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The BBC's Louise Greenwood
"The decision by the two airlines could alarm the Bank of England"
 real 56k

Friday, 15 September, 2000, 14:30 GMT 15:30 UK
Fuel costs push air fares up

BA has been hit by competition on its transatlantic routes
Some airlines are planning to raise their airfares to cover the rising cost of fuel.

British Airways and Virgin Atlantic plan to increase their fares by 3%, they announced on Friday.

Several airlines have flagged up the cost of fuel to shareholders when releasing their results in recent months.

All we are trying to do is cover costs

Virgin Atlantic

Given public sympathy to protests against the high cost of fuel, the airlines may have thought now was a good time to raise fares in the increasingly competitive market.

Rising fuel bill

BA's annual fuel bill is now more than 1bn a year, it said, as the cost of fuel has risen by almost half in the past year.

Europe's biggest airline said the increase in the cost of travel will take effect immediately and will cover all tickets except current promotional deals.

Fuel prices have increased by 46% from $212 per tonne in August last year to a record this month of $310, a BA spokeswoman said.

Earlier this year, BA warned shareholders at its annual general meeting that the strong pound and the high cost of fuel were in part responsible for the drop in profits.

BA has been hit by increased competition on transatlantic routes.

These problems have been exacerbated by a fuel and oil bill of 804m last year, which helped push it into loss.

Covering costs

KLM Royal Dutch Airlines, which is in merger talks with BA, announced on Thursday that it was raising fares by 4% due to higher fuel costs.

British Midland has said it is reviewing its fares while Virgin Atlantic has said it plans to raise fares by 3% as a result of rising oil prices.

"All we are trying to do is cover costs and I hope customers see it as a necessity rather than anything else," a Virgin Atlantic spokesman said. "This obviously comes as a result of the significant rises in fuel prices."

Tax free

But some campaigners have pointed out that the airline industry already enjoys an advantage over other sectors.

There is no duty or VAT on the fuel used by jet aircraft, a Friends of the Earth spokesman said.

"More and more people are becoming aware of this anomaly. The AEF [Aviation Environment Federation] wants to see a level playing field where the aviation industry pays its fair share of tax instead of being given an advantage over other sectors," AEF director Tim Johnson said.

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11 Jul 00 | Business
Business 'picks up' at BA
07 Jun 00 | Business
British Airways confirms KLM talks
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