AirAsia, the biggest low-cost carrier in Southeast Asia, is cutting fuel charges on its tickets as global oil prices continue to plummet. The Selangor, Malaysia-based airline company said Sunday that the latest move would also apply to flights operated by its long-haul subsidiary, AirAsia X.
According to AirAsia CEO Tony Fernandes, the decision to scrap the fuel charge from tickets is expected to help reduce travel costs while stimulating demand and boosting tourism in the region, The Associated Press (AP) reported Monday. Oil is now priced at below $50 a barrel after six months of decline. Although AirAsia dominates budget travel in Southeast Asia, of late it has been facing increasing competition from other low-cost airlines in the region, the AP report noted.
Last week, Virgin Australia reduced ticket prices for flights from Australia to the U.S. in response to lower oil prices. The company reportedly cut fuel charges for economy and premium economy fares by about $32 while business class fares were reduced by $40.
Cebu Pacific, the Philippines-based carrier which flies to Asia, Australia and the Middle East, also dumped all fuel charges across the board as global oil prices continued to stay down, ABC News reported.
On Friday, U.S. oil prices fell to their lowest level in six years as investors bet that Saudi Arabia’s new king Salman Bin Abdulaziz, who took over after the death of King Abdullah last week, will not change the country’s policy of continuing to supply crude without cutting back on production, despite falling prices.
“Crude production needs to slow down first to decelerate the speed of stockpiling, which is seen to be even faster than during the 2008 financial crisis,” Hong Sung Ki, an analyst at Samsung Futures Inc. in Seoul told Bloomberg. “With Saudi Arabia, the market hardly reacted last week and will remain unchanged as King Salman is known to be very conservative.”