JET FUEL JUMPS TO $141 A BARREL

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By TESTCustomwebLP TESTCustomwebLP April 11, 2011 19:38

JET FUEL JUMPS TO $141 A BARREL

The cost of jet fuel has surged 35% since the start of the year to close at $141 a barrel last week. The price of crude oil rose above $113 for the first time in 30 months due to the continuing unrest in the Middle East and Libya. Many airlines have already been forced to raise it fuel surcharges to offset the cost but there is no telling where this will end and more surcharge rises may be on the horizon.

Airlines such as Jetstar and Tiger Airways are most exposed to the surging price of jet fuel as it is a bigger component of their overall costs. Analysts have stated that these airlines face stiff competition on domestic routes and weaker demand from leisure consumers who were tightening their belts.

Qantas has hedged 97% of its fuel for the rest of this financial year at a worst-case crude oil price of $101.25 a barrel.

Meanwhile………….

The European Union plans to unveil changes to its 2004 airline-passenger rights law today. In what the EU says is a reaction to criticisms from carriers and consumers. EU Transportation Commissioner Siim Kallas will announce measures “to clarify and strengthen enforcement” of the regulation, so consumers can exercise their rights more easily and airlines can gain more clarity about how the law will be applied.

The 2004 law currently compels all EU carriers operating world-wide and any airline leaving from EU airports to make payouts of as much as €600, per passenger to ticketed travelers who are denied boarding except under exceptional circumstances. It also covers cancellations and long delays.

The current legislation was tested to the limit last year during closures in April and May after the eruption of an Icelandic volcano. Millions of travelers were affected, and carriers argued that in all these situations they weren’t responsible for delays or cancellations, and so shouldn’t be compelled to pay compensation. In response Mr. Kallas is pushing near-term measures to beef up the existing legislation. The changes include clarifying rules for national enforcement bodies that police compensation claims in each EU country, and strengthening those offices’ mandate.

This could be bad news for airlines, the devil will be in the detail.

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By TESTCustomwebLP TESTCustomwebLP April 11, 2011 19:38
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