Air Canada, rivals chop fees as fuel prices ease

Thu Sep 18, 2008 5:00pm EDT
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - Air Canada said on Thursday it will be the first major North American carrier to drop its extra fee for a second piece of checked baggage in response to the recent drop in fuel prices.

Air Canada also said it will start incorporating all fuel costs into its advertised fares on North American flights, rather than tacking them on separately as surcharges.

Domestic rivals, WestJet Airlines Ltd and Porter Airlines Inc, quickly followed suit by removing their own fuel surcharges.

With Canada's economy slowing and a round of staff and capacity cuts looming, Air Canada's move is more a signal of its desire to boost competitiveness than a sign that tough times in the sector are coming to an end, an analyst said.

It had joined numerous other airlines in implementing a C$25 ($23) charge for extra bags this spring as oil prices headed to highs above $147 a barrel. Crude has since dropped by a third to below $100.

Air Canada said it will scrap the fee on September 23.

"It is fair to say that we are always going to be competitive in our markets. Because we have seen some retreat in the fuel prices of late, we've made the decision to reinstate our previous baggage policy," Air Canada spokeswoman Angela Mah said.

It has been adding a fuel surcharge of C$20 to C$60 per one-way fare on Canadian and U.S. routes.   Continued...

<p>Air Canada passengers wait in line to check baggage at Pearson International Airport in Toronto in this June 17, 2008 file photo. The airline has dropped an extra fee for checking a second piece of baggage on its flights because fuel prices have moderated from record levels, the country's biggest airline said on Thursday. REUTERS/ Mike Cassese</p>