Lufthansa, Air France, Air Berlin Increase Fuel Charges

June 11, 2008

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Germany's two biggest airlines, Lufthansa and Air Berlin, plan to raise the surcharges they impose on passengers to offset high fuel costs for the second time in a month as oil hovers above USD$130 a barrel.

Lufthansa will charge EUR24 euros (USD$37.19) each way on domestic and European routes from June 16, while Air Berlin will charge EUR25, both increases of EUR3, the carriers said on Wednesday.

The long-haul surcharge will rise by EUR10 each way to EUR92 at Lufthansa and EUR95 at Air Berlin.

Air Berlin added that surcharges to medium-haul tourism destinations would rise EUR3 to EUR35, with flights to Egypt, Madeira and the Canary Islands seeing surcharges up EUR5 to EUR45.

"In recent weeks, crude oil and kerosene prices have continued to rise... In response to this development, Lufthansa is adjusting its fuel surcharges on its flights," Lufthansa said.

Air France also said on Wednesday it will increase its fuel surcharge by EUR2 on domestic flights, EUR5 on medium-haul flights, EUR10 on long-haul flights and EUR20 on very long-haul flights from June 13.

"Half of this increase will be withdrawn as soon as the price per barrel remains steady under USD$120," Air France said in a statement. "The remaining increase will be withdrawn as soon as the price per barrel remains steady under USD$115."

Lufthansa last increased its fuel surcharges on May 14 and repeated on Wednesday it would monitor oil prices and make further adjustments depending on jet fuel price trends. Its smaller German competitor last raised them on May 16.

UK rival British Airways last week lifted its fuel surcharges to GBP16 pounds (USD$31.29) each way on short-haul routes, GBP78 on long-haul routes of less than nine hours and GBP109 each way on flights of over nine hours.

The price of oil hit a record USD$139.12 a barrel on Friday and was trading at over USD$133 on Wednesday. Airlines have said rising fuel costs will hit profits this year despite efforts to hedge against increases, with some carriers looking to trim capacity and cut services to stem losses.

The International Air Transport Association (IATA) said this month that the global airline industry was set to record a loss this year, possibly as high as USD$6.1 billion, as carriers struggle with sky-high fuel prices.

Commerzbank senior commodity analyst Eugen Weinberg said on Wednesday the oil price could peak at around USD$150-170 in the next three months.

Lufthansa said last week it expected its fuel bill to jump to EUR5.7 billion this year from EUR3.9 billion in 2007. In April, Lufthansa had estimated 2008 fuel costs of EUR5.26 billion and gave a range of scenarios from EUR4.88 billion with oil at USD$89 a barrel to as much as EUR5.71 billion at USD$134.

Air France-KLM last month warned it would have to expect a EUR1.1 billion rise in fuel costs, squeezing profits this year and forcing it to find EUR150 million in savings.

Air Berlin meanwhile abandoned its full-year profit forecast last month and said it was scrapping unprofitable routes. It said it was reviewing its entire long-haul network as it tries to weather the higher cost of fuel.