
Everyone seems to have noticed that fuel prices have come down an awful lot since summer 2008. Everyone except the airlines, anyway, most of whom continue to slap "fuel surcharges" on plane tickets, even with peak summer travel season at an end.
David Rowell recently asked the question in one of his e-mail newsletters. The Travel Insider is upset by the so-called "fuel surcharge" that British Airways and other airlines charge. He recently cashed in frequent flier miles for a British Airways flight for a free ticket, and the company demanded he pay $418 to cover the addtional costs of fuel over and above the ordinary jet fuel cost.
David's annoyed for two reasons. Why is he paying $418 (plus taxes and fees) for a "free" ticket. That takes all of the fun out of earning frequent flier miles.
Plus, David suspects that BA is lying about the true cost of the fuel.
"Who knows what their 'normal' fuel cost would be, so we can't be sure what their extra cost is…. It is, of course, not a fuel surcharge, but rather a profit surcharge."But David thinks the airline is paying something more like $65 for his part of the fuel cost on a Seattle to London roundtrip, leaving the airline with a $385 profit.
To be fair to British Airways, it would likely say it can't possibly be gouging customers because it has had its worst financial year ever, losing about $640 million over 12 months.
UPDATE: 9/2: I asked a BA spokesperson for his reaction:
We pay our fuel charges in U.S. dollars, and in the past year, the dollar has weakened against the pound and we wind up taking a beating having to exchange pounds to dollars to pay for fuel. Thus our costs are still very high.It should be noted that last winter, as the price of jet fuel fell, British Airways cut the price of its fuel surcharge accordingly. We cut the surcharge by as much as a third on our longhaul services from Thursday December 18. The move reflects the reduction in the price of oil and the airline's fuel hedging policy for 2009/10. For World Traveller flights lasting more than nine hours, that means a reduction of £30 per sector to £66. On flights of less than nine hours a reduction of £15 per sector to £53.
What do you think about fuel surcharges?
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Yes, obviously you should ask British Airways and the other airlines also about their continued use of this now bogus "fuel surcharge." Why did you run this article without even asking them for an explanation? You give the impression you are covering for the airline companies.
Posted By stansmith on August 31, 2009, 1:46 PM
If they instituted a surcharge when fuel went above a certain price, do they plan to offer us a "fuel rebate" when it goes below that price? SWA purchased fuel insurance back when fuel was affordable but other airlines are charging us for their lack of foresight. What do the bag check fees apply toward if not fuel? (Some airlines levy hundreds of dollars per bag.) David Rowell paid $418 fuel surcharge for an itinerary that usually levies $119 fee...so why was he forced to pay so much more when using miles if not for the airline to recoup profit (which in theory they should have on the many flights he took to earn those miles).
Amtrak and Greyhound do not levy such a fee. If property taxes go up, hotels do not charge a "property taxes surcharge". All of the airline surcharges and deleted services were created with one strategy in mind: to entice you into purchasing a ticket that you might not purchase were you initially shown the bottom-line price.
Southwest Airlines has had 36 straight years of profitability, so if other airlines complain that they must gouge us to remain profitable, perhaps they should examine their business model. Service is part of the equation when customers decide where to spend their money. The best thing we can do as potential customers is to keep well-informed prior to making purchases...and of course to make our voices heard when we're unhappy. And remember that the biggest vote you cast pro/con is how you spend your money.
Posted By angelique on August 31, 2009, 3:07 PM
Hello,
Thanks for taking the time to comment. You’re right, Stan Smith. I should’ve included a quote from BA or other airlines defending their practices.
Angelique: Great point, re: "Amtrak and Greyhound do not levy such a fee."
Kind regards,
Sean
Blog editor
Posted By Blog Editor on August 31, 2009, 4:09 PM
It you would be very interesting to read if you'll be able to get any comments from airlines about levy they charge.
Posted By Vilmis @ Travel Tips on August 31, 2009, 7:02 PM
Sounds like plane robbery to me (pun intended). I have cashed in lots of FF awards with Southwest and never have had to pay anything additional. Like Angelique says, they already earned their profit.
Posted By Tom B. on August 31, 2009, 8:00 PM
I am working in the airline industry and I can confirm that the fuel surcharges are not used to boost profits. In fact, fuel surcharges cover only a percentage of the actual additional cost of increasing fuel bill. Hence why the airlines are concerned with the impact on their profitability when the fuel prices go up.
Posted By Stef B. on September 1, 2009, 7:25 AM
Some of your commenters seem to be writing from another planet, particularly when they start talking about 'fuel insurance' (by which I can only assume they mean fuel-hedging contracts). Last year, when oil (and thus jet fuel) prices spiked to unprecedented levels, most airlines (not just Southwest) expanded their fuel-hedging programs -- and were lambasted by the armchair airline execs for not doing more, sooner. This year, oil prices declined somewhat (though they are still at least fifty percent above historical levels) and the airlines have taken a bath on fuel hedges, including Southwest, which showed a loss in the first quarter of this year, mostly due to upside-down hedges.
Posted By RNB on September 1, 2009, 9:48 AM
Fuel is an expense that cannot be controlled and a surcharge is justified. However, surcharges and taxes should be rolled into the quoted fare, rather than the present piecemeal approach.
Airlines deserve to make a profit for the service they render. Once I buy my ticket, I appreciate that no rate change occurs, regardless of fuel cost.
I like the charges on baggage, too--maybe people will leave more of their unneeded junk at home.
It is too bad airlines don't add more food options. I am willing to pay for what I receive.
Posted By Bruce Frohman on September 3, 2009, 1:24 PM
I agree with Bruce--it's not that airlines don't deserve to profit nor have their expenses covered like any other business, it's that appending it as a surcharge smacks of trickery. Opening this door means that next they could add on "seat surcharges" and "crew surcharges" and "restroom privilege surcharges". Eventually, you could go to the grocery store and be slapped with "checkout surcharges", "cart surcharges", and "browsing surcharges". And airlines: treat your customers as you wish to be treated. Ask yourself how you'd feel next trip to the grocery store if you were charged the "surcharges" shown above (remember, stores pay for fuel for their trucks to bring them food).
Posted By angelique on September 5, 2009, 1:08 PM
I have been recently been looking for airline tickets to travel during the first three weeks of November. What I have encountered were really cheap tickets, but by the time I get to the check out part of my purchase I notice my ticket's price has increased it has doubled, if not more. Once I immedietly contacted the airline and thier explanation was the gas price. I wonder why dont they just increase the actual ticket price. Plus all these surcharges that the company doesnt really explain or give you something to compare it to is really sneaky. If they want us to continue purchasing tickets from them they should give us all the information we need to make an educated purchase.
Posted By Charlene on September 19, 2009, 7:57 PM