International fuel surcharge jumps to Level 21 — first increase in 3 months
September MOPS average hits $149.29 per barrel, up 25.4% from prior month
International fuel surcharges have been raised again as oil price volatility resurfaces in the wake of the prolonged Middle East war. After the United States and Iran signed a ceasefire MOU that helped push surcharges lower for three consecutive months, renewed tensions between the two countries are once again weighing on the airline industry.
Korean Air said Tuesday that fuel surcharges for international flights departing South Korea and ticketed in September have been set at Level 21.
Under the new level, a one-way surcharge of 354,000 won ($250) will apply to the longest routes, including New York, Dallas and Boston. That is 36.6 percent higher than the 259,200 won charged in August, when Level 14 was in effect.
The increase reflects a 25.4 percent rise in the Singapore jet fuel price (MOPS) — the benchmark used to calculate monthly international surcharges — which averaged $149.29 per barrel over the July 16 to Aug. 15 reference period, up from $119.06 the previous month. As MOPS climbed, the Ministry of Land, Infrastructure and Transport raised the applicable surcharge level accordingly.
International fuel surcharges are a system allowing airlines to pass on a portion of rising fuel costs through ticket prices. As global oil prices stabilized, surcharges fell for three straight months. The surcharge scale runs 33 levels in total; it hit the maximum Level 33 in May amid the fallout from the Iran war, before easing to Level 27 in June, Level 19 in July and Level 14 in August.
The renewed rise in oil prices is hitting airline earnings. South Korean carriers posted strong top-line growth in the second quarter on the back of robust passenger demand, but high fuel costs and a weak won sharply eroded profitability.
Korean Air posted second-quarter sales of 5.02 trillion won, up 25.9 percent year on year and a record for any second quarter. However, operating profit fell 34.4 percent year on year to 261.8 billion won, limited by the impact of high fuel costs.
Low-cost carriers were hit even harder. Jeju Air set a quarterly sales record of 441.7 billion won in the second quarter but posted an operating loss of 52.4 billion won, widening its deficit by 16.4 percent. Jin Air and Air Busan recorded operating losses of 73.1 billion won and 35.5 billion won, respectively, swinging to losses or seeing their deficits expand sharply. T'way Air logged a cumulative operating loss of 162.8 billion won for the first half of the year.
eyre@heraldcorp.com
