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BA Increases Fuel Surcharge for Fifth Time

Posted on: Friday, 9 September 2005, 06:00 CDT

There was fresh misery for travellers yesterday as British Airways increased its fuel surcharge for the fifth time and Arriva, the UK's third biggest bus operator, warned fares would have to rise to offset higher fuel costs.

BA said the latest surge in oil prices in the aftermath of Hurricane Katrina had left it with no option but to pass the increased costs on to passengers. The surcharge on long-haul flights will rise from pounds 48 to pounds 60 for a return trip. The surcharge on short-haul flights will remain at pounds 16 for a round trip.

Martin George, BA's commercial director, said: 'Our fuel bill of around pounds 1.6bn is now our second largest cost after employee costs. This latest fuel surcharge rise is very regrettable but we have little choice but to pass on some of our extra costs on to our customers.'

He added that the cost of fuelling a BA plane had risen 400 per cent since December 2000. BA introduced fuel surcharges in May last year, when an extra pounds 5 was added to the price of return flights on both long- haul and short-haul routes. They went up in August and October last year and March and June this year.

A fierce internal debate has been raging within BA about whether the airline should continue to itemise fuel surcharges separately or simply raise its fares as oil prices go higher. But Mr George said BA had decided it was better to be 'transparent' with passengers, rather than 'hide the costs by raising fares behind the scenes like some other airlines chose to do'.

Arriva's chief executive Bob Davies said fuel costs in its UK bus division would rise pounds 14m next year to pounds 42m, which it aimed to recoup by increasing passenger numbers and increasing fares.

The company is limited in its scope to raise ticket prices in London, where it is the biggest bus operator with 19 per cent of the market, because fares are regulated. But it is free to raise fares as it sees fit in the rest of the country, where it is the third biggest bus company after FirstGroup and Stagecoach.

Oil prices hit $70 a barrel in the wake of Katrina, although they have fallen back since. North Sea Brent fell 16 cents to $62.72 a barrel yesterday, while US light crude was 12 cents off at $64.25 as data from the US showed that petrol stockpiles had not been drained as much as feared after Katrina. Gasoline stocks fell by 4.3 million barrels over the week " some 2 million less than analysts had forecast.

The industrialised nations of the OECD have agreed to make available 2 million barrels a day from their stockpiles for the next 30 days to ease pressure on supplies to US consumers. A large number of US refineries were put out of action and it may still be short of 900,000 barrels per day of refining capacity by the end of the month.

Source: Independent, The; London (UK)

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