Airlink cuts fuel levy

Airlink, the Southern Africa regional airline, will cut fuel levies (YR Tax) on one-way domestic flights by USD$10 (approximately ZAR100 at current exchange rates) from the beginning of February.
The reduction, which will apply to flights within South Africa and its services to Lesotho and Swaziland, are in line with world jet fuel prices that have recently returned to 2006 levels after peaking at around USD$180 a barrel last year.  
According to the International Air Transport Association`s (IATA) latest analysis, jet fuel is trading worldwide at an average USD$62 a barrel, 42 percent down on the January 2008 average price.

Airlink CEO and Managing Director, Rodger Foster says “Airlink is able to pass on what amounts to savings of more than two hundred rands on every applicable return ticket, bringing welcome relief to hard-pressed consumers and cost-conscious business travellers”.
“For once, we are able to debunk the market perception that prices will continue rising, even when fuel prices are improving,” added Foster.

The YR TAX, or fuel surcharge, is levied by airlines in South Africa and around the world, as a part of their fares.  It was introduced as a discretionary mechanism to help airlines recover cost fluctuations in the fuel price in addition to currency depreciation (aircraft, engines, spare parts, finance, insurance and fuel are mostly purchased in US dollars, while most airlines generate their revenues in other currencies).

But Airlink is currently unable to adjust its YR tax on flights to its other destinations beyond South Africa, Lesotho and Swaziland, as costs (including fuel) at these locations are priced by service providers in US dollars and not in local currencies, Foster says. The Rand currently remains depressed by approximately 23%, pushing fuel and other prices higher at these regional destinations served by Airlink.   

The announcement comes as South Africans become more vocal about high prices following the collapse of the fuel price bubble last year. Many price increases were the result of the oil price balloon and with its deflation they are seeking corresponding price decreases.

Many airlines and other industries are stuck between this sentiment and fuel price hedging. Jan Blake, SAA general manager of mergers and acquisitions, earlier this month told the Saturday Star SAA had only partially recovered its increased fuel costs through the fuel levy and therefore had to absorb the remainder of the costs in its normal operating expenses, when oil prices rose to over $140 a barrel.
“This would have made ticket prices unaffordable,” he said. “There is a lag of between three to four months from when the price of crude oil lowers to when the airline can benefit from this.”

Glenda Zvenyika, communications manager at Comair, which operates and British Airways flights, told the paper they had recently reduced their fuel surcharge by an average of 20 percent on all flights. “Decisions on any further reductions or increases will be made after taking into consideration the current oil price as well as the rand’s performance against the dollar,” she said, adding that Comair’s fuel bill constituted 50% of its operating costs.

Virgin Atlantic boasted lowering its fuel surcharge by up to £70 (R1 034) on return flights in December following a sustained decrease in the price of crude oil. The charges were trimmed by up to R500 (£35 on a one-way flight) depending on the destination and class of cabin. The airline said economy passengers were now paying about R220 less on shorter sectors and R440 less on longer sectors.