Vueling and Ryanair decided not to add fuel surcharge

waldova · Post by **waldova** » 15 Nov 2004, 12:01

According to www.lukor.com:

During the last days Iberia, Spanair and Air Europe decided to add a fuel surcharge to their ticket price. In a reaction of this Ryanair and Vueling announced that they will not add a fuel surcharge and will keep their low prices for the costumer.

Ryanair announced never ever to add such a surcharche on any of their tickets.
Vueling announced not to add a fuel surcharche for the coming months. Carlos Muñoz, one of the Vueling board members, said this is possible because the strategic plan of Vueling is so recent that it already accounted for high fuel prices and that they are also flying newer types of airplanes which are more fuel efficient than other types of airplanes.

You can see the article on the following link:

http://www.lukor.com/not-neg/sectores/0410/14190705.htm

waldova · Post by **waldova** » 15 Nov 2004, 12:02

I think this is a good choice of both companys. When you look at for example with Virgin, they ask a 8 euro fuel surcharche on a one way ticket. This is in my eyes really a lot. But it is smart, because passengers only look at the ticket price and they don't look at the taxes. Once they have chosen the ticket they take the ticket and they don't look at the taxes. If you know that on the route to Valencia the cheapest ticket with Virgin is 19 Euro and with Vueling 35 Euro, then you would expect Virgin to be much cheaper. Well you get finally a ticket with Virgin for a round trip of around 80€ and with Vueling of 97€. This is a proof that the taxes of Virgin are high. In my eyes, a little bit exagerated.

Avro · Post by **Avro** » 15 Nov 2004, 20:27

It doesn't surprise me that FR doesn't ask an additional fee because of high oil prices.

If I remember well, FR "freezed" (I don't know if hedged is the correct word) the price of the fuel they buy and this for 90% of their needs or something like that. So for the moment they are quite safe.

On the other hand it wouldn't surprise me if Vueling would introduce a small surcharge in a couple of months if the price will stay that high.

Chris

Buzz · Post by **Buzz** » 15 Nov 2004, 23:37

Avro wrote:It doesn't surprise me that FR doesn't ask an additional fee because of high oil prices.

If I remember well, FR "freezed" (I don't know if hedged is the correct word) the price of the fuel they buy and this for 90% of their needs or something like that. So for the moment they are quite safe.

FR has hedged their fuel at around $25 I believe, but it ended end of october... They will not hedge more untill prices fall to 'normal' level.

JetB · Post by **JetB** » 16 Nov 2004, 08:17

Ryanair doesn't ad an additional fuel fee, but Virgin isn't the only one that is trying to keep the base ticket price low.

You cant call Ryanair's credit card free hardly normal !.
And what about a wheelchair levy ?

waldova · Post by **waldova** » 16 Nov 2004, 09:33

Buzz wrote:
Avro wrote:It doesn't surprise me that FR doesn't ask an additional fee because of high oil prices.

If I remember well, FR "freezed" (I don't know if hedged is the correct word) the price of the fuel they buy and this for 90% of their needs or something like that. So for the moment they are quite safe.
FR has hedged their fuel at around $25 I believe, but it ended end of october... They will not hedge more untill prices fall to 'normal' level.

Sorry, I don't understand. Could you explain me what you mean with FR hedging their fuel at around 25$. Does this mean that FR had a agreement with a fuel company, like a contract and that because of this their fuel was a standard price?

eurojet · Post by **eurojet** » 16 Nov 2004, 09:51

Hi Waldova,

indeed, it is a contract between RYR and let's say BP, where BP agrees to sell RYR during one year fuel at USD 25.00 a barrel, whatever the price of fuel is (if fuel goes down to USD 25.00 a barrel, RYR will pay USD 25.00 though. These contracts do not come for free though, there is an additional risk premium to those contracts (calculated using the Black and Scholes model, if my memory serves me right). Future, options, swaps and its pricing calculation are pretty complicated stuff. Sabena got it wrong on a couple of occasion's, hedging too high, oil price drops, and Sabena is forced to buy fuel at a price which is higher than the market price.
Best way to compare is with a mortgage: if you take a fixed rate, you know what you will pay, but you can be out-the -money if the market interest rate goes down, and your rate is not adjusted. You are in-the-money if your rate remains stable and the market rate is higher. A floater will go up and down with the market rate. With fuel futures and options, same story, you are in our out the money.

waldova · Post by **waldova** » 16 Nov 2004, 09:54

So it is a risk you take when you make that contract, like betting if I understand. So you can win a lot of money by doing it but you could also lose a lot of money if you are wrong. Like a big bet then?

By the way thank you for you quick answer!

website-info · Post by **website-info** » 16 Nov 2004, 09:59

and just to make the point even stronger Ryanair have applied extra titles in reaction to the fuel surcharges of other carriers to three of its 737-800s

EI-CSF with "Dites NON a la surchage kerosene d'Air France"
EI-CTB with "Say No to British Airways fuel surchage"
EI-DAD with "Nein zum Lufthansa Kerosinzuschlag"

see the first pic at

http://www.skyliner-aviation.de/viewpho ... picid=1505

Rgds
Tony

eurojet · Post by **eurojet** » 16 Nov 2004, 09:59

It is indeed a bit like a casino, you can get it terribly wrong! If you like options, futures, hedgings, etc .. just walk into your KBC or Dexia office and they will tell you the wonders.. Or talk to anyone who did some hedging on Lernhout and Hauspie shares back in the good old days, they can tell you how you can lose money by predicting the future ... Small advise from someone who works it nearly daily: stay away from it, it hurts!!