Thursday, April 14, 2011

AirAsia's creative solution to high fuel price

Kuala Lumpur: AirAsia Bhd (5099) may not have imposed fuel surcharge amid a slew of increases by other carriers, but the budget carrier has recently hiked up certain ancillary charges.

On February 21, the budget airline revised upwards charges for super-size baggage, Pick A Seat and Hot Seats (seats with more leg room).

A quick survey done by Business Times showed that AirAsia had increased its super-sized baggage charges by RM15, Pick A Seat by RM1, Hot Seats by RM10, while its convenience fee (for those paying via credit card) is up by RM3.

For example, a passenger flying to Bali (return), who picks a seat and purchases the minimal baggage allowance available (0-15kg), will now pay RM12 and RM70 respectively, from RM10 and RM40 previously.

And if you pay by credit card, you will be charged a convenience fee of RM16 for each transaction per person, compared with RM10 before.
Asked if the increase was a way to deal with the high price of jet fuel, AirAsia regional head of commercial Kathleen Tan agreed that it was.

"Yes, you can say that. However, AirAsia does not impose fuel surcharge, unlike other airlines, and our ancillary products are wholly optional. Guests only need to purchase what they opt-in for," Tan said via e-mail in response to questions sent.

AirAsia X also appears to have imposed similar increases.

For example, charges for a flight to Christchurch show that a Hot Seat (one way) costs RM10 more at RM110, and a 0-20kg baggage allowance costs RM65, up from RM50 previously.

According to the International Air Transport Association's jet fuel price monitor, as at April 8, aviation jet fuel stood at US$143.1 (RM432) per barrel.

In February, AirAsia co-founder and chief executive officer Datuk Seri Tony Fernandes told AFP that the carrier could impose a RM20 fuel surcharge if it has to begin paying US$100 (RM303) a barrel.

At AirAsia's last results briefing, Fernandes said the airline has hedged 21 per cent of its fuel requirements at US$92 (RM278) up to the second quarter of 2011.

When the airline first introduced fuel surcharge in 2005, it charged RM5 per sector for flights within Peninsular Malaysia, RM10 per sector for flights to Sabah and Sarawak and RM25 per sector for regional flights.

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