Virgin Australia is dropping the fuel surcharge on its flights to the US and rolling the costs into its full fares.
The move will result in a saving on tickets of between $40 and $50.
Australian airlines, including Qantas, have been under pressure to remove the surcharge after prices for oil plunged about 50% in the last 12 months.
And the corporate watchdog, the ACCC (Australia Competition and Consumer Commission), has started an investigation into the surcharge.
“These reductions reflect the benefits of the decline in global oil prices along with the negative impact of the depreciating Australian dollar,” Virgin said.
The Virgin Australia move is a restructure on how airfares are put together rather than an elimination of charges for fuel.
Fuel costs for those airfares will now be treated in the same way as other operating expenses and incorporated into the base fare rather than being charged as a surcharge.
Virgin had reportedly previously charged $680 for fuel on a return flight between Australia and Los Angeles.
The airline says global oil prices are just one factor contributing to the price of an airfare. Others include market conditions, operating costs, airport pricing and taxes, currency exchange rates and Virgin’s foreign currency hedging position.
Virgin shares were up more than 2% to $0.47.