Wirraway
17th Oct 2004, 16:14
Mon "The Australian"
Qantas in flap over surcharge claim
Steve Creedy, Aviation writer
October 18, 2004
QANTAS has lashed out at claims that its latest fuel surcharge is largely unnecessary, slamming an analyst's comments as "malicious, as well as stupid" and taking the unusual step of revealing an estimated $196 million blow-out in its 2004-05 fuel budget.
The airline defended its decision to lift fuel surcharges for a second time as "a legitimate and prudent response to unprecedented increases in the cost of oil".
Chief financial officer Peter Gregg also warned yesterday that the airline would still have "some difficulty" meeting its budget despite the surcharges and fuel hedging.
Qantas announced on Friday that it would this week raise its surcharge from $10 to $12 per domestic sector and from $22 to $29 per sector on international services. The increase is the second since the airline introduced the surcharge in May and mirrors similar moves by airlines around the world.
A claim in an ABN Amro note that the airline's hedging position made the increases "largely unnecessary" prompted Qantas to yesterday release fuel cost estimates for the current financial year.
"The statement by ABN Amro analyst Anthony Srom that the surcharges are 'money for jam' and 'largely unnecessary' are malicious as well as stupid," Mr Gregg said.
"Fuel represents around 20 per cent of our operating expenditure. No amount of fuel hedging could cover the recent price increases."
Mr Srom declined to comment on the Qantas remarks or on figures from Mr Gregg showing the airline's fuel bill was now $560 million ahead of the $1.35 billion bill for 2003-04.
Mr Gregg said hedging and the three fuel surcharges would cover $360 million of this but the airline still faced an increase of $196 million over last year not budgeted for in 2004-05.
While Qantas had paid heavily to hedge itself against the rise in oil prices, the airline was still exposed to price movements in areas such as jet fuel, he said.
Airline officials expect jet fuel prices to continue to rise and while Qantas is strongly hedged for this financial year and has some cover into next year, it faces some hard decisions going forward.
"Even at these levels the forward prices are so high, the cost of cover is very expensive and if you take hedge cover now at $US45 or $US47 a barrel and the price falls back to $US32 you're going to suffer," Mr Gregg said.
The Qantas figures came as Air New Zealand chief executive Ralph Norris also warned that most of the world's airlines would run into problems if high jet fuel prices were maintained over the next six to nine months.
Mr Norris agreed that hedging provided some insulation for the next six to 12 months but said average fuel prices were increasing day by day as edging rolled off.
Mr Norris also told the Nine's Network's Business Sunday program that the airline was not actively looking for another major airline to take a strategic stake in Air NZ after the departure of Singapore Airlines.
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Qantas in flap over surcharge claim
Steve Creedy, Aviation writer
October 18, 2004
QANTAS has lashed out at claims that its latest fuel surcharge is largely unnecessary, slamming an analyst's comments as "malicious, as well as stupid" and taking the unusual step of revealing an estimated $196 million blow-out in its 2004-05 fuel budget.
The airline defended its decision to lift fuel surcharges for a second time as "a legitimate and prudent response to unprecedented increases in the cost of oil".
Chief financial officer Peter Gregg also warned yesterday that the airline would still have "some difficulty" meeting its budget despite the surcharges and fuel hedging.
Qantas announced on Friday that it would this week raise its surcharge from $10 to $12 per domestic sector and from $22 to $29 per sector on international services. The increase is the second since the airline introduced the surcharge in May and mirrors similar moves by airlines around the world.
A claim in an ABN Amro note that the airline's hedging position made the increases "largely unnecessary" prompted Qantas to yesterday release fuel cost estimates for the current financial year.
"The statement by ABN Amro analyst Anthony Srom that the surcharges are 'money for jam' and 'largely unnecessary' are malicious as well as stupid," Mr Gregg said.
"Fuel represents around 20 per cent of our operating expenditure. No amount of fuel hedging could cover the recent price increases."
Mr Srom declined to comment on the Qantas remarks or on figures from Mr Gregg showing the airline's fuel bill was now $560 million ahead of the $1.35 billion bill for 2003-04.
Mr Gregg said hedging and the three fuel surcharges would cover $360 million of this but the airline still faced an increase of $196 million over last year not budgeted for in 2004-05.
While Qantas had paid heavily to hedge itself against the rise in oil prices, the airline was still exposed to price movements in areas such as jet fuel, he said.
Airline officials expect jet fuel prices to continue to rise and while Qantas is strongly hedged for this financial year and has some cover into next year, it faces some hard decisions going forward.
"Even at these levels the forward prices are so high, the cost of cover is very expensive and if you take hedge cover now at $US45 or $US47 a barrel and the price falls back to $US32 you're going to suffer," Mr Gregg said.
The Qantas figures came as Air New Zealand chief executive Ralph Norris also warned that most of the world's airlines would run into problems if high jet fuel prices were maintained over the next six to nine months.
Mr Norris agreed that hedging provided some insulation for the next six to 12 months but said average fuel prices were increasing day by day as edging rolled off.
Mr Norris also told the Nine's Network's Business Sunday program that the airline was not actively looking for another major airline to take a strategic stake in Air NZ after the departure of Singapore Airlines.
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