Fuel relief? Qantas cuts surcharge, as oil drops

Qantas cuts fuel surcharges, in one of the first signs the pressure of rising oil costs may be easing

Qantas has cut its fuel surcharges on passenger tickets, in one of the first signs the pressure of rising oil costs may be easing.

The airline has led business in upping its fuel surcharges to keep pace with rising jet fuel costs on the back of skyrocketing oil prices.

But Qantas says oil prices have now eased enough to reduce ticket prices booked from Thursday.

"Although the price has fallen below US$100 a barrel in recent days, oil remains very volatile and a major challenge for the airline industry," Executive General Manager John Borghetti says.

Qantas has significant hedging arrangements to lock in fuel costs at lower prices, but Borghetti says the company’s fuel bill this year will still be $1.3 billion higher than in 2007-08.

The surcharge on flights to the United Kingdom and Europe will fall from $210 to $190, while flights to the Americas and Africa will be cut by $15.

Fares on domestic and regional services will also be cut by 2 to 3 percent.

Oil prices have fallen below US$90 a barrel to eight-month lows in recent days, but overnight shot up again as the market speculated about possible cuts to output by the OPEC group of oil producers.

Producers are concerned the current global economic downturn could reduce demand for oil and hit their own bottom lines, arguing for production cuts to protect revenue.

Economists are also warning Australian fuel consumers the sharp drop in the value of the Australian dollar due to the markets fallout could negate any cut in oil costs at the pump.

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