Air Canada quietly adds fuel surcharges to Canadian flights
May 9, 2008MONTREAL - Air Canada (TSX:AC.A) has quietly imposed domestic fuel charges for the first time in four years that could cost Canadians travelling across the country an extra $120 for a round-trip ticket.
The price increases, imposed Friday, would add $120 a round-trip for flights of more than 1,001 miles, or 1,601.6 kilometres each way. Smaller surcharges would be slapped on tickets for shorter trips.
The biggest increase would apply to most trips between Western and Eastern Canada.
Canada's largest airline applied the surcharge to transborder flights Thursday, matching similar moves by American airlines. It added the surcharge to domestic trips Friday.
The new surcharges are $40 return for flights of less than 480 kilometres, $80 return on flights between 480 kilometres and 1,600 kilometres and $120 for longer flights.
The fuel surcharges are effective immediately, the airline says.
On Thursday, the three biggest U.S. air carriers, American Airlines, United Airlines and Delta Air Lines, to recoup rising fuel costs.
With the price of oil soaring to record highs, Air Canada decided for the first time in four years to no longer include fuel costs in base fares.
International tickets already have fuel surcharges, but those rates are adjusted on a case by case basis.
It wasn't immediately clear whether other Canadian carriers will apply similar surcharges.
Calgary-based WestJet (TSX:WJA) and Porter Airlines are studying the move.
WestJet hasn't followed Air Canada's lead of charging the $25 for second checked bags on North American flights for the cheapest fares.
"The cost of everything is going up due to the rapid and unprecedented rise in the price of oil and we are no exception," Air Canada spokeswoman Isabelle Arthur said in an e-mail.
"The situation for airlines is compounded by the fact jet fuel prices have risen even more and as of this week are up 78 per cent from a year ago."
Incorporating fuel costs within fares is no longer workable because of the volatility of fuel prices. On Friday, the world price of oil increased to a record US$126.20 per barrel.
Without the surcharges, fares would have to be changed daily, confusing customers, Arthur added.
Air Canada said the new fuel surcharges won't allow it to recoup the full added cost of fuel. The airline's fuel bill increased by $130 million in the first quarter from the same period a year earlier. That number is expected to increase by more than $220 million in the coming quarter, putting pressure on the world's airlines to add charges and reduce costs.
