Air Canada adds fuel surcharge as oil prices soar

May 9, 2008

Air Canada has tacked fuel surcharges on to fares for domestic flights and U.S. routes to cope with crude prices that soared above US$126 a barrel on Friday for the first time, the carrier said.

For North American flights, the surcharge is $20, $40 or $60 depending on the distance flown, effective immediately, Air Canada spokeswoman Angela Mah said.

That is in addition to surcharges already in place for flights overseas, Ms. Mah said.

"What it boils down to is that raising fares is not sufficient to offset the total cost of fuel. There is no single fix, i.e. raising fares, to this unprecedented situation, which is affecting all sectors of the economy," she said.

On Thursday, Air Canada, the country's largest airline, said first-quarter fuel costs increased by $130-million from the same period a year earlier.

The transborder surcharge matches those instituted recently by U.S. carriers, Ms. Mah said.
It is not known if the extra cost will discourage some travellers from flying Air Canada, which has enjoyed a strong domestic market, in contrast to U.S. carriers, Research Capital Corp analyst Jacques Kavafian said.

The impact could be felt immediately, Mr. Kavafian said.

"We'll see how it goes, but if the market holds up, it's good for them," he said.

Mr. Kavafian pointed out that Air Canada's main domestic competitor, WestJet Airlines Ltd., has yet to institute a fuel surcharge.

WestJet executives said last week they were considering a surcharge, but did not specify an amount.

Oil settled at a record US$125.96 a barrel on Friday, up US$2.27, after jumping above US$126. That is more than twice the price of a year ago.

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