License article

Qantas lifts fuel surcharge on partnered routes

Qantas Airways has lifted the fuel surcharge on flights from Australia to Europe, much of Asia and the Middle East for the first time since July to bring the fees in line with alliance partner Emirates at a time of continued high fuel prices and a weaker Australian dollar.

The Australian airline on Wednesday told travel agents and other industry partners of the fee increases. A one-way economy-class ticket to Europe will now attract a fuel surcharge of $270, up 6 per cent from the previous fee of $255. A one-way business class ticket to Europe would attract a fuel surcharge of $495, up 11 per cent from the previous fee of $445. The new surcharges are effective for bookings made after January 23.

Qantas requires passengers redeeming its classic frequent flyer rewards to pay the fuel surcharges in addition to the points required.

The changes to the fuel surcharges come amid struggles in its loss-making international business from tough competition from Asian and Middle Eastern carriers in particular. The airline is expected to report a half-year loss of up to $300 million next month and has launched a strategic review that could result the sale of stakes in key assets, like its frequent flyer program or Jetstar.

The new fuel surcharges will apply to some of the international routes where it has been struggling the most, such as Singapore and Europe. But for Asian flights, routes not shared as part of the Emirates alliance such as Hong Kong, Shanghai, Tokyo, Manila and Jakarta will not be affected whereas the costs of flying to Singapore, Kuala Lumpur and Bangkok will rise.

The fuel surcharges on trans-Tasman flights and flights to the United States, Chile and South Africa will also remain unchanged, because the latest increase is targeted at keeping surcharges in line with Emirates.

Qantas is hoping to return its international business to a break even position by the 2014-15 financial year but some analysts think that is becoming a stretch target in light of strong competition and weak market conditions. The airline's credit rating has been downgraded by Moody's and Standard & Poor's to "junk" levels because the competition from Virgin Australia Holdings means it now is facing challenges on both the domestic and international fronts.

In December, chief executive Alan Joyce said Qantas would slash 1000 jobs over the next 12 months and cut costs by $2 billion over the next three years. On Tuesday, the airline announced the loss of 35 jobs at its ground handling operations in Hobart. Those jobs will be outsourced to a third-party contractor as part of QantasLink taking over that route from the mainline brand.