Fuel surcharges aren’t about fuel.
- They are a convenient, easy way to raise or lower all fares in a market.
- Since they are a surcharge rather than part of the fare, they aren’t subject to percentage discounts that may attach to certain contracts.
- They conveniently are an excuse to charge more for award passengers (in some programs and for travel on some airlines), whose mileage currency can’t be used anywhere a member wants the way cash can.
Airlines have used the price of fuel as the narrative for high costs, and explain surcharges rather than changes in fare as fuel (even though when coded as “YQ” they are ‘miscellaneous’ charges in the fare construction), it’s becoming tough for the storyline that attaches to these fees.
Skift reports that Japan Airlines is reducing their surcharge February 1. What’s more interesting to me is that Skift gets British Airways’ parent company on the record doing backflips to explain all the reasons that they won’t reduce the fuel surcharges even with lower fuel prices.
“The fuel surcharge has never recovered the rise in our airlines’ fuel costs since the oil price started increasing more than 10 years ago,” said an IAG Spokesperson. “The current decrease in fuel prices does not have an immediate, noticeable impact on our airlines given that we hedge a significant proportion of our fuel. In addition, the US dollar has strengthened recently against the euro and sterling, partly offsetting any savings that the lower prices may provide.”
So it’s never been about the cost of fuel, and we’ve never really made up for higher costs. We bet on commodity markets anyway, so derivatives trading. And currency markets (which we apparently don’t hedge). And stuff. Oh, look, shiny things!
- What are fuel surcharges and how do they work?
- Why are airfares rising when fuel prices are going down?
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