Domestic fuel surcharges hit an all-time high, adding to airlines' burden

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[Financial News] As high oil prices have persisted due to the war in the Middle East, Korean Air's fuel surcharge has surged to an all-time high on domestic routes, following international flights. Fuel surcharges at low-cost carriers (LCCs) are also expected to rise, and the industry is watching closely for any further drag on domestic travel demand.
Korean Air announced on the 7th on its website that the domestic one-way fuel surcharge will be raised from tier 18 to tier 19. This is the highest level ever.
As a result, the domestic one-way fuel surcharge for tickets issued in June, including value-added tax, will rise by 1,100 won from May to 35,200 won. If the surcharge goes up after purchase but before departure, passengers are not charged the difference. However, if it falls, no refund is issued.
Domestic fuel surcharges are set on a 1-to-25 tier scale based on the average Singapore jet fuel price, or Mean of Platts Singapore (MOPS), from the first to the last day of the month two months earlier.
Accordingly, June's domestic fuel surcharge reflects April oil prices. The average Singapore jet fuel price, or MOPS, rose from 465.24 cents per gallon in March, or $195.40 per barrel, to 477.20 cents per gallon in April, or $200.42 per barrel.
After Korean Air, domestic fuel surcharges at LCCs are also expected to increase. Since ticket prices include fuel surcharges and base fares, the financial burden on travelers is likely to grow further.
An industry source said, "Many passengers have already shifted to domestic travel because international trips have become too expensive, and we are watching to see whether this could lead to a decline in domestic travel demand." The source added, "Although the burden is lighter than on long-haul international routes, even the newly raised domestic fuel surcharge is not enough to absorb the sharp rise in oil prices, so airlines are facing a growing burden as well."
Meanwhile, domestic airlines have been locked in a cutthroat competition over the past month, rolling out special international flight promotions to secure summer peak-season demand. As soaring fuel surcharges dampen travel sentiment, discount competition is intensifying to defend passenger loads.
hoya0222@fnnews.com Kim Dong-ho Reporter