Malaysian budget carrier AirAsia today scrapped fuel surcharges on all its flights including on long-haul carrier AirAsia X, in response to the decline in global oil prices.

AirAsia chief executive officer Tony Fernandes said the regional carrier's fares will remain unchanged.

tony fernandez and airasia "We want to get rid of all surcharges and we have been able to... be the first airline in the world that is completely getting rid of fuel surcharges," he told reporters.

"This initiative recognises the current economic situation and the need to provide more affordable and transparent air fares for business and leisure travellers," he added.

Southeast Asia's largest budget carrier implemented the fuel surcharge in July 2005, in line with other airlines as the price of oil soared, reaching US$147 per barrel in July this year, and easing to around US$60 now.

AirAsia passengers pay an average fuel surcharge of RM47 on each sector.

The carrier said passengers will still have to pay other taxes - a RM22.50 administration and insurance charge and airport tax of RM6 for domestic flights and RM25 on international routes.

500,000 cheap tickets

It is also offering 500,000 free seats, with no fare or fuel surcharge, in a five-day campaign beginning midnight Wednesday for flights in the third quarter of 2009.

Fernandes said however that the fuel surcharge could return if oil prices surged again.

He said that although many airlines are cutting capacity as a result of an expected global recession, AirAsia was planning on increasing routes and capacity because of its low prices, high load factors and aggressive marketing.

"What we are doing is to produce more routes and lower prices to fight out of the (global) economic recession," he said.

Fernandes said that while scrapping the fuel surcharge was unlikely to affect the airline's profitability, the carrier will initiate other programmes to make up for the loss of revenue.

AirAsia stands to lose at least RM940 million in fuel surcharge revenues in 2009, as Fernandes predicts more than 20 million passengers will fly the airline next year.

AirAsia X was launched in January 2007 and is an affiliate of AirAsia and Virgin Group. It flies to the Gold Coast, Melbourne and Perth in Australia, as well as Hangzhou in China. It plans to fly to Britain early next year.

- AFP