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The cost of jet fuel may be tracking lower because of the global plunge in oil prices, but Canadian carriers are reluctant to adjust ticket prices or eliminate fuel surcharges.
Air Canada (AC.TO) is pointing to the high U.S. dollar as the main reason for not bringing fares in line with the cheaper cost of fuel. A spokesperson told BNN the widening currency spread is having an “unfavourable impact” on the cost to Canadian carriers because fuel is bought in U.S. dollars.
The U.S. Gulf Coast Kerosene-Type Jet Fuel Spot Price fell 20.22 percent between November and December of last year.
Air Canada adds a fuel surcharge on its international flights. WestJet (WJA.TO) doesn’t impose a separate fuel charge on international flight, but their prices are comparable to rival carriers.
The marketing technique designed to call attention to the impact of jet fuel – the industry’s main cost input – has been in use at Air Canada for about a decade. But customers getting used to big savings at the gas pumps are questioning why airfares haven’t budged.
Air Canada isn’t exactly wanting for customers, eliminating the need to lower rates to increase fares. Canada’s largest carrier reported a record setting year in 2014, with a system-wide load factor of 83.4 percent versus 82.8 in a 2013. That’s thanks in large part to a 16.2 percent increase in traffic to the U.S.