Qantas Lowering Fuel Surcharges On Award Tickets

With oil prices as low as they are, it’s somewhat puzzling why airlines are still imposing fuel surcharges. As I wrote about in November, the reason many airlines haven’t lowered fuel surcharges is because they don’t have to. There’s no accountability.

Fuel surcharges don’t impact most customers

There’s nothing wrong with the concept of fuel surcharges as such. If there’s a short period where the cost of oil spikes then I think it’s fine (in theory) to impose a fuel “surcharge.” That being said, when you charge it long term it’s just ridiculous. You might as well offer free tickets and then have a crew surcharge, fuel surcharge, maintenance surcharge, etc.

Since fuel makes up a large portion of the operating costs of airlines, shouldn’t it be a given that it’s “included” with the price of a ticket?

But for most customers, fuel surcharges don’t actually matter. That’s because fuel surcharges simply make up a large portion of the fare an airline charges. So if an airline eliminated $800 in fuel surcharges they’d just add $800 to the base fare of a ticket, which would be perfectly justified.

It’s frequent flyers that are getting screwed. That’s because in many cases airlines pass on these surcharges.

For example, take the below British Airways fare between New York and London, which costs ~$1,000 roundtrip. The base fare is only $403, while they’re charging $458 in fuel surcharges:

BA-Fare

That means if you redeemed British Airways Avios for an award ticket on that flight you’d pay all the “fees” except the $403 base fare ($201.50 each way).

Which brings me to the point of the post.

Qantas will include fuel surcharges in base fare

Via Qantas’ press release, they’ll be working towards including the fuel surcharges in the base fare:

Overall fares will not change as a consequence of the surcharge gradually being absorbed into base fares, as prices advertised to customers already include taxes and charges. Qantas will continue to price competitively, with fares moving in line with the broader market.

While global fuel prices have fallen in recent months, international air fares are extremely competitive and are significantly lower than when surcharges were first introduced 10 years ago.

Given the size of the Qantas International network the process to absorb fuel surcharges into international base fares for up to 200 destinations will take time.  As overall fares are not changing, customers will not be disadvantaged.

As stated, this doesn’t actually impact those traveling on revenue tickets. The fares will stay the same, just the way they’re structured will change.

Kudos to Qantas on that change!

Qantas-First-Lounge-Sydney-60

Qantas will lower the fees on award tickets

On the surface you’d think “great, Qantas is eliminating fuel surcharges, so now they’re not going to charge those horribly high fees on award tickets, right?” Wrong:

From tomorrow, fuel-related charges that currently apply to Frequent Flyer on Qantas and Jetstar Classic Award redemption bookings will fall by up to $110 in Economy and up to $130 in Premium Economy on some routes for a return flight. Reductions will vary across the network but average around 14 per cent.

Instead Qantas will be reducing fuel surcharges anywhere from 0% to 26%, with an average reduction of 14%.

Australian Business Traveller has a handy chart showing the old and new surcharges that Qantas is imposing on award tickets:

Qantas-Fuel-Surcharges

But really I think it’s time airlines call these “surcharges” what they are — co-pays on award tickets.

It’s that simple. Back in the day the argument could be made that “oh the cost of fuel is so high, we have to charge something on awards.” But it’s utterly disingenuous at this point to call these “fuel surcharges.”

Anyway, for those of you booking Qantas award tickets using American AAdvantage miles, you don’t have to pay these surcharges either way, so it’s a moot point.

Bottom line

Personally I find Qantas’ frequent flyer program to be among the least attractive out there. Their redemption rates are sky high, and surcharges are in some cases ridiculous.

Ultimately this is good news on one hand (Qantas is simplifying their fare structure), though on the other hand this exposes what a scam fuel “surcharges” are.

Comments

  1. Ben, Not sure why you give kudos to QF for this –
    “As stated, this doesn’t actually impact those traveling on revenue tickets. The fares will stay the same, just the way they’re structured will change.

    Kudos to Qantas on that change!”

    To me – they are openly fooling people when they “absorb” the fuel surcharge into the base fare – which means that part of the surcharge has not become a more permanent component of the total fare – which the airline can manipulate very well. If they are really removing any of it, I should expect the total cost of the ticket to go down! What am I missing?

  2. @ Apu — I give them kudos because the cost of fuel surcharges on award tickets has gone down some. Other than that I disagree with the thought process, though.

  3. I think you’re overlooking the other reason surcharges are so popular: corporate discount rates.

    For example, if an airline gives company X a 40% off discount on all fares, this usually only applies to the base fare.

  4. Your word choice here is interesting: “But really I think it’s time airlines call these “surcharges” what they are — co-pays on award tickets.”

    A “real” copay is something that happens in the insurance world. When airlines started doing the money grabs for upgrades and award tickets, their marketing departments came up with “copay” (Just like insurance, so it’s okay, right?!) to make it seem more “reasonable.” But it’s not a copay. It’s a FEE. It is literally a way they can take money from the customer in the very game the airlines are allowed to rig.

    Don’t get me wrong, I like earning my miles/points as much as the next person. However in describing what they’re doing, precision matters in how we refer to these fees. (I’m not wagging a finger at you, Ben, I’m wagging a finger at the airlines)

    @Dylan
    Good point. It should also be mentioned that when one flies a carrier that imposes a revenue threshold for earning frequent flyer status, only the base fare is taken into account, not any taxes or fees.

  5. I think there should NEVER be a fuel surcharge.

    A plane can not fly without fuel!

    If fuel costs increase and the airlines wants mpre oneu – they just need to increase the cost of the ticket.

  6. Back in November of 2013 there was a federal lawsuit that got the green light to proceed in Brooklyn, NY. Anyone know whatever happened with this suit? It was the only bright light in an otherwise dismal topic. I myself loathe these misleading fees and go out of my way to avoid them whenever possible. Not always possible though. 🙁

  7. Ben, can u do a comparison between qff and aa to demonstrate how weak the qff program is? It’s nearly worthless and the only reason people sign up to it is because qf is the dominant airline in Australia

  8. It must be said that it’s only because of Virgin Australia that Qantas has capitulated and succumbed into ‘lowering’ this surcharge …. If anything, it should be VA getting the praise here

  9. @ Victor — Yeah, they’re so radically different that they’re almost not comparable. I’ll see what I can do.

  10. My take on it is “great”. Put fuel into a static charge going forward. Then when fuel goes back up in price (which it will) there suddenly start screaming “we HAVE to charge more…we need to add a fuel charge”

    I just see it happening over time. I don’t think in this cycle of oil it’ll happen, but if other airlines start the move from, essentially hiding, the fuel fee into the standard price….then when fuel rises to “historic highs” (which HOLY CRAP inflation means there will ALWAYS be “historic highs”), they lobby, or just shove in a fuel fee…great..pigs feeding at the trough.

    -2 cents.

  11. this isn’t a ‘kudos’ moment. CX eliminated them recently as did JAL. Air Asia and a bevy of other asian LCC’s just did too. qantas is pretty much the last carrier x Malaysia Air (who do nothing right) to do this in the area.

  12. Yes the QF ff program is just about the worst value in the world yet for an airline in a country if 23 million people, they have over 10 million members. I’m pretty sure AA don’t have 150 million members!

    The reason so many people are chained to qantas is not because of the burn rates but because of how incredibly easy it is to earn QF points both in the air and on the ground. People thinking nothing of dropping 250k points on an award ticket because those points were earnt easily.

  13. How is it easier to earn QF points as compared to AA?

    From my research, they offer similar earning opportunities i.e. online shopping, insurance partners, etc., however it is a lot easier to earn AA points from credit cards than it is here in Australia. Yes, we do have Woolworths Everyday Rewards that allow earning from grocery spends, but only after the first $30. The only people who benefit from that are those with large families or large incomes. There is the odd chance to earn some really cheap points, but those have been few and far between.

    QF points earning on metal are okay and someone can earn enough Status Points for Silver (and be on their way to Gold) on a well thought out itinerary, but if you live anywhere in the country other than Melbourne or Sydney you really do pay for that “privilege”.

  14. Honestly, I LOVE fuel surcharges. Where would we be without any YQ? We couldn’t dump any tickets and then we couldn’t fly anywhere for such low prices! 🙂

  15. On revenue travel the reduction in the surcharge only makes a difference for those buying under corporate agreements. Typically only the base fare is subject to the corporate discount (whether it be flat fee for a route, or % discount) and fuel surcharges remain non-discounted.

    This is why they don’t just include the surcharge in the base fare as it would dramtically increase the discount they have to offer corporate clients

  16. So, I booked a QF flight from HKG to MEL using AA points. AA charged me $29.10.

    Does the QF fuel surcharge only apply when using QF award points to book seats?

    Thanks,

    Curt

  17. @ Curt Flood — Correct, it depends on which airline’s miles you book with. American doesn’t impose fuel surcharges for travel on Qantas.

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