Surcharge decline should boost regional sector

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LEADING THE WAY: In a bid to boost volumes, British Airways World Cargo and Lufthansa Cargo are both lowering surcharges in response to recent oil-price drops.

Following the abrupt dropping of the oil price from its near-US$150-a-barrel high in August, a number of European freight carriers have lowered their fuel surcharges.

Middle East cargo operators have not yet matched their European counterparts, although a degree of speculation indicates that such a decision is imminent.

The lowering oil price has come as an unexpected bonus for the global airline industry, which has been beleaguered by sky-high fuel costs and faltering demand over the course of the last year or so. However, industry executives have been keen to point out that the sector still faces a bleak future if wholesale changes are not implemented soon.

British Airways World Cargo led the way with three fuel-surcharge reductions during a two-week period in August. The decision was made by the operator as a result of the second consecutive week that the fuel index had been below its level 23 threshold.

"As a result of the recent fall in fuel costs, we are reducing the fuel surcharge by two levels, in line with our index," said Adam Carson, senior manager, revenue management, British Airways World Cargo.

However, earlier in the month, Carson was keen to remind clients that the still-high prices remained a very real challenge for the industry. Other freight companies that have lowered the surcharge include Lufthansa Cargo and Aer Lingus' cargo division, as well as US operator Northwest Airlines.

For passenger airlines, the recent relief is likely to take some time to filter through, especially as the surcharge makes up a far higher percentage of the total price for cargo operations in comparison to passenger transport.

In fact, both Japan Airlines and All Nippon Airways both stated that they would increase their fuel surcharges still further from October on some international long-haul flights.

This decision stems from the fact that the average price of jet fuel during May-July - the period used to set charges for the October-December period - was as high as $163.50 a barrel. However, Emirates Airline opted to lower fares for flights to 30 popular destinations towards the end of August.

"It is good news that the oil price is going down but few expect it to go below $100 any time soon and efficiency gains are a long way from filling the gap," said Giovanni Bisignani, IATA CEO and director general.

"Moreover, the unstable geo-political situation in Russia and the Middle East could easily send prices sky-rocketing again. At the same time growth is slowing."

However, the Middle East has largely been able to buck the airfreight volume trend, as regular readers of Air Cargo Middle East & India will be aware. Burgeoning economic growth, a strong strategic location and the fact that the region is to a degree insulated from other economies by excess liquidity has meant that air cargo carriers have still been able to attain strong growth figures, even though there has been a decline in volume increases.

As this magazine went to press, however, none of the Middle East's major cargo operators had elected to lower their surcharges. "Fluctuating fuel costs are a challenge for all airlines," said Tom Clarke, a spokesman for Etihad Airways, the owner of Etihad Crystal Cargo.

"Fuel remains a significant proportion of Etihad's total costs and we continue to monitor the situation on a daily basis. The fuel surcharges vary within each market."

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