Virgin Australia cuts airfares on oil tumble

Sydney - Virgin Australia said on Thursday it will cut fuel surcharges from flights to the United States and reduce airfares in response to plunging oil prices, putting pressure on fierce local rival Qantas.

Airlines across the world have been under increasing pressure to cut or reduce fuel surcharges as crude costs plunge - losing more than half their value since June owing to weak demand and a global supply glut.

The move comes after the Australian Competition and Consumer Commission (ACCC) said last week it had launched an investigation into whether airlines are making misleading, deceptive or false representations about fuel surcharges.

Virgin Australia said fuel surcharges would be bundled into base fares. At the same time, ticket prices will be lowered by up to Aus$50 on the four daily flights to and from Sydney and Brisbane to Los Angeles.

"These reductions reflect the benefits of the decline in global oil prices along with the negative impact of the depreciating Australian dollar," the airline said in a statement. The Australian dollar recently hit a five-and-a-half year low against the US dollar.

"Virgin Australia has monitored the reduction in fuel prices over recent months and, in anticipation that fuel costs will continue to remain at lower levels than the record highs seen in recent years, the ... reductions to these airfares will be made effective from Friday."

Australian flag carrier Qantas said Thursday it would monitor the use of surcharges, but added: "The bottom line for consumers is that Qantas fares already in the market are some of the cheapest in years.

"Fuel surcharges are already included in the advertised price of Qantas fares, and those fares remain extremely competitive."

The announcement is likely to take some heat off Virgin Australia from the ACCC.

"The ACCC has confirmed that it is considering whether representations made by airlines imposing fuel surcharges, following the fall in wholesale aviation fuel prices, are misleading," the Commission said in a statement to AFP on Thursday.

"Under the Competition and Consumer Act 2010 businesses must not make misleading, deceptive or false representations about the price of goods or services. This includes when making representations about the reasons for rising fuel costs."

Japan Airlines said earlier this month it will reduce fuel surcharges for international flights from February 1, while Qatar Airways has made a similar announcement but has not set a date.