Stop the “fuel surcharge” charade

by Janice Hough on December 12, 2012


In 2007, only a little more than five years ago, airlines came up with the idea of fuel surcharges. Back then, oil prices spiked over $80 a barrel. In 2008, when oil hit over $100 a barrel, the fuel surcharge was about $100 one-way to Europe.

Now, oil is selling at about $86 a barrel. For examples, a coach fuel surcharge to Europe is over $200; in business class it can be over $400.

Since airlines now have to divulge their total prices (including mandatory surcharges, taxes and fees), some consumers may wonder why this matters. There are several reasons.

First, in fare displays for travel agents and others, the basic price is still shown without taxes or surcharges. So, when looking at fares, it’s easy to get false expectations. For example, the lowest round-trip fare from San Francisco to London on United in February displays like this.

USD BASIS
1 UA 201.00R KKXNC13S

But book and price the flights, and the total cost (including mandatory surcharges, taxes and fees) is $876.90

Second, why still single out fuel, especially now that those costs are much more stable? Labor costs, for example, also fluctuate, but there’s no “staff surcharge.”

Third, it’s not honest. If fuel costs had doubled from 2007 that might be a reason to more than double the surcharge. But in truth, they haven’t. Fuel surcharges have gone down from their peak.

Fourth, and perhaps most important to the airlines, it’s a sneaky way to get around corporate discounts and commissions, because surcharges, fees and taxes are nondiscountable.

While officially airlines don’t pay commissions anymore, in reality, especially with higher fares, they contract with major agencies, online and otherwise, and negotiate corporate discounts with large companies, often in return for market share.

In addition, airlines sometimes offer “bulk rates” to tour operators and consolidators, which are discounted from published rates. But again, the fuel surcharge is not discounted.

Besides corporations paying higher total fares, since agencies and tour operators don’t get any commission or discount on the “fuel” portion of the ticket, it means a higher markup is necessary to make a profit. Hence, in the end, the consumer pays more.

If, in the future, the price of oil were to spike significantly, it might make some sense for a temporary surcharge. For now, however, the airlines should admit that this particular surcharge is part of the fare.

Print Friendly
Be Sociable, Share!

  • Graham

    The first time fuel surcharges were applied was much more than 5 years ago. I retired from the industry then and they had been around for many years. They may not have arrived in the US until 2007 but the US is not the world!

  • Anonymous

    You skipped another reason that the airlines like the fuel surcharge, they list it as a tax (tax code YR or YQ) and therefore they don’t have to include it as part of the fare, thereby giving the impression that the fare is really low but the taxes are high. And as has been pointed out previously, the actual amount has very little to do with the amount of fuel used or is needed. The surcharges appear to be little more than money grabs.

  • Anonymous

    What you say isn’t exactly true in the U.S. at least. For at least the last few years, the fare display presented to the consumer has been required to include any fuel surcharges (i.e. if AA.com displays a fare of $300 from DFW to LAX, that price already includes the surcharge). Apparently, such is not the case for travel agent displays, which is problematic if you ask me.

    The real problem I’ve seen is with FF awards on certain European carriers like BA. The award doesn’t include surcharges, so that “free” ticket to Europe and Asia can often cost in excess of $1,000 depending on routing and fare class.

Previous post:

Next post: