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Virgin Blue To Review Fares Rather Than Impose Further Across-the-Board Fuel Surcharges
Virgin Blue today announced that it is reviewing fares throughout its entire network, in light of continuing oil price increases, in an effort to avoid imposing a further across-the-board surcharge.
Oil prices continue to climb to record high levels, with jet fuel now over US$60 per barrel, up from around US$33 per barrel just 12 months ago. There has been a fundamental shift in global economic conditions affecting fuel and Virgin Blue believes the market will continue to see sustained high oil prices in the medium term.
In recent weeks, Virgin Blue has carefully considered all options, including the possibility of imposing a further fuel surcharge in line with other airlines around the world.
Brett Godfrey, Virgin Blue’s CEO said: “While this shift in world fuel prices has impacted our cost base, we continue to be committed to offering low fares and driving growth in new and existing markets. As such, we believe any cost recovery benefit we would gain from imposing a further fuel surcharge in certain markets would be offset by a decrease in demand.”
“Virgin Blue believes a combination of the existing fuel surcharges and a fare review will be a better solution to mitigate the impact of the substantial increase in fuel costs,” Mr. Godfrey continued. ”Virgin Blue has therefore decided to review its fares across the entire network, and this route by route analysis will help minimize the impact on our key demand sensitive routes.”
The fare review is already underway and will continue over the next few weeks. It will take into account a variety of factors including customer price sensitivity, load factors and fuel consumption per route.
The existing fuel surcharge of $10 per sector for Virgin Blue flights and $20 per sector for Pacific Blue flights will continue to apply.
Mr. Godfrey said: “Virgin Blue’s entry into the Australian domestic market has resulted in a substantial decrease in ticket prices in real terms over the last four years, and that continues today. We remain committed to keeping airfares as low as possible. While Virgin Blue sees no indication of an immediate downturn in oil prices, we reaffirm our promise to review any increases and charges and, as clearly demonstrated in the past, we will immediately remove them if fuel prices return to previous levels.”