friday, would
add $120 a round-trip
for flights of more than
1,001 miles, or 1,601.6
kilometres, each way.
Smaller surcharges would
be slapped on tickets
for shorter trips.
For example, people
flying from Halifax,
Montreal and Toronto to
Calgary, Edmonton,
Regina or Vancouver
would pay the highest
surcharges as the
country's largest
airline tries to recoup
soaring costs for jet
fuel.
Air Canada applied the
surcharge to transborder
flights to the United
States on Thursday,
matching similar moves
by the big American
carriers. It added the
surcharge to domestic
trips Friday.
The new surcharges are
$40 return for flights
of less than 480
kilometres, $80 return
on flights between 480
kilometres and 1,600
kilometres and $120 for
longer flights.
The fuel surcharges are
effective immediately on
all flights booked, the
airline says.
On Thursday, the three
biggest U.S. air
carriers, American
Airlines, United
Airlines and Delta Air
Lines, raised fares to
improve their finances.
With the price of oil
soaring to record highs,
Air Canada decided for
the first time in four
years to no longer
include fuel costs in
base fares.
International tickets
already have fuel
surcharges, but those
rates are adjusted case
by case.
It wasn't immediately
clear whether other
Canadian carriers will
apply similar
surcharges.
Calgary-based WestJet
Airlines (TSX:
WJA), the No. 2
airline, and Porter
Airlines, which flies
from the Toronto Island
Airport to domestic and
U.S. cities, are
studying the move.
WestJet also hasn't
followed Air Canada's
lead of charging the $25
for second checked bags
on North American
flights for the cheapest
fares.
"The cost of everything
is going up due to the
rapid and unprecedented
rise in the price of oil
and we are no
exception," Air Canada
spokeswoman Isabelle
Arthur said in an e-mail
Friday.
"The situation for
airlines is compounded
by the fact jet fuel
prices have risen even
more and as of this week
are up 78 per cent from
a year ago."
Incorporating fuel costs
within fares is no
longer workable because
of the volatility of
fuel prices. On Friday,
the world price of oil
increased to a record
US$126.20 per barrel.
Without the surcharges,
fares would have to be
changed daily, confusing
customers, Arthur added.
Air Canada said the new
fuel surcharges won't
allow the Montreal
carrier to recoup the
full added cost of fuel.
The airline's fuel bill
increased by $130
million in the first
quarter from the same
period a year earlier.
That number is expected
to increase by more than
$220 million in the
coming quarter,
intensifying pressure
for the carrier to add
more charges or reduce
costs.
Overall, Air Canada lost
$288 million in the
first quarter, more than
eight times the $34
million loss for the
same period in 2007,
when oil prices were
about half of today's
levels.
Airlines around the
world have been racing
to boost airfares, tack
on surcharges, and
charge for amenities
such as extra bags and
legroom as they struggle
to cope with soaring
world energy prices.
Many airlines now count
fuel as their biggest
cost.
The price of jet fuel,
like gasoline, has risen
rapidly along with the
price of crude. A gallon
on the spot market in
New York was selling for
US$3.57 – or 94 cents a
litre – this week.
That's up about 78 per
cent from this time last
year.
At the same time,
carriers are cutting
back on flights to
reduce costs and
maintain their pricing
power as the economy
slows. Even so, analysts
expect many large
carriers to post large
losses.
http://www.thestar.com/article/423846
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