It occurred to me after writing my post on fuel surcharges yesterday that another factor driving the move towards ‘fees’ apart of ‘prices’ is <I>commissions</i>.
It’s highly unlikely that a new fuel surcharge will actually result in a higher total price paid by consumers (otherwise airlines would have already raised their prices).
Rather, fuel surcharges are a shift in the components of the price paid for airfare. Commissions (or ‘overrides’) generally aren’t paid on surcharges, just base fares. So take this simple illustration.
An airline with 100 million passenger enplanements annually charging a $5 fuel surcharge each way won’t really make an extra $500 million dollars. But it will exclude that $500 million from commissions.
Assume that the surcharge applies to only 80% of those passengers, and is paying commission on only a quarter of the passengers paying surcharges. That’s still 20 million passengers for whom $5 of their fare is excluded from commissions. $100 million. Real money.
The lession here is that small per-passenger amounts significantly effect an airline’s bottom-line. And that’s why I fully expect US airlines to begin passing fuel surcharges on to award customers (and other ‘free’ tickets including those given as denied boarding compensation).
An airline with 7 million roundtrip awards might next $70 million this way based on a $10 roundtrip fuel surcharge. That’s going to be too tempting to pass up. Mark my words.