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Mas to Impose Fuel Surcharge Soon

Posted on: Monday, 22 August 2005, 06:00 CDT

FOR Malaysia Airlines System Bhd (MAS), it is not a question of if it

will impose an additional fuel surcharge to cushion rising oil prices,

but when.

The airline is poised to suffer a loss of as much as RM200 million for

the quarter ended June 30, 2005, partly because it was slow in imposing a

fuel surcharge for passenger flights, analysts say.

In July, the national carrier said it will charge a fuel surcharge for

international travel by RM15 to RM30 depending on the destination.

An additional surcharge is on the cards, as airlines adopt to a change

in environment, with rising price of oil radically altering cost

structures.

Traditionally, an airline's biggest cost has been its workforce, but

now it's the cost of fuel.

MAS has a workforce of slightly more than 20,000, and cutting corners

here, at best can be described as "challenging".

The national carrier is having a briefing early this week, and high on

the list of questions will be if it will be following the footsteps of

Thai Airways International, Thailand's national carrier and American

Airlines, the world's largest carrier in increasing the fuel surcharge.

Both carriers imposed the additional charges last week, while Qantas

Airways Ltd, Australia's biggest airline, said it is considering imposing

a second surcharge soon to make up for higher fuel prices.

Singapore Airlines Ltd, the world's second biggest airline by market

capitalisation, said that it is monitoring its fuel surcharge on tickets

as oil prices continue to soar.

Singapore Airlines first imposed a fuel surcharge in June last year

when jet fuel was US$40 (RM149.52) per barrel and has increased it

subsequently when jet fuel rose to US$50, US$60, US$65 and US$70 a barrel.

Jet fuel prices on the Singapore Jet kerosene fob Spot Cargo Price now

trades above US$77 per barrel as crude oil rose over the last few weeks

to highs of break the US$67 per barrel barrier.

Apart from fuel cost, MAS has long delayed plans to join an alliance,

but opted for code share agreements.

Joining an alliance could pave way for a future stake sale in MAS - but

apart from offering connectivity, joining an alliance is extremely

resource-intensive.

West Asian carriers such as Emirates Airline, the biggest Arab airline,

haven't join an alliance as it could pose a threat to their own explosive

growth, while the low connectivity in Africa is one of the major reasons

cited as to a lack of African participation in an alliance.

But with firmer relations with Singapore, expectations are that the

carrier would find it easier to join the STAR Alliance, a grouping of 16

airlines which includes Singapore Airlines and Deutsche Lufthansa,

Europe's second biggest airline.

Besides STAR Alliance, the others are Oneworld, KL/NW/CO and SkyTeam.

Source: Malay Mail

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