Air fares increase hits holidays

HOLIDAYMAKERS were today hit by a rise in air fares - with the threat of more to come as oil prices soar. British Airways is slapping a £5 surcharge on return flights from Thursday.

The move came after Australian carrier Qantas Airways said it was increasing all its international fares by £5.90 a ticket.

Dozens of carriers are expected to follow within days. Virgin Atlantic said it was keeping the option of a rise 'under review'. Air New Zealand said it was 'actively considering it'.

Airlines are struggling to absorb the recent huge increase in oil prices. Crude oil is close to 13-year highs of just under $40 a barrel and some experts fear it could spiral to as much as $50 soon.

A prolonged period of higher oil prices would cause havoc with airlines' finances and could see much steeper fare surcharges over the next few weeks.

British Airways is believed to be facing a £100m increase in its £1bn-a-year fuel bill.

The company raised ticket prices to cover oil prices in March last year when long-haul air tickets went up by around £20 a round trip and £5 per short-haul journey.

Giovanni Bisignani, director-general of the International Air Transport Association, said airlines face an extra £4.5bn costs this year.

Qantas chief executive Geoff Dixon said: 'Fuel represented about 15% of Qantas's costs last year, the second largest cost to the group after salaries and wages.'

He added: 'The US dollar price of jet fuel today is almost 60% higher than it was 12 months ago and this has significantly increased the cost to our business.' Its increase comes in next Monday.

The last time Qantas introduced a passenger fuel surcharge was in late 2000 after jet fuel prices shot up.