Since July 2003, the price of Singapore Jet fuel has increased by 77% from US$30 per barrel to the current price of US$53 barrel. Since introducing the original fuel surcharges on May 12, the price of fuel has risen by US$10 per barrel.

Based on current prices, fuel is expected to cost Air New Zealand in excess of $600 million after accounting for hedging and foreign exchange movements this year, up from $480 million in FY 04.

Flights on Air New Zealand's regional Link services will incur a $6 (inclusive of GST) surcharge per one-way journey (up from $3) and domestic main trunk jet services a $10 (inclusive of GST) per one-way journey surcharge (up from $6). Trans-Tasman and Pacific Island flights will incur a $22 per sector surcharge (up from $15) and long haul flights a $26 per sector surcharge (up from $20). Flights from Auckland to London, which are effectively two sectors, will be subject to a $44 surcharge each way.

Flights booked and paid for before Thursday 2 September, for travel commencing after this date will not be subject to the increased surcharge.

The surcharge on domestic flights will be incorporated into the cost of the fare. Flights originating in a regional centre and connecting with a domestic main trunk jet service will only incur a $10 fare increase per one-way journey.

Group General Manager Marketing/Network/Sales, Norm Thompson, says that while Air New Zealand has absorbed the recent fuel increases until now, the current market conditions have made it necessary to implement the additional surcharge.

"While we certainly hope that fuel prices will ease back to more sustainable levels and we are able to remove the surcharge, if fuel prices remain at their current high levels in early October, Air New Zealand will look to incorporate the fuel surcharges into all of its fares ex New Zealand at that time.

"As evidenced by our Express fares, we are committed to keeping fares as low as possible and it is with reluctance that we increase the fuel surcharge. Unfortunately, the $120 million plus exposure from increased fuel costs is too large for us to absorb," said Mr Thompson.

Some of the other airlines to implement surcharges as the result of the high price of jet fuel include Qantas, Singapore Airlines, Emirates, Cathay Pacific, Pacific Blue, British Airways, Air France, Lufthansa, Continental Airlines and American Airlines, in addition to numerous other airlines who have also introduced surcharges.

Ends

NOTE: The content of all Air New Zealand media releases are accurate at the time of issue, as stated at the top of each release. For updates on any changes, please contact Air New Zealand.

Air New Zealand is proud to be a member of Star Alliance. The Star Alliance network was established in 1997 as the first truly global airline alliance to offer worldwide reach, recognition and seamless service to the international traveller. Its acceptance by the market has been recognised by numerous awards, including the Air Transport World Market Leadership Award, Best Airline Alliance by both Business Traveller Magazine and Skytrax. The member airlines are: Adria Airways, Air Canada, Air China, Air New Zealand, ANA, Asiana Airlines, Austrian, Blue1, bmi, Continental Airlines, Croatia Airlines, EGYPTAIR, LOT Polish Airlines, Lufthansa, Scandinavian Airlines, Shanghai Airlines, Singapore Airlines, South African Airways, Spanair, SWISS, TAP Portugal, Turkish Airlines, THAI, United and US Airways. Aegean Airlines, Air India, Brussels Airlines and TAM have been announced as future members. Overall, the Star Alliance network offers 19,500 daily flights to 1,071 airports in 171 countries.

For more information about Air New Zealand visit www.airnewzealand.com and for more information about Star Alliance visit www.staralliance.com.