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Airline Surcharges


Airline surcharges: are they just a rip-off?

Jun 15, 2008

A variety of surcharges on flights and holidays have been making the headlines in the past few weeks. But what exactly do they all really mean?

The soaring price of oil has resulted in British Airways and Virgin Atlantic, among others, announcing hefty rises in fuel surcharges to help cover rapidly escalating fuel bills.

Take British Airways. It recently increased its fuel surcharges from £26 to £32 return on short-haul flights, from £126 to £156 on medium-haul flights, and from £158 to £218 on flights of more than nine hours. BA claims the surcharges are the most transparent way of presenting, and passing on, the airline's spiralling fuel costs to customers. But I beg to differ.

These latest increases are the 13th since BA first introduced a fuel surcharge back in May 2004. Then, the surcharge was £5 on a return flight, and the price of a barrel of oil was about $38. Now, the surcharge is as high as £218, while (as I write) the price of a barrel of oil is $133.

This means the cost of oil has gone up by around three-and-a-half times, but BA's fuel surcharge on long-haul flights has risen more than 40-fold. Can you see any transparency in that?

'Basically, airlines are simply putting up their prices with these fuel surcharges,' says aviation expert James Fremantle, of the Air Transport Users Council (AUC).

'British Airways chooses to call the increases "fuel surcharges" because it reckons it gives the impression that raising fares is not really its fault, and that the charges are imposed by some third party.' Which of course they are not.

It also strikes me that by banging on about their fuel surcharges, rather than straightforwardly putting up their fares, airlines such as BA are shooting themselves in the foot.

Every time they raise their fuel surcharges, they present Ryanair with an open goal. The Irish airline loses no opportunityto label its rivals' fuel surcharges as a rip-off, and to make us aware of the fact that, in the words of its boss, Michael O'Leary: 'Unlike almost all of our competitors, Ryanair remains committed to a policy of no fuel surcharges - ever.'

But this holier-than-thou stance is disingenuous. Ryanair hits customers with ever-rising surcharges of its own that it uses to keep profit margins up and to counter the increasing cost of fuel.

Two years ago, it introduced a surcharge for checking in bags, of £5 per bag on a return flight (if you did so in advance, online). Last month, it raised this charge to a whopping £16 return per bag.

In similar vein, last September it started levying a £2 fee per flight to check in at the airport (which you have no choice but to do if you have bags to put in the hold). The fee has since been doubled to £4.

Ryanair argues that in contrast to fuel surcharges, these baggage and check-in charges are 'discretionary'. But for the many passengers who cannot travel with just hand baggage - as many as 60% on some flights, the airline admits - that's irrelevant.

As James Fremantle says: 'Ryanair's airport check-in and baggage charges are comparable to BA's fuel surcharges. They are just a different way for Ryanair to raise their fares.' As Ryanair's surcharges are not levied on all its passengers, they are not included in its basic fares - and thus the airline is able to keep its headline prices low.

To date, this practice has largely been the preserve of the no-frills airlines. But the rising cost of fuel means that traditional airlines are also starting to consider ways to charge passengers more, without raising basic fares.

American Airlines, for example, has just started charging economy passengers $15 (£7.70) per flight to check in a bag when flying within the US - copycat measures are likely on this side of the Atlantic soon.

So my overall point is that the whole issue of airlines' surcharges is really just a smokeandmirrors game and, as a traveller looking for the best deal, you need to guard against being deluded by the airlines' PR guff.

Before booking, look carefully at the total cost of prospective flights, including any extra charges - whether they be for fuel, baggage, in-flight meals or anything else. Finally, some holiday companies are applying a very different kind of surcharge on their package holidays this summer.

In most cases, their justification is the poor pound-euro exchange rate. Tour operators would have calculated the price of this summer's holidays last year, when the pound was about 15 per cent stronger against the euro than it is now. Some say the only way they can avoid making a loss on these holidays is to levy a retrospective surcharge on bookings they have taken.

It seems a pretty outrageous thing to do - not least because holiday companies don't exactly come rushing to us with refunds when the exchange rate moves in a favourable direction.

But I'm afraid the law says they are allowed to impose these surcharges, as long as they warned about them in their booking conditions. What's particularly galling is that you are entitled to cancel and get your money back only if the surcharge is more than 10 per cent of the holiday price.

At the time of writing, 27 operators - including several distinguished names such as Cox & Kings, Bales Worldwide and the Camping & Caravanning Club - are levying surcharges on at least some of the holidays they have sold.

Don't fly with a lame duck

At the end of last month, Silverjet, a business-class-only airline that flew from Luton to New York and Dubai, collapsed, affecting thousands of passengers. It became one of some two dozen airlines around the world to have stopped flying in the past six months.

Other failures include two more transatlantic business-class-only carriers, MAXJet and Eos Airlines; Oasis Hong Kong Airlines, which provided low-cost flights between London and Hong Kong; Nationwide Airlines, which flew between London and South Africa; and EuroManx, the Isle of Man-based airline.

It's extremely likely there will be more casualties. In the current climate, you may want to think twice about booking flights with minor airlines. If your airline fails, it's not only inconvenient but you risk losing your money and having to pay for alternative flights.

The financial protection covering flights is complicated (see the Air Transport Users Council's website, www.auc.org.uk).

But the simplest way to protect your money is to pay with a credit card. Then, as long as the transaction exceeded £100, if the airline folds you should be able to get a refund from the card issuer.

Annoyingly, many airlines charge an additional fee for credit-card payments, but if you plan on booking with Flybynite Airlines, it's probably worth paying extra.

thisismoney.co.uk

Airline surcharges: are they just a rip-off?
Sharp operator: Ryanair does not demand a fuel surcharge but racks up the fees elsewhere



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