Airlines have been quick to add fuel surcharges during this period of soaring jet fuel costs. But will the changes in the direction of jet fuel prices on the open markets be reflected in fuel surcharge reductions? Already, consumers can see price changes at gasoline pumps.
Gas prices are down 7.1 percent from last week. Anyone driving past gas stations will notice prices falling by about 10 cents a week (at least in Virginia or New Hampshire where I have been driving) and now it is not unusual to see a gallon of gas in some parts of the country costing in the $3.80 range. Wall Street has been starting to be nudged upwards by seeing oil prices drop from around $140 a barrel into the $120s.
Fuel surcharges are now an entrenched part of the pricing landscape. Rick Seaney took the time to outline the basics of fuel surcharges
… (Seaney) pulled the fuel surcharges from our system on non-stop flights from the U.S. to London and was a bit surprised at the amounts. The highest came it at $426, while the lowest was $270 — roundtrip.
Remember, these fuel surcharges plus another $120 to $180 in taxes serve as the starting point before airlines even charge for actual airfare, so even though you can still find some great international airfare deals, rising surcharges, taxes, and fees can make those deals seem a little less appealing.
Three months ago we suggested that there should be a reduction in the price of oil. Naturally, prices continued to soar while the factors we covered were changing the oil price forecasts and Senator McCain and President Bush began their drumbeat of additional drilling.
Now, prices are clearly drifting downward.
However, we haven’t see any airlines announcing cuts in fuel surcharges yet. And no one is betting on fuel surcharges dropping as fast as the price of jet fuel. The simple fact is that airlines claim they have not been able to raise surcharges as fast as the price of oil has risen. With that in mind, airlines will be loath to drop their surcharges until they feel their real costs are being covered.
The airline industry is expected to report combined losses of $6.1 billion this year, the worst since 2003, due largely to soaring fuel costs, according to the International Air Transport Association, a trade group. Airlines earned profits of $5.6 billion last year, the first year in the black since 2001.
In the meantime, airlines are going to extremes trying to save jet fuel with everything from power washing the engines to limiting the number of inflight magazines carried on each flight.
Passengers shouldn’t plan on seeing any dramatic drops in fuel surcharges until the airlines begin to see costs stabilize. As oil prices drop, there is probably a better chance for peripheral add-on charges not matched by all the legacy carriers, like the first-checked-bag charge, to be eliminated before passengers see fuel surcharges evaporate.
Charlie Leocha is the President of Travelers United. He has been working in Washington, DC, for the past 14 years with Congress, the Department of Transportation, and industry stakeholders on travel issues. He was the first consumer representative to the Advisory Committee for Aviation Consumer Protections appointed by the Secretary of Transportation from 2012 through 2018.
