I’m no fan of airline fees, but if there is one that is making me hot under the collar, it is fuel surcharges to Europe, and boy oh boy are they on the rise, and we are getting ripped off.
Fuel surcharges were first initiated in late September 2007 by British Airways, when oil hit over $80 a barrel. Since then we’ve seen fuel prices fluctuate, climbing to over $114 a barrel last year, holding steady at that price for quite a few months, and after dropping for a while, and then climbing back up. Today the cost of a barrel of fuel is coming in around $97 a barrel.
We have seen fuel surcharges rise dramatically since they were introduced. The fuel surcharges back in 2007 were $130 to London and $150 to most of the rest of Europe, and in 2008, when fuel hit its highest price to date, at $146 a barrel, fuel surcharges went up to $330. Today, with a barrel of oil costing $49 less than the peak price, we are paying a whopping $458 to England, and $516 to most other cities in Europe.
We looked at what it would cost to fly a Boeing 777-200ER aircraft the 3,500 miles each way from New York to Paris and found it would take 29,000 gallons of fuel roundtrip. The jets on this route hold an average of 273 people (43 Business Class, and 230 Economy), so that’s 106 gallons per person.
When I recently checked the price of jet fuel on the NYSE on August 22, 2012, it was $3.07 per gallon, so the cost per person for fuel was $325. Even if the plane is 90 percent full, with 246 people on board, the fuel cost per person should only be $362, but the airlines are charging over $154 more than that for the fuel surcharge on each airline ticket, based on a 90% full plane.
However, the airlines charge a much higher fuel surcharge for Business and First Class seats. The fuel surcharge for these seats is currently $856. If the plane was at 90% occupancy in Business Class, which would be 39 passengers. The airline would collect $33,384 in fuel surcharges just from these passengers alone.
The bottom line is this, if this Boeing 777-200ER flies the just over 7,000 miles roundtrip from New York to Paris, it would use 29,000 gallons of fuel, which would cost the airline $89,030, at today's current price of jet fuel. If the plane flew at 100 percent capacity, with the full with 230 Economy passengers and 43 Business Elite passengers, and each economy passenger was being charged $516 per ticket in fuel surcharges, and each Business passenger $856, the airline would collect $155,488 in fuel surcharges.
That is pure profit of $66,458 for each full flight that they fly overseas. That means that these airlines are charging the consumer up to 75% more in fuel fees, than their actual cost of fuel. The airlines could fly their planes at only 58% full and they would break even on 100% of their fuel costs to fill the entire plane.
If this plane was anything similar to the flights I took to Europe last summer, they were 100 percent full; then the airlines are making a bundle! Talk about fuzzy math, I think someone is taking us for a ride!
In Asia, South America, and many other countries, airlines are required to file for price increases, including fuel surcharges, and they must be government approved. We notice that fuel surcharges are lower to some of these destinations than to Europe, where the rules are more liberal.
A flight from New York to Hong Kong is more than double the distance of a New York to Paris flight, at over 8,000 miles each way, yet the fuel surcharge is only $298 roundtrip. That means you are being charged $218 more in fuel to travel half the distance.
Americans are also being charged more than the Europeans are for travel on the same routes. The Europeans are paying the equivalent of $350 US for fuel surcharges on the same routes that Americans are paying $516.
I think that the airlines charging customers a fuel surcharge fee is price fixing. We are paying double in fuel surcharges than what it costs to fly the plane. The airlines have a guarantee of being able to make money on each trans-Atlantic flight by charging these fuel surcharges.
Even though the airlines have tons of optional fees that make them millions each year, they have no guarantee that you will buy a meal, charge a bag, or pay for an upgrade, but they have you locked in with this fuel fee that is guaranteed to make them money.
We looked at what FedEx, DHL and UPS were doing in the face of higher fuel costs. They have instituted a 14.5 percent fuel surcharge on their overnight air delivery charges. This amount seems reasonable and is another example of the airlines taking us for a ride with their fees.
People ask me when these fees will go down and I have to say that once fees are imposed, it is very hard to get them to go down. I don’t see these fees going away, because we basically have three airline alliances calling the shots on flights to Europe.
We used to have as many as 13 different carriers flying to Europe, like TWA, Pan Am and Northwest, but today, because of codeshares and alliances, the numbers are down.
We have the Oneworld Alliance, SkyTeam and the Star Alliance and under these codeshare alliances, these airlines are legally allowed to discuss and set prices, including airfares and fuel surcharges. This leaves only three guys calling the shots and having fewer competitors makes it harder to get prices to come down.
While these fees probably won’t go away, there is hope that they will decrease. The U.S. Department of Transportation (DOT) has announced that it will be taking a closer look at these fees. As part of the full fare advertising rule that went into effect earlier this year, the DOT will be taking a tougher stance, letting airlines know that the fuel surcharge must reflect the actual increase in costs to fly a route with today’s higher fuel prices.
Today, we are looking at paying a minimum of $800 to $900 roundtrip, including taxes and fees, and a whole lot more than that for peak travel times, like summer. The only way we will see $500 fare deals again, is if fuel surcharges dip back to the $200 range.
Another thing you’ll need to watch out for is fuel surcharges on international award tickets. A number of foreign airlines are charging these inflated fuel surcharges for award tickets on international flights, but we haven’t yet seen U.S. based carriers do the same.
If you want to cash in miles on British Airways to Europe, you’ll be redeeming 50,000 air miles, plus paying the fuel surcharge of up to $516 and international entry and exit fees of about $191. You are better off redeeming those BA miles on their codeshare partner American Airlines, and fly somewhere domestically. Although, you will be required to pay taxes and fees, it is still hundreds of dollars less per person than the fuel surcharge to Europe.
We think you could use those miles to fly two people across America. Or you can use the miles for one ticket on more expensive routes such as Hawaii, Canada, Mexico, and the Caribbean. You can still use your international airline carriers miles, but you avoid the fuel surcharges and pay less in international landing fees when you cash them in on a domestic carrier.
Check out this interactive crude oil futures chart. You can put your cursor over the chart and see what the opening price and the closing price for each day, starting in 2007 when fuel surcharges were first imposed. The fuel surcharges have increased by over 244% since 2007, yet the cost of a barrel of fuel has only increased by $16 more than the original price that initially made the airlines take action and start charging these fees. We are being ripped off with skyway robbery!
The charts below show what the airline's are demanding for fuel surcharges,
check out the fluctuation over the past five years to Europe.
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