Hard on the heels of Jetstar's about-face on allocated seating comes news that Qantas may this week "make adjustments" to its unpopular fuel levy. Both moves come after expressed outrage by passengers. I used to think that banking was the business least concerned with what customers want. It's a fiasco that customer fury should be a driving force behind service industry decisions.

In place since 2004, the Qantas fuel levy has subsequently been raised six times, the most recent impost boosting the surcharge on flights to Europe to $98 per sector and to $31 a domestic leg. But when fuel prices drop, as they have since August, does that levy fall? Not at all; not until now it seems, as the airline simultaneously hikes domestic fares!

Only last month the airline was refusing to cut the surcharge, its chief financial officer arguing, "we would need to see a sustained reduction in fuel prices before we could even consider reducing our fuel surcharges ... it's not like filling your car up on the spot". (The wholesale petrol price has dropped 21 cents a litre since early August.) Yet recent analysis indicates the high levy has clipped passenger's wings. Singapore Airlines announced at the weekend that it would cut its fuel levy by $US2 to US$8. Virgin Blue's fuel levy has remained unchanged since April 2005.


Business is soaring while the fuel levy savages passengers

Airlines do need to plan ahead and the oil price does fluctuate. But isn't that what hedging is all about? And huge as they may be, fuel costs have hardly brought Qantas to its knees. Reporting a healthy full year profit before tax of $671 million for the year ended 30 June 2006, Qantas CEO Geoff Dixon said fuel costs in that financial year had been $2.8 billion, a 45.1% on the previous year. "While nobody can predict how high fuel prices will go or for how long they will stay at these levels, we are forecasting a total fuel bill of $3.9 billion for 2006/07," he said, adding that the current year will be tough.

Well, how tough exactly? While Qantas business is reported to be booming, oil prices have slid to around $59 a barrel compared with $70 earlier in the year. Meanwhile the fuel surcharge has reaped an estimated $19 million on domestic flights alone in the past two months. To use an aviation term, I now wait to see exactly what "trim" the airline applies to this unpopular levy.