Wirraway
6th Dec 2004, 03:39
Mon "Sydney Morning Herald"
Qantas profits rocket skywards
By Scott Rochfort
Sydney
December 6, 2004
Qantas profits are expected to be given a major boost in coming months, thanks to the slide in oil prices, the strong Australian dollar and the airline showing little sign of scaling back two hikes in its fuel surcharge.
Despite oil prices hitting a three-month low last week, Qantas says they will need to fall further and then stabilise for it to cut its $12 one-way domestic surcharge and $29 one-way international surcharge. "To take the surcharges off altogether, it would have to fall to $US32 a barrel," said Qantas chief financial officer Peter Gregg.
"We are keeping a close eye on it obviously. But it's still fairly volatile," he said after the airline's share price closed at a nine-month high of $3.65 on Friday. But the fuel monitoring group FUELtrac says Qantas is now in a good position to wind back some of its fuel surcharges.
"Qantas should have retreated from their second fuel surcharge increase several weeks ago, given that the price for crude has gone back," said FUELtrac managing director Chris Kable. "Relatively speaking, the price for crude in Australian dollars has gone back to the price it was when they brought in the first surcharge," he said.
In Australian dollars, at $55 a barrel the oil price is lower now than when Qantas announced the first of its three surcharges in May, when it was around $60.
Qantas announced a one-way domestic surcharge of $6 and international one-way surcharge of $15 on May 11, when the price of oil rose above $US40 a barrel. The airline increased the domestic surcharge to $10 and international surcharge to $22 on August 20 when the price of oil was above $US47 a barrel.
In mid-October, Mr Gregg hit out at concerns that the second increase, to current levels, was unnecessary. At the time, he said, Qantas faced $196 million in extra fuel costs this financial year - even when taking into account the $360 million in extra revenue from the surcharges and the airline's strong fuel hedging position.
The price of oil neared $US55 a barrel in mid-October, but Qantas is yet to update the forecast given the recent slide in oil prices. In the past week oil prices have fallen 14 per cent, to $US42.54 a barrel.
Having 100 per cent of its fuel contracts hedged at $US32 a barrel until December 31, Goldman Sachs JBWere upped its profit forecasts partly on the estimate that Qantas is now 70 per cent hedged at $US38.25 a barrel in the second half.
Virgin Blue has also been coy on when it intends to remove any of its $10 one-way domestic and $20 one-way Pacific Blue surcharge.
"We've always said that when Singapore jet fuel returns to historic levels we'd like to remove the fuel surcharge," said Virgin head of communications David Huttner.
Mr Huttner did not specify what price would constitute a historic level.
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Qantas profits rocket skywards
By Scott Rochfort
Sydney
December 6, 2004
Qantas profits are expected to be given a major boost in coming months, thanks to the slide in oil prices, the strong Australian dollar and the airline showing little sign of scaling back two hikes in its fuel surcharge.
Despite oil prices hitting a three-month low last week, Qantas says they will need to fall further and then stabilise for it to cut its $12 one-way domestic surcharge and $29 one-way international surcharge. "To take the surcharges off altogether, it would have to fall to $US32 a barrel," said Qantas chief financial officer Peter Gregg.
"We are keeping a close eye on it obviously. But it's still fairly volatile," he said after the airline's share price closed at a nine-month high of $3.65 on Friday. But the fuel monitoring group FUELtrac says Qantas is now in a good position to wind back some of its fuel surcharges.
"Qantas should have retreated from their second fuel surcharge increase several weeks ago, given that the price for crude has gone back," said FUELtrac managing director Chris Kable. "Relatively speaking, the price for crude in Australian dollars has gone back to the price it was when they brought in the first surcharge," he said.
In Australian dollars, at $55 a barrel the oil price is lower now than when Qantas announced the first of its three surcharges in May, when it was around $60.
Qantas announced a one-way domestic surcharge of $6 and international one-way surcharge of $15 on May 11, when the price of oil rose above $US40 a barrel. The airline increased the domestic surcharge to $10 and international surcharge to $22 on August 20 when the price of oil was above $US47 a barrel.
In mid-October, Mr Gregg hit out at concerns that the second increase, to current levels, was unnecessary. At the time, he said, Qantas faced $196 million in extra fuel costs this financial year - even when taking into account the $360 million in extra revenue from the surcharges and the airline's strong fuel hedging position.
The price of oil neared $US55 a barrel in mid-October, but Qantas is yet to update the forecast given the recent slide in oil prices. In the past week oil prices have fallen 14 per cent, to $US42.54 a barrel.
Having 100 per cent of its fuel contracts hedged at $US32 a barrel until December 31, Goldman Sachs JBWere upped its profit forecasts partly on the estimate that Qantas is now 70 per cent hedged at $US38.25 a barrel in the second half.
Virgin Blue has also been coy on when it intends to remove any of its $10 one-way domestic and $20 one-way Pacific Blue surcharge.
"We've always said that when Singapore jet fuel returns to historic levels we'd like to remove the fuel surcharge," said Virgin head of communications David Huttner.
Mr Huttner did not specify what price would constitute a historic level.
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