BA customers face air fuel surcharge as oil prices rise

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The Independent Online

British Airways is to impose a surcharge on flights for the first time in its history following a surge in world oil prices.

British Airways is to impose a surcharge on flights for the first time in its history following a surge in world oil prices.

The airline announced yesterday that it is to impose a fuel levy of £2.50 on all flights with effect from tomorrow as a result of increased oil costs. Virgin Atlantic has not yet moved on the oil-price hike but said the situation was "under review".

Meanwhile the country's leading gas producer, BG Group, said bills were bound to rise, partly because gas prices were tied to movements in the oil market and partly because of supply shortages.

BA is facing a £100m rise in its fuel bill this year because of the dramatic rise in oil prices. The introduction of the surcharge coincides with the start of the summer season - traditionally BA's busiest and most profitable time of the year.

The surcharge, the first to be imposed in the airline's history, will raise around £45m if it stays in force for six months. A BA spokesman pledged that it would review the surcharge on a regular basis with a view to adjusting it "when appropriate".

However, the no-frills airline Ryanair, which is not increasing its ticket prices, attacked BA's move. "As usual, the first instinct of BA and other high-fare airlines is to gouge passengers," said Mic-hael O'Leary, the chief executive of Ryanair.

"It is unfair that passengers who have already bought and paid for tickets should now have to pay surcharges. After all, British Airways didn't offer these passengers refunds when fuel prices were falling over the past five years."

Ray Webster, chief executive of easyJet, said: "The decision to raise fares will be disastrously counter-productive for British Airways. Rather than taking steps to plug the hole in their cost base, higher fares will result in fewer people travelling, lower load factors and less revenue. If they want to fill their aircraft, BA should get their prices right. If they can't make money they should reduce capacity."

But BA defended the surcharge on the grounds that, being a long-haul airline, its aircraft spent longer in the air. Aviation fuel accounts for about 11 per cent of BA's operating costs - a percentage which is certain to rise further this year if the oil price remains high.

Ironically, news of the BA fuel surcharge came as oil prices briefly fell after Saudi Arabia, the world's biggest producer, urged Opec to increase output. They rose later in the day, however, as doubts set in about Opec heeding the call.

Brent crude rose by 64 cents a barrel to $36.61 (£20.84) while the price of US light crude increased by 47 cents to $39.40 - just 60 cents short of the 13-year high of $40 it reached last Friday.

BA stressed that it had been considering a surcharge for several days. Other airlines have already imposed surcharges. The Australian airline Qantas, one of BA's partners in the Oneworld alliance, has raised ticket prices by between A$6 and A$15 (£2.37 and £5.94) while Singapore Airlines and the German airline Lufthansa have imposed surcharges on freight customers. The Scandinavian airline SAS and Air New Zealand are considering surcharges, while Air France and the Dutch carrier KLM are monitoring the situation.

Frank Chapman, the chief executive of BG, said he did not believe the current high oil prices were sustainable. But he forecast that gas prices would continue to rise. In the first three months of the year they rose 5 per cent and Mr Chapman said: "By 2005 or 2006, the UK will be a net importer of gas and it will be coming from a lot further away and all that will put upward pressure on prices."

Centrica, the parent company of British Gas, disclosed on Monday that it had lost 220,000 customers so far this year because of its above-inflation hike in gas prices in January.

Although other gas companies followed suit, British Gas suffered the worst because consumer groups claimed it was abusing its dominant position and urged household customers to switch to other suppliers.