From the managing editor

JUST about every consumer in Australia is smiling at the moment each time they fill up their car. Unlike just about everything else we buy, fuel prices have actually fallen at an unprecedented rate in recent months, with outlets in some Australian capital cities now selling petrol at less than $1 per litre. The price of Brent Crude Oil has fallen from US$110 per barrel last June, to below US$50 in late January – a whopping 55% drop over a seven month period. This has to be excellent news for the travel industry, with one analyst commenting that the amount saved on fuel by an average family will have the same impact as a 0.25% drop in interest rates. Potential travellers will have more money in their pockets, and hopefully the resulting lift in consumer confidence will in some way redress the negative impact that the government’s ongoing budget impasse is having on spending patterns across the economy. Of course, the airlines are another massive beneficiary of the drop in fuel prices – although they are quick to downplay the impact on their bottom lines and the possibility of any change to fuel surcharges. First imposed a decade ago (and at the time as a non-commissionable element of airfares) fuel levies have relentlessly increased since then, and in the case of Qantas and Emirates, now amount to almost $1100 on a return business class fight to Europe. Virgin Australia also charges $680 on Los Angeles flights, while for other carriers fuel surcharges continue to comprise a significant proportion of their fares. Although commission is now payable on fuel levies in Australia, the surcharges are a significant source of revenue for carriers because in most cases, frequent flyer redemption tickets require an additional cash payment to cover the surcharge component. In November, Qantas told Travel Daily that while the recent trend of falling fuel prices was a positive sign, “we would need to see a much more sustained and significant benefit before we would be in a position to revisit fuel surcharges”. Financial markets certainly seem to think there’s a significant upside for airlines from the price decline, with the QF share price surging from below $1 to around $2.30 – and the ACCC is also looking at the matter at the behest of Senator Nick Xenophon. Airlines hedge their fuel purchases in advance, so the full benefit of the price decline may not be apparent yet. But whatever the justification, keeping surcharges at current levels is definitely not a good look.