WestJet
Airlines, Air Canada tack on second fuel surcharge
in two months
August 15, 2005
For
the second time in two months, WestJet Airlines
attempted to lessen the blow of record-high oil
prices by tacking a fuel surcharge on the base
price of its fares.
And
while the move was mirroring a similar price increase
by rival Air
Canada on
Thursday, it remains to be seen how the surcharges
will effect demand on
Canada's dominant discount air carrier.
Starting Monday, Aug. 15, WestJet
(TSX:WJA) will increase its base fares on flights
by $5, $8 and $12 each way depending on the distance
travelled.
"As a low-cost airline, we find it particularly
unpleasant to increase our fares as we always endeavour
to keep travel as affordable as possible for our
guests," WestJet vice-president Hugh Dunleavy
said in a release.
"That being said, we are faced
with the current reality of record high fuel prices
and we simply
must adjust our fares to recover a portion of these
additional costs."
The price of oil - which is refined into a variety
of fuels including jet fuel - has set new record
highs in each day of trading this week, rising as
high as $67.10 in Friday trading on the New York
Mercantile Exchange.
The transportation sector is one of the first to
feel the pinch of higher oil prices, though it tries
to pass some of these costs on to customers in the
form of fuel surcharges.
WestJet said Friday that travellers can avoid paying
the higher fares by booking travel with the discount
carrier before Monday.
In June, WestJet levied fuel surcharges of $8, $10
and $15 per one-way ticket in order to try and claw-back
some of its unexpected fuel costs. The airline says
the cost of fuel has increased 40 per cent in the
first seven months of 2005 compared to last year.
The question remains what the cumulated effect of
the fuel surcharges on sales.
"At what point does this ever-increasing price
for an airline ticket turn off the travelling public?" said
airline analyst Ted Larkin with Orion Securities
in Toronto.
Though the summer months are traditionally the busiest
- and most lucrative - for the airline industry,
it remains to be seen how the steep rise in fuel
prices will affect the bottom lines of Canada's two
major carriers.
Though a visible sign of spreading
the pain of higher fuel costs, the surcharges do
not fully offset the
higher price of fuel, said Larkin, and are "a
small aid more than anything else."
Another analyst said because fuel surcharges are
now embedded in the ticket price, it is hard to say
if they will last, or be effectively handed back
to consumers in the form of seat sales in Canada's
fiercely competitive domestic air travel market.
"This time around you have to
hope, from the airline's perspective, that the
surcharge sticks."
On
Thursday, Air Canada (TSX:ACE.B) and its Jazz subsidiary
said they were raising ticket prices on
flights within Canada and to the United States in
response to record high fuel prices.
Source:
http:// www.canada.com
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