With oil prices down, I’ve been asked on a daily basis lately why airlines don’t lower their fuel surcharges. In spirit, a surcharge should be temporary, to reflect an additional burden.
But if you follow the way airlines impose fuel surcharges, the system seems to be that the fuel surcharges go up every time that oil prices increase, while they don’t go down when the cost of oil decreases.
Even with the cost of oil prices way down, fuel surcharges still make up the majority of fares in many cases. For example, take the below flight between New York and London, which has a $264 base fare, and $458 in fuel surcharges.
Why? Unfortunately the only accurate answer is “because they can.” As far as I know, the only way in which airlines are benefiting from fuel surcharges nowadays is in terms of fees they can levy on award tickets:
- Airlines have to advertise all-in prices nowadays, so must include all taxes, fees, and fuel surcharges when quoting prices — therefore there’s no advantage to having “inflated” fuel surcharges
- As far as I know travel agents get commission on the entire pre-tax fares nowadays, so I don’t think they’re screwing travel agents out of anything by keeping fuel surcharges high
Let’s be clear, even if they did lower fuel surcharges, it wouldn’t lead to a decrease in airfare. They’d simply increase the base fare accordingly. And that’s certainly their prerogative. The cost of airfare has never really reflected the cost of providing the service, given what a perishable commodity it is. That’s why airlines can lose billions of dollars one year, and make billions of dollars the next year.
But for those of us looking to redeem miles, it sure can be frustrating to pay for these “surcharges” when they’re not based in reality.
Along the same lines, the always awesome Scott Mayerowitz of the AP published an article today entitled “Why airfare keeps rising despite lower oil prices.”
His conclusion is simple by spot on:
So why don’t they share some of the savings with passengers?
Simply put: Airlines have no compelling reason to offer any breaks. Planes are full. Investors want a payout. And new planes are on order.
The moral of the story is not to expect fuel surcharges to go down. The best we can hope for is that more airlines don’t start imposing fuel surcharges on award tickets.