Danny Alexander has welcomed Virgin Atlantic’s move to slash £10 off air travel ticket prices to reflect falling oil prices.
The Chief Secretary to the Treasury had written to all major British airlines on Tuesday asking for their assurance that they are passing on fuel price savings to consumers by cutting fuel surcharges or reducing ticket prices.
Today the Liberal Democrat MP welcomed Virgin Atlantic’s decision to reduce ticket prices and called on other airlines to follow suit.
Danny Alexander said:
“I welcome Virgin’s good example and am seeking reassurance that all airlines are doing all they to reflect falling oil prices by cutting fuel surcharges and ticket prices.
“The oil price has fallen dramatically in the past few months and I will continue to put pressure on airlines and oil companies to ensure people across the UK feel the benefit in their wallets.
“This government is doing all it can to support consumers with the costs of flying, including abolishing Air Passenger Duty for children on economy flights - saving a two child family nearly £150 on a long-haul flight.
“It's essential that airlines do all they can to pass on savings.”
Despite a major drop in oil prices of almost $50 per barrel since the summer, there is anecdotal evidence that some airlines have yet to cut fuel levies or fares to a level that fully reflects the scale of the oil price fall.
There is no tax on international aviation fuel, which accounts for approximately almost 30% of the industry’s costs, so customers could expect a significant fall in oil prices to lead to a drop in flight ticket prices.
The move by Virgin Atlantic follows calls by Danny Alexander for oil companies to pass on oil price falls to consumers last month, which led to major supermarkets cutting the price at the pumps.
Notes to Editors
Please see below for Danny Alexander’s letter to airlines.
16 December 2014
FALLING OIL PRICES AND AIRLINE FARES
I am writing to seek reassurance that you are doing all you can to ensure that your passengers benefit from the recent fall in oil prices. I have been made aware of anecdotal concerns from members of the public, and reports in some national media outlets, that airline ticket prices appear not to be falling as significantly as customers might expect given the very significant fall in oil prices.
2. Since summer this year crude oil prices have fallen almost $50 per barrel, standing at around $60 per barrel today. The costs of aviation fuel are a significant component of the cost of air travel – estimated recently by the IATA as almost 30% of the airline industry’s costs (not taking account of recent falls in the price). International treaty agreement means that there’s no tax on international aviation fuel and no VAT on international flights
3. At present, households are under considerable pressure in their ability to meet the costs of living – which affects the ability of families to enjoy air travel. The government has taken action to address this through cuts to air passenger duty (APD).
4. The Autumn Statement announced savings for families by abolishing APD for children on economy flights, helping to lower the cost of going on holiday and seeing distant relatives. This will save a two child family £26 on flights to short-haul destinations within the UK or Europe, and £142 on flights to long-haul destinations like Florida and the Caribbean.
5. Budget 2014 also announced cuts in the cost of flying to the furthest long-haul destinations by reforming APD. The reform places all countries over 2,000 miles from London into a merged APD band from 1 April 2015, making the rate to these countries the same as to the USA, saving up to £52 per passenger. Collectively, the Budget and Autumn Statement announcements mean that in 2015-16 over 99 per cent of passengers will see a freeze or reduction in APD.
6. As set out above, the Government is doing all it can within the constraints of a challenging deficit to reduce APD and thereby help reduce the cost of air travel. But airlines must play their part too. For those airlines that levy a ‘fuel surcharge’ it would seem obvious that falls in the oil price should be reflected in a reduction of any such fuel surcharge. However, some of the anecdotal evidence brought to my attention suggests that they are not falling by an amount commensurate with the large scale fall in oil prices. For those airlines that don’t have a separate fuel surcharge, we would expect the fares themselves to fall. Therefore, I seek your urgent assurance that your company is passing on all of the fall in fuel prices by reducing fares and/or any fuel surcharge, and doing so as quickly as possible.
7. I would be grateful for your assurance on this matter.