The price of jet kerosene in Singapore
rose from $US138.88 to $US174.45 a barrel this month, causing a
serious impact on business for Jetstar, the low-cost carrier for
major Australian airline, Qantas.
Qantas chief executive, Geoff Dixon said the airline is currently
not able to “bridge the gap” between the increase in
fuel costs with the amount of fuel the airline offsets.
"Fuel prices are something we have no control over, so we
have to look hard at areas we do have control," the chief
executive said in a statement.
Dixon predicts a $2 million "blow-out" in the airline's
fuel bills over the next financial year. As Simon Westaway, Jetstar
spokesman, explained to media, "Four years ago, fuel was 17
per cent of our costs....it has been 33 per cent and it is going
to be 40 per cent of our total costs."
Dixon remains optimistic, however. Despite the cutbacks, he says
Qantas remains "a fundamentally strong company with a good
balance sheet and a commitment to investment that includes a $35
billion order for aircraft."
Last month, Qantas raised ticket prices on domestic flights by
nearly 3.5 percent, and international flights by 3 percent. Now,
Australia's biggest air carrier will "trim capacity" by
about 5 percent, according to Bloomberg.com, by suspending domestic
services and reducing the size of its fleets. The cutbacks are
the equivalent to grounding six plans, Qantas says. Six domestic
routes will be cancelled or scaled back immediately and further
reductions to international flights – mainly to Japan and
Southeast Asia - will be implemented this year.
The decision by Qantas to cut its flight capacity due to rising
fuel prices will have a major impact on the tourism sector, said
Shadow Tourism Minister Steven Ciobo, particularly for key destinations
such as the Gold Coast, Sunshine Coast, Adelaide, Cairns and Ayers
Rock.
The low-cost carrier will also freeze pay for senior executives, defer an upcoming
review to hire another 1000 executives, and make job cuts. Meanwhile, hundreds
of Qantas flight engineers in Melbourne and Brisbane took job action to seek
a 5 per cent pay increase; and unions fear Qantas could use rising fuel prices
as an excuse to move maintenance jobs to Asia.
Qantas is not the only major airline to announce cutbacks this month. According
to Bloomberg.com, US airline Jetblue will defer delivery new aircraft on
order; British Airways and Ryanair have both announced plans to ground some
of their aircraft; and American Airlines is cutting back flights and staff.
Delta Air Lines and US Airways Group, have also announced plans
to drop flights because of fuel costs. Cathay Pacific Airways Ltd.,
Hong Kong's biggest carrier, has said it may do the same.
Australia’s other major carrier, Virgin Blue, is also considering
a range of options to offset its fuel costs, including capacity
reductions, redeployment of aircraft, and fare reviews.
"In the airline business you have two choices today: you
can decide to do something or you can sit and pray that fuel is
going to go back to $100 or $80,” chief executive, Brett
Godfrey told media.
|
