SIA ups fuel surcharges again on escalating jet fuel costs

March 9, 2011
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, SINGAPORE, Mar 9 – State carrier Singapore Airlines (SIA) Wednesday said it was hiking fuel surcharges for the second time this year due to skyrocketing jet fuel costs.

The surcharge increases of "between $2 and $26" depending on distance and class of travel, will be levied from next Thursday on SIA flights as well as regional wing SilkAir\’s, the airline said in a press statement.

"Singapore Airlines will increase its fuel surcharge for tickets issued on or after 17 March 2011, as a result of the continued escalation in the price of jet fuel," it stated.

"The price of jet fuel is now above $130 per barrel, which is the highest in two years."

SIA\’s latest surcharge hike was its second this year after it raised rates in January due to escalating oil prices, and its third since December 2, 2010 when jet fuel surged above $95 per barrel.

Prior to December, the last increase was in June 2008. There were three fuel surcharge cuts — in September and November 2008 and in February 2009.

"The adjustments will offer only partial relief from the higher operating costs arising from increases in the price of jet fuel," the airline said.

"Singapore Airlines will continue to closely monitor the price of fuel and keep surcharges under constant review."

Standard & Poor\’s Equity Research Aviation analyst Shukor Yusof said SIA had little option other than to raise fuel surcharges to offset the effect of escalating jet fuel costs.

"The continual rise in oil prices are now at a stage where they are threatening the financial health of most airlines if not all. If you look at jet fuel prices, it has exceeded a level that most airlines can contain," he told AFP.

"So the implication pretty much is that in order to remain profitable and in order to be solvent, I think airlines have very little choice other than to impose fuel surcharges."

Shukor added that SIA would be hit especially hard should jet fuel prices continue to rise due to its fleet of large planes, which consume more fuel.

"If it goes on climbing higher and higher, than its going to be tough for airlines, especially SIA which runs a fleet of wide-body aircraft," he said.

SIA\’s operating fleet as of December 31, 2010 comprised 109 passenger aircraft, including 11 A380 superjumbos, its third-quarter earnings report released in January stated.

The airline had in the report said rising jet fuel costs, along with US, European Union and South Korean antitrust fines were a major factor dragging down its third-quarter earnings.

Jet fuel prices had also been the company\’s biggest expense during the October-December quarter, it said.

SIA\’s net profit in the period fell 29 percent to Sg$288.3 million ($225.30 million), down from Sg$403.7 million a year earlier.

Crude prices were mixed in late Asian trade Monday as traders tracked the supply situation amid ongoing unrest in Libya and awaited energy inventory data in the US.

New York\’s main contract, light sweet crude for April delivery, fell 19 cents to $104.83 per barrel while Brent North Sea crude for delivery in April gained 59 cents to $113.65.

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