WestJet joins Porter in reducing fuel surcharge

As fuel prices ease, some Canadian airlines are lowering fuel surcharges, while others are taking a wait-and-see approach.

WestJet, for one, has reduced its fee on companion vouchers from $60 to $40 per one-way or round-trip booking, according to a new report from the Canadian Press.

The temporary surcharge applied to the WestJet Rewards loyalty program was first introduced in April to address rising fuel costs brought on by the closure of the Strait of Hormuz.  

“Fuel is the largest contributor to airline operating costs, and a temporary surcharge helps us manage the recent surge in fuel prices,” the airline said in a press statement at the time.

PAX reached out to WestJet for comment but did not hear back by press time.

Market normalizes

It appears the market is normalizing as the busy summer travel season begins.

Earlier this week, Porter Airlines cut its fuel surcharge for new reward flight bookings in half, bringing it down to $20, and says it will continue adjusting prices if market conditions improve.

Air Canada, meanwhile, says it absorbs fuel costs through its regular fare structure, although a fuel surcharge still applies to packages sold with Air Canada Vacations, reports the Canadian Press.

PAX has contacted Air Canada Vacations to see if any changes are coming to its fuel surcharge policy.

Flair Airlines, meanwhile, has not made any changes to its pricing but says it continues to monitor fuel costs and will adjust fares if necessary, CP reports. 

The decline in fuel prices follows a drop in crude oil, which has returned to about US$70 a barrel after the U.S. and Iran reached a framework agreement aimed at ending a conflict that had disrupted the region since late February.

READ MORE: Porter reduces fuel surcharge as market normalizes

Earlier this spring, crude briefly climbed above US$100 a barrel as shipping through the Strait of Hormuz—a key route for roughly 20 per cent of the world's oil supply—was disrupted.

Despite continued uncertainty in the Persian Gulf, aviation fuel prices have started to come down.

According to the International Air Transport Association, the average price of jet fuel in North America fell 23 per cent last week compared with a month earlier, though it remains nearly one-third higher than the same time last year.

A substantial toll

The rise in fuel prices earlier this year added significant financial pressure to airlines, many of which passed those costs on to consumers through higher fares.

It seems travellers have largely continued booking flights despite higher prices.

READ MORE: U.S., Iran to open Strait of Hormuz; recovery will be slow, fares could stay high, airlines warn

Still, industry leaders say elevated fuel costs have taken a substantial toll on airline profitability.

Speaking at the International Air Transport Association (IATA) summit in Brazil earlier this month, IATA Director General Willie Walsh warned of the financial impact facing carriers worldwide.

"We expect average jet fuel prices to be 70 per cent higher year on year. And that will add $100 billion to our collective fuel bill this year," Walsh reportedly said, resulting in "wafer-thin" profit margins for the global industry of just two per cent.

In the United States, airlines collectively lost approximately $1 billion during the first quarter of the year, according to the U.S. Department of Transportation.

Capacity adjustments

Fuel costs have surged to more than twice what they were before the conflict in Iran began, prompting airlines to eliminate routes, end some seasonal service early, and implement surcharges.

Canadian airlines are also feeling the impact of these market pressures, which continue to influence capacity planning and scheduling decisions.

Recently, WestJet revealed it will reduce capacity by four per cent in September and by just under three per cent in October, extending a series of cuts first implemented during the spring travel season.

Air Canada, too, has made notable adjustments, removing select routes from its future schedule while shortening some seasonal services.

Summer’s good to go

At the same time, airlines have been reassuring customers that they have enough fuel to run a successful summer schedule.

In May, the Lufthansa Group’s Chief Commercial Officer Dieter Vranckx said that concerns about a fuel shortage in Europe in the coming months are largely unfounded.

"There are no signs from our suppliers that fuel supply will be at risk this summer,” Vranckx said in an interview, shared on the airline’s website.

READ MORE: WestJet reduces fall flight capacity amid rising fuel costs

Air Canada has also set the record straight, sharing in a June 2 email to customers that it is not running low on fuel and will operate summer as planned.

“Please be assured that we are fully expecting to operate our current summer schedule. While global fuel markets remain dynamic, Air Canada has a diversified and sophisticated fuel supply in place,” the email reads.

“There is no fuel shortage affecting our operations, including across Europe, and we do not anticipate any significant impact through the summer.”

Air Transat has shared a similar message.

"Working in collaboration with its partners and suppliers, and supported by a robust supply chain, Air Transat has secured the fuel required to operate its full summer program," the airline stated in a press release. "Operations are running as planned."

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