Airfare fuel surcharges to drop by 20 percent in July

Fuel surcharges on international flights will fall more than 20 percent next month, following a slide in oil prices. For travelers flying to New York, the cut will trim more than 200,000 won ($132) from a round-trip fare just as the summer holiday season begins.

Surcharges on tickets issued in July will be set at level 19, eight steps below the level 27 in effect this month, the airline industry said Tuesday. The surcharge is pegged to a Singapore jet fuel benchmark, the Mean of Platts Singapore (MOPS), which has fallen alongside oil prices.

The jet fuel price used to calculate the July surcharge averaged 338.3 cents a gallon, or $142.09 a barrel, in the month to June 15, down 17.5 percent from a month earlier. Compared with May, when surcharges peaked at 511.21 cents per gallon, they have dropped 33.8 percent.

The lower prices ripple through to what airlines charge passengers. Korean Air set its July international surcharges at 46,400 to 344,000 won one way, about 24 percent below this month's range of 61,500 to 451,500 won.

On the shortest routes, such as Incheon to Fukuoka in Japan and Shenyang and Qingdao in China, the lowest one-way surcharge drops 15,100 won. On long-haul U.S. routes, such as Incheon to New York, Dallas, Boston and Atlanta, the highest one-way surcharge drops 107,500 won. For a round trip, that works out to savings of 30,200 won to 215,000 won.

Asiana Airlines is also cutting surcharges. Its lowest one-way bracket falls to 48,500 won from 68,000 won and its highest to 275,800 won from 382,800 won, easing the cost for passengers on long-haul routes to Los Angeles, San Francisco, Seattle, New York, London and Paris.

The reductions are tied to the easing of tensions in the Middle East. With the military tensions between Iran and Israel winding down, oil prices have steadied. Jet fuel costs had surged in April and May, pushing surcharges to their highest level amid fears of a drawn-out war, but prices have since corrected quickly as worries about supply disruptions have faded.

The industry expects the lower surcharges to support a recovery in overseas travel demand during the summer peak. Analysts say the relief could especially help bookings on long-haul routes to the United States and Europe, where surcharges make up a bigger share of the fare than on flights to Japan and Southeast Asia.

Still, some in the industry caution that it is too early to relax. Surcharges have come down from their peak but remain well above where they stood in March, before the war. Korean Air's July surcharge of 46,400 to 344,000 won one way is still more than three times its March range of 13,500 to 99,000 won.

"If oil prices stay stable, it should help lift booking sentiment for the summer holiday season," a Korean Air official said. "But Middle East conditions and oil prices can turn volatile at any time, so whether surcharges fall further remains to be seen."

BY PARK YOUNG-WOO [[email protected]]