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Azri

MH Surcharge

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I have been searching for the best fare for my next holiday and it appears that MH still impose its surcharge on the supposedly low fare. Its so frustrating to finally find out that the total fare for most sector is much higher after the surcharge added. (such an anti- climax when you initially think that you get the best fare on their website)

 

After checking with few airline website such as SQ, QR and EK it appears that only MH still impose the surcharge!

 

My question is;

Why MAS is still imposing surcharge ? (despite the current oil price) and;

When wil this surcharge be abolished? What makes surcharge?

 

Despite being a die hard fan of MAS, I have recently decided to fly on Qatar Airways not only due to their lower price but also based on the fact that they use far superior planes with excellent inflight product-oh did I mention about the food on regional flight-*sigh*. (Case of point: flight between KUL and DPS).

 

Honestly despite being a big fan of MH, at the end of the day its all about the fare and what kind of equipment airlines are using. For me if MH doesn't use its B744/B772 to the destination I am flying, I have no choice but to fly with their competitors.

 

 

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My question is;

Why MAS is still imposing surcharge ? (despite the current oil price) and;

When wil this surcharge be abolished? What makes surcharge?

 

MH had hedged 48% of it's fuel at USD102. So while the price of fuel is now down to below USD40, MH is still paying USD102 for the fuel and therefore can't afford to remove it's fuel surcharge. Fuel hedging is a gamble that just didn't pay out for MH this time.

Edited by Alan B.

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MH had hedged 48% of it's fuel at USD102. So while the price of fuel is now down to below USD40, MH is still paying USD102 for the fuel and therefore can't afford to remove it's fuel surcharge. Fuel hedging is a gamble that just didn't pay out for MH this time.

 

 

Alan,

 

I unerstand the hedging strategy for airlines. But isn't there limited time for such practice? Like 6 months in advance or so. Any idea how far ahead MH hedge their fuel? When can we expect this surcharge be abolished?

 

Thanks.

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MH had hedged 48% of it's fuel at USD102. So while the price of fuel is now down to below USD40, MH is still paying USD102 for the fuel and therefore can't afford to remove it's fuel surcharge. Fuel hedging is a gamble that just didn't pay out for MH this time.

 

 

Too early to tell Mr Alan.....we never know how much the fuel would be next year....I am sure they are using a very competitive hedging tool. Infact, the hedging is benchmarked aganst other carriers and MAS certainly has calculated the risk!

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MH had hedged 48% of it's fuel at USD102. So while the price of fuel is now down to below USD40, MH is still paying USD102 for the fuel and therefore can't afford to remove it's fuel surcharge. Fuel hedging is a gamble that just didn't pay out for MH this time.

 

48% of fuel use in 1, 3, 6 or 12 months is hedged while oil price was $102/barrel?

 

Understand airlines in China lost very badly in oil hedging.

 

:drinks:

 

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Alan,

 

I unerstand the hedging strategy for airlines. But isn't there limited time for such practice? Like 6 months in advance or so. Any idea how far ahead MH hedge their fuel? When can we expect this surcharge be abolished?

 

Thanks.

 

I don't know when the hedge ends. The figure I got was taken from the Malaysia Airlines Blog. It is from a letter Idris Jala sent to The Edge and published on 15th November 2008.

 

Fuel Surcharge

 

In recent weeks, fuel prices have fallen and many customers are asking the question: When will Malaysia Airlines reduce its fuel surcharge?

 

Fuel surcharge only provides us partial relief from the increased jet fuel cost, which remains high and volatile despite the recent correction. On average, the fuel surcharge that we impose only recovers about 40% of the fuel cost. Despite this, we have already reduced fuel surcharge on routes where this is justifiable from a competitive standpoint. Our policy is that our fares combined with the fuel surcharge must be competitive. For instance, we have already reduced our fuel surcharge for our All-Inclusive Low Fares promotion.

 

Our competitor analysis on a route by route basis shows that some airlines who reduced or removed their fuel surcharge actually maintain relatively high fares whilst other airlines which did not lower their fuel surcharge have reduced their fares. Consequently, it is often observed that what the customers ultimately pay for is the same in both cases. In the final analysis, it is the total sum of the parts that counts. After all, customers pay for both the fares and fuel surcharge. The total amount must be competitive.

 

We are closely monitoring the situation so that fuel surcharge can be adjusted on a route-by-route basis for us to remain competitive.

 

Cost management

 

We are also doing things smarter, and faster at Malaysia Airlines. We are set to save RM1 billion this year through operational efficiency with various initiatives such as e-ticketing, fuel efficiency programmes, rationalization of facilities and customer service/ preference analysis.

 

Our cost management includes hedging. In the case of Malaysia Airlines, we have hedged about 48% of our fuel requirement at an average crude oil price of USD102 per barrel. As crude oil prices falls, there may be concerns of potential hedging losses from our fuel hedges. However, these potential losses are small, relative to the cost savings from our actual fuel consumption. Therefore, the decline in fuel prices is actually a net positive for Malaysia Airlines.

Edited by Alan B.

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Exactly, surcharge to mots of the destination turns out to be still very expensive. With the currently global economic slowdown, demand of air travelling has also been affected. When competetion intensify over the next few months, perhaps the management will consider reducing the surcharge. MH does not have a superior product on its fleets and i am afraid some of the loyalty customer may just prefer other airlines...when they have a choice of flying in a more advance machines with a greated inflight entertainment and etc etc

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Guest topolino

i fly often on the cpt - eze part of mh 201/202 - now with SA flying between jnb and eze, it is about USD200 cheaper for me to fly cpt - jnb - eze on SA vs the cpt - eze on MH, this is with added airport taxes and the SA fuel surcharge. if you think about it very little pax fly kul - jnb - cpt - eze, so mh sell most seats twice mean two people pay a fuel surcharge for the same seat on one flight

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i fly often on the cpt - eze part of mh 201/202 - now with SA flying between jnb and eze, it is about USD200 cheaper for me to fly cpt - jnb - eze on SA vs the cpt - eze on MH, this is with added airport taxes and the SA fuel surcharge. if you think about it very little pax fly kul - jnb - cpt - eze, so mh sell most seats twice mean two people pay a fuel surcharge for the same seat on one flight

 

Precisely, this route should be axed off long time....i guess mh still flies this sector for political reason ....

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i fly often on the cpt - eze part of mh 201/202 - now with SA flying between jnb and eze, it is about USD200 cheaper for me to fly cpt - jnb - eze on SA vs the cpt - eze on MH, this is with added airport taxes and the SA fuel surcharge. if you think about it very little pax fly kul - jnb - cpt - eze, so mh sell most seats twice mean two people pay a fuel surcharge for the same seat on one flight

 

The beginning of the end for MH CPT/EZE :pardon:

 

:drinks:

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"Our policy is that our fares combined with the fuel surcharge must be competitive. Our competitor analysis on a route by route basis shows that some airlines who reduced or removed their fuel surcharge actually maintain relatively high fares whilst other airlines which did not lower their fuel surcharge have reduced their fares.

 

Consequently, it is often observed that what the customers ultimately pay for is the same in both cases. In the final analysis, it is the total sum of the parts that counts. After all, customers pay for both the fares and fuel surcharge. The total amount must be competitive.

 

We have reduced our fuel surcharge on routes where this is justifiable from a competitive standpoint.

 

Amongst the routes are from Malaysia to Korea, Japan, Paris, Hong Kong and Singapore, and from other points of sales to other destinations.From Malaysia, the reductions are RM126 (USD36) to Korea, RM105 (USD30) to Japan, RM80.50 (USD23) to Paris, RM38.50 (USD11) to Hong Kong and RM28 (USD8) to Singapore. "

 

 

- Malaysia Airlines Commercial Director, Dato' Rashid Khan -

 

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Consequently, it is often observed that what the customers ultimately pay for is the same in both cases. In the final analysis, it is the total sum of the parts that counts. After all, customers pay for both the fares and fuel surcharge. The total amount must be competitive.

 

Then why don’t remove the surcharge and readjust the fare accordingly? Not that commission payable to travel agent on USD30 surcharge is significant.

 

:drinks:

 

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Then why don’t remove the surcharge and readjust the fare accordingly?

 

 

I second that KK Lee. As consumer the word "surcharge' does not carry any positive connotation, at least from my point of view. I'd rather see higher price initially on my screen rather than that unwelcoming "surprise" surcharge at the end.

 

Its just kills your excitement...

 

I thought the PR people in MH should know better. Enough already with the "LCCesque" approach.

 

MH is a Five Star Airline and lets hope it stays that way.

Edited by Azri

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"Our policy is that our fares combined with the fuel surcharge must be competitive. Our competitor analysis on a route by route basis shows that some airlines who reduced or removed their fuel surcharge actually maintain relatively high fares whilst other airlines which did not lower their fuel surcharge have reduced their fares.

 

Consequently, it is often observed that what the customers ultimately pay for is the same in both cases. In the final analysis, it is the total sum of the parts that counts. After all, customers pay for both the fares and fuel surcharge. The total amount must be competitive.

 

We have reduced our fuel surcharge on routes where this is justifiable from a competitive standpoint.

 

 

- Malaysia Airlines Commercial Director, Dato' Rashid Khan -

 

Now that the fuel surcharge matter has been addressed, can MH PR please explain the need for admin fee, and what the justification is for this given the era of e-ticketing?

 

I recall an article in The Star two or three weeks back where Bernard Francis was trying (but failing to do so satisfactorily)to explain what admin fee is for when questioned by biz journalist BK Sidhu and he seems to be struggling to justify it. He said something like it costs money to produce the ticket etc etc, but why isnt that all part and parcel of the base fare? Maybe previously one can charge admin fee for paper tickets, but given the virtually 100% use of e-tkts and mcuh automation these days, MH now seems keen to maintain it as a yield enhancing tool.

 

Can MH come clean and explain (minus the PR spin) this "admin fee"? (Are we paying for somebody's secretary and clerks?)

 

 

 

 

 

 

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