Monday, July 7, 2008

The sham of fuel surcharges - Part 1

I recently read a post on Smarter Travel by Tim Winship, a frequent flyer expert and fellow industry insider who I generally admire. Unfortunately I have to strongly agree with him on the subject of airline fuel surcharges, specifically with regards to Delta's recent decision to start imposing them on frequent flyer tickets. This is a subject which I plan on blogging a great deal about over the upcoming weeks.

Fuel surcharges are without a doubt the biggest con imposed on travelers these days, and have been for several years. The fact of the matter is that fuel surcharges do NOT come down when fuel prices come down. I've been in this business for over 10 years and it simply doesn't happen. It just doesn't.

While I fully sympathize with the airlines' plight in today's economy, the industry has allowed the sham of fuel surcharges to go on for far too long.

The main difference between fuel surcharges and other recent fee hikes such as checked baggage fees is the fact that they're non-negotiable. Consumers have the option of not checking a bag (albeit within ever-tighenting carry-on limitations) or not paying for in-flight meals if they so choose. In contrast nobody has the option to decline the fuel surcharge, and thus logic says that airlines should be incorporating the cost of fuel in to their base fares. While some airlines do in fact do this, most airlines pass the fuel surcharge off as part of the "taxes and fees" associated with the ticket.

The lack of self-regulation by the airline industry has allowed fuel surcharges to skyrocket to comical porportions. For example, Virgin Atlantic now charges $213 in fuel surcharges for every long-haul flight segment. That means that a 4-segment itinerary such as round-trip from San Francisco to Johannesburg (SFO-LHR-JNB-LHR-SFO) is subject to a whopping $852 in fuel surcharges alone. That's on top of approximately $160 in additional US, UK and South African taxes that would be included on that ticket (all of which are imposed by local governments and are understandably beyond the airline's control).

Not only do the airlines have no incentive to police themselves with regards to the bogus concept of fuel surcharges, but many of them (notably British Airways) have recently been fined for collusion and price-fixing on the very subject.

Unless some external power, specifically the International Air Transport Association (IATA), steps in to regulate fuel surcharges then this sham will only continue to get worse.

And as for fuel surcharges on frequent flyer tickets, just as the airlines should simply raise their fares to account for the skyrocketing cost of fuel, they could also raise the number of miles required to redeem free tickets. This would at least protect one of the last remaining "free" services that airlines are willing to provide.

Link to original article: