Scoot to increase fares by an average of 5% from 1 Sept in response to increase in jet fuel prices

The low-cost arm of Singapore Airlines Group, Scoot, stated that it will raise fares across its network by an average of 5 percent with effect from 1 September in response to a surge in jet fuel prices that had pushed up costs.

In a press release on Thursday, Scoot stated that it will add S$5 to S$30 to the cost of each one-way journey depending on the flight duration.

According to the airline, jet fuel prices have surged almost 40 per cent year-on-year and are now close to US$90 (S$123) per barrel on average, Scoot said.

Earlier in June, the International Air Transport Association forecast average passenger yields, a proxy for air fares, would rise by 3.2 percent this year, in the first annual gain since 2011. However, it noted that the airlines would lower its annual profit estimate due to the rising cost of fuel and labour.

In May, Air New Zealand announced a 5 percent increase in domestic fares due to rising costs.

Meanwhile, Japan and Taiwan’s regulators have allowed airlines to put in place fuel surcharges to help compensate for the higher oil price.

Last week, Singapore Airlines reported a 3.2 percent decline in passenger yields for the quarter ended 30 June, including a 1.8 per cent fall at Scoot.

Scoot stated that it would look to cut costs in addition to raising fares, by exploring ways to reduce fuel burn, reviewing supplier contracts, using measures to increase productivity and keeping manpower resources lean.

It also said that the fuel comprised an average of 32 percent of its operating costs and its fuel costs had risen by 31 percent compared to a year earlier.

The airline reported a S$1 million profit in the June quarter, down from S$3 million a year earlier.

Singapore Airlines stated that there were no plans for the parent airline and its regional arm SilkAir to follow Scoot’s lead and announce specific fare rises in response to higher oil prices.

Its representative said that its airfare pricing is dynamic based on supply and demand.