Soaring oil prices are bound to make you sweat if your annual fuel consumption exceeds 80 million gallons. With its mind sharply focused on the world market trends, Air Mauritius is feeling the heat but has not yet turned into a panic station.

Just like other airlines worldwide, it will fly through a rough patch but preventive measures taken by management seem to have weathered the storm. The company’s hedging policy has partly protected the company against the rise in oil prices. However, Air Mauritius still finds itself with a residual exposure of $ 16,5 million (around Rs 476 million). This figure represents the additionnal fuel bill resulting from the soaring oil prices.

Instead of increasing air ticket prices, Air Mauritius and the other members of the Board of Airliners (BOA) have opted for another route : they will impose a fuel surcharge on every ticket. The level of the applicable surcharge varies from airline to airline but will nevertheless spare passengers a unilateral 7% increase in tariffs. While most airlines are making their clients pay for their additional fuel bill, Air Mauritius has decided that its customers will not.

<B>Fuel surcharge</B>

“We can’t pass the buck to our passengers. It is unthinkable for them to fork out Rs 476 million. That’s why we will take on 80 % of the residual exposure” says a member of the Air Mauritius management team.

Air Mauritius passengers will not be totally spared from the fuel crisis. They will have to pay surcharges on their tickets amounting to a total of $ 4,5 million (Rs 130 million) representing a fifth of the additional fuel bill.

Customers flying on long haul flights (Europe) will pay a surcharge of 19 euros (Rs 620) for a one way ticket or twice this amount (Rs 1240) for a return. Passengers on middle haul flights (Asia and South Africa) will fork out 14 euros (Rs 457) for a one way ticket or 28 euros (Rs 914) for a return. Finally, those using regional services (Réunion, Rodrigues and Madagascar) will need to pay a surcharge varying between 10 and 12 euros (between Rs 326 and Rs 391) per leg. The rupee conversions are based on yesterday’s exchange rates and are bound to fluctuate.

“We will remove this surcharge as soon as oil prices fall again and settle around the $ 26 to $ 28 per barrel mark” assures a senior Air Mauritius source.

After peaking at a record $49.40 a barrel on Aug. 20, crude oil prices have dropped 11 percent. On Friday, light crude for October delivery was at $43.18 on the New York Mercantile Exchange. Although last week’s 7.6 percent drop was the biggest weekly decline in a year, analysts fear in a new surge in prices. Yesterday, they edged higher as Iraq’s oil exports continued at more than 30 percent below normal after sabotage attacks on pipelines.

The Jet A1 bill represents the biggest chunk of Air Mauritius’s operating costs. Passenger traffic (including those ferried by helicopters) amounts to 80% of the company’s revenue, against 13% for air freight and 7% for other activities. The national airline carried a total of 1 049 157 passengers last year, around 60% of the local air traffic.

A collective sigh of relief can also be heard at Air Mauritius Centre following the timely interruption of flights to Brussels, Vienna and Munich. These operations were far from profitable and would have become a heavy burden had they continued in the current climate.

“These were long haul flights with high operating costs and little revenue. Were these flights still on, we would have been on our knees at this point in time” explains a member of the Air Mauritius management team.

Air Mauritius is one of the biggest users of fuel in Mauritius. It consumes around 44 million gallons of Jet A1 locally every year. Another 36 million gallons are pumped into the tanks of its aircrafts at the 25 destinations it serves.