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Friday, February 6, 2015

JAL to factor in currency fluctuation in fuel surcharge calculation

Japan Airlines (JAL) has announced the new way to determine fuel surcharge for tickets sold in Japan from fiscal year 2015 which starts on April 1 2015. The change is prompted by the wide fluctuation of JPY against USD over the years. But the good news is even with this change, everyone will enjoy a lower fuel surcharge for tickets issued between April 1 and May 31 2015.

Up till now, JAL has always determine the fuel surcharge using the 2-month average price of Singapore kerosene-type jet fuel which is traded in USD. But in order to strengthen the resistance against a fluctuating exchange rate of JPY, JAL will add average JPY/USD exchange rate to the equation. The average jet fuel price will first be converted into JPY using the average exchange rate for the same period, then the average price in JPY will be used to determine the surcharge zone.

For example, the average jet fuel price between December 2014 and January 2015 was USD71.02 per barrel and the average JPY/USD exchange rate was 118.85. Therefore the average jet fuel price for that period was JPY8,441.00. This corresponds to Zone C (JPY8,000 - JPY9,000) for tickets sold in Japan but Zone B (USD70 - USD80) for tickets sold outside of Japan.

With this change, people from Japan will pay more fuel surcharge with a weak JPY but the situation will be reversed if JPY appreciate against USD. Note that online award may be issued in Japan and thus you may be subject to the higher fuel surcharge even you are not a Japan region member. But even with the higher level in Japan, the surcharge will be greatly reduced in April. So wait to issue your tickets if you can.

Source: JAL Press Release (Japanese, English)

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