Japan: Bye bye, fuel surcharge

Japan’s airlines are set to remove fuel surcharges with oil trading around a 12-year low, ending a decade of high jet kerosene costs that had added as much as 66,000 yen ($563) to the price of a round-trip ticket to the US or Europe. The current price of Singapore kerosene is below the minimum level for adding surcharges, Hiroshi Hasegawa and Osuke Itazaki, analysts in Tokyo at SMBC Nikko Securities Inc., wrote in a Jan. 15 report. Airlines are cutting fuel surcharges as oil prices slump amid China’s economic slowdown and an expected bump in supply as Iran sanctions are lifted. The surge in prices since 2004 had turned fuel into airlines’ single largest cost. “With Singapore kerosene prices breaking significantly below the lower bound of the fuel surcharge table, we think airlines could enjoy major earnings advantages if fuel prices remain at current levels,” Hasegawa and Itazaki wrote in the report. ANA Holdings says on its website that if the two-month average of Singapore kerosene-type jet fuel falls below 6,000 yen for flights originating from Japan, or below $60 for flights originating elsewhere, then it won’t collect a fuel surcharge. JAL sets the same limits. If Japanese airlines do remove surcharges, they would merely be catching up with some of their counterparts elsewhere.<br/>