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Aer Lingus reaps the spoils of a global oil glut as passengers pay sky-high fuel levies

Fuel costs have gone through the floor, but customers aren’t getting much benefit.

Image: Artur Widak/PA Wire/Press Association Images

AER LINGUS EXPECTS to reap a €50 million-plus windfall this year from falling oil prices but has no apparent plan to give long-haul passengers any relief on its fuel levies.

The airline has been accused of gouging fliers on its lucrative transatlantic routes for failing to pass on its savings from plunging fuel costs – despite being quick to jump on any price rises in the past.

The airline’s fuel surcharges on many long-haul flights remain at the same levels set in mid-2008, when oil was trading at nearly 3 times the price it has been since December.

Aer Lingus, which is nearly 30% owned by Ryanair with another 25% in taxpayer hands, introduced a series of hikes to its fuel surcharges in that year after what it described as a “record upsurge of oil” over the earlier weeks.

The global oil price shot up to about $140 a barrel midway through 2008, but it is now trading at nearly one-third of that – about $50 a barrel.

The price of jet fuel very closely tracks the crude oil price and it has also plunged over the past 4 months on the back of a global glut in production.

Jet Fuel Source: International Air Transport Association

Meanwhile, passengers on return flights from Dublin or Shannon airports to the US east coast now hand over €150 for the surcharge, while those flying further afield pay up to €216 on a return ticket.

The fees to cities like New York, Boston, Washington or Chicago remain at the same level they were in July 2008, when the oil price hit historic highs.

Aer Lingus 3 Source: TheJournal.ie

Fueling windfall profits

Earlier this week, Aer Lingus said it expected to save €52 million on its 2015 fuel bill because it had been able to buy 40% of what it needed for the year ahead at a heavy discount on the figures it had been using for its financial forecasts.

It bought the latest share for over 25% less than what it was paying before October, at which stage it had already locked in prices for 50% of the fuel it needed for this year.

Fuel costs make up about one-quarter of all the airline’s running expenses and the €52 million saving could add double-digit growth to its bottom line.

The airline on Friday knocked back a second buyout offer from British Airways parent IAG which valued the company at €1.28 billion. It recently said it expected its 2014 profits to be ahead of the €61 million it delivered in 2013.

No price cuts unless forced

Consumers’ Association of Ireland chief executive Dermott Jewell said there was an “urgent need” for companies like Aer Lingus that were reaping the benefits of low oil prices to pass savings on to their customers.

DERMOT JEWELL Dermott Jewell Source: Graham Hughes/Photocall Ireland!

“The efficiency with which price increases are rolled out is breathtaking – so it beggars belief that there is a complete absence of even discussing a reduction in prices now that they have the opportunity to do it,” he said.

You definitely come away with the clear understanding that they are doing nothing unless they are forced or embarrassed into doing it.”

When asked if Aer Lingus had any plans to cut its fuel surcharges in line with the drop in oil prices, a spokeswoman said the company would only “continue to monitor the situation”.

“Aer Lingus hedges fuel costs in advance so market benefits take some time to realise,” she said.

READ: Aer Lingus named among the world’s top safest low-cost airlines >

READ: Oil is cheaper today than it has been for nearly 6 years >

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About the author:

Peter Bodkin  / Editor, Fora

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