Good morning, class.
Today we are going to talk about fuel surcharges. This week, United Airlines announced they were increasing their domestic fuel surcharge to twenty-five dollars each way on all routes.
So, what makes this different than a fare hike? Well, a fuel surcharge is not part of the fare. It is separate. One could say that it makes things misleading, but in reality, it is not exactly so in the United States. The U.S. Department of Transportation requires that the fuel surcharge, as any charge imposed by the airline, be included in all advertisements as part of the advertised fare.
So, in the United States, you will not be caught surprised by a fuel surcharge. Only travel agents are. They can pull up a fare display and it will show them the fare. A few months ago, Chris Elliott interviewed a travel agent on the subject…
“It’s a game,†says travel agent Janice Hough, who points out that a United ticket from Washington to London costs $195 roundtrip, until taxes and fuel surcharges are factored in. Then, the price goes up to $504. “So taxes and surcharges are over 150 percent of the fare,†she says.
Now, we couldn’t resist putting our two cents in at the time, and pointing out that travel agents would notice, but the average customer on a website, or someone looking at an advertisement would never notice. If the cost of fuel goes up, the fare should go up. All this does is separate it out to a separate line item that ultimately totals up under fare anyway.
In Europe, where advertising laws in many countries allow airlines to advertise the fare minus the fuel, and put the fuel in the fine print at the very bottom, as well as the United States, there has been discussion of requiring airlines to use the total price including taxes and fees in their advertising.
In contemplating this issue, we tried to find someone pondering the same issues. On the third of January, with oil prices reaching one hundred dollars a barrel, the prediction was that someone will try to uncouple fuel entirely from the fare. Unlike the cruise industry, once you buy an airline ticket, if fuel goes up, the airline usually won’t call you and ask you to pay them more money.
This answers what fuel surcharges may be for in the future. People will start noticing when they are called and told that they need to pay more money because fuel has gone up since they bought the ticket. During the energy crisis in the 1970s, charter airlines had separate fuel prices that were set before takeoff.
Imagine checking in online and being told the current fuel surcharge, and having to click to pay it and get your boarding pass. By doing this, airlines would avoid the fluctuations of fuel prices entirely, and would no longer has to aggressively hedge. As Upgrade Travel points out, the victims would be the passengers. Budgeting for travel would become harder, and prices would likely go up, because those who rely on low fares would not be able to budget effectively. He thinks that Spirit or Skybus may be the first to try this. We would add that Europe, home of the ultra-discount carrier, ie Ryanair, may be the first place to try this, as they are already more comfortable with their fuel surcharges.
We think this is not good for everyone. Chris Elliott commented that $100 a barrel oil would be good for travelers because:
- Green isn’t an option anymore.
- Time to finally get serious about mass transit
- Your kids will thank you
- How ’bout an all-inclusive to Syria?
- Say it with me: de-commodization of airline tickets.
We agree and disagree. For one, companies SHOULD be green because it is the right thing to do, because they have to survive in this world the same as any other entity. Pricier oil might force companies to research greener alternatives if they haven’t been doing so as aggressively as they could be. We are still waiting for the electric car on every street.
Elliott mentions mass transit, another area of interest for us. This country dismantled a massive train system, Amtrak is not economically viable, and no one wants a mass transit project rammed through their background. All that is unfortunate. The last time we wanted to visit Boston from our hometown of New York, we hopped the Delta or US Airways shuttle…not Amtrak.
In 2001, the Washington Post sent four reporters to New York. One by plane, one by train, one by car, and one by bus. The reporter traveling by air did beat the train by 39 minutes, but considering New York airport ground delays since then, that might no longer be the case. Bus routes are adding internet for business travelers, and despite Amtrak problems, the Northeast corridor is still their best area of service.
Air passengers are demanding more and more nonstop service. No one wants to change planes. But a careful integration of intermodal transportation, increasing connections between rail and plane, would significantly help the country’s infrastructure, congestion, and the problems of cost.
Why is Continental Airlines the only airline that codeshares with Amtrak?
Back to the topic, fuel prices may force positive change, but being cynical and possibly realistic, it is more likely to hurt.