Thai Airways’ cheapest Los Angeles-Bangkok ticket last week had a $542 fuel surcharge round trip — $352 more than the airline charged a year ago.
The least expensive ticket between Washington, D.C., and Tokyo on All Nippon Airways carried a $630 fuel surcharge, and that was $400 more than a year ago.
Between New York and Dublin, Delta Air Lines’ (DAL) cheapest ticket last week came with a $230 surcharge, $138 more than on the same date last year.
Despite lower jet-fuel prices, fuel surcharges on international tickets are much higher than a year ago, according to an analysis of airline fare data for USA TODAY. Surcharges on many tickets have doubled, and many tickets on shorter flights — which often burn less fuel — have higher surcharges than longer-distance flights.
Most round-trip international tickets still have surcharges ranging from $200 to more than $500, even after airlines lowered the surcharges by $20 to $70 on many U.S.-Europe tickets last week. U.S. domestic fares still carry fuel surcharges, too, but international fares have the highest ones.
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Meanwhile, the price of jet fuel in New York last Tuesday fell to $2.32 per gallon and averaged $2.35 on four previous weekdays, according to the most recent Department of Energy statistics. Those prices are lower than the price on Oct. 22, 2007, and about the same as the average price in September 2007.
“All the noise about airlines rolling back their fuel surcharges to pre-oil-crisis levels is a bunch of hooey,” says Rick Seaney, CEO of FareCompare.com, which tracks airfares for consumers.
Airlines’ views vs. travelers’
Airlines say the surcharges added during the past year did not cover their costs when fuel prices were much higher and that collectively, they still will lose billions of dollars this year. “The price of fuel has risen significantly for months and dropped only recently,” says David Castelveter, vice president of the Air Transport Association of America, an airline trade group. “We are far from being out of the woods.”
However, the fuel fees, combined with new service fees and increases in airfares, infuriate many travelers.
The surcharges are “a simple money grab by the airlines,” says frequent flier Ron Goltsch, an electrical engineer in Parsippany, N.J. “They think we have become so used to seeing surcharges that they think they can add them on with impunity.”
For large companies, fuel surcharges may add $10 million to $20 million a year in travel expenses, says Kevin Maguire, president of the National Business Travel Association.
The issue has even attracted attention in Congress. Last week, Sen. Bob Menendez, D-N.J., wrote a letter to 11 U.S. airline CEOs, calling on them to reduce fuel surcharges as soon as possible, because the price of jet fuel had dropped from $4.34 per gallon on July 2 to $2.34 per gallon on Oct. 15.
At USA TODAY’s request, FareCompare.com analyzed 75 non-stop overseas routes to and from the USA, and compared fuel surcharges for the cheapest coach tickets on Oct. 22, 2008, with the same airline’s surcharge on the same date last year.
The comparison shows that:
•Every airline and every route in FareCompare.com’s survey showed a higher surcharge than a year ago. The average increase was 67%. Nearly one-quarter of the surcharges last week were more than 90% higher.
•Surcharges for Thai Airways’ Los Angeles-Bangkok route and All Nippon Airways’ Washington-Tokyo route had the biggest increases, rising 185% and 174% since last October.
•Surcharges for one or more routes of four U.S. airlines — American, (AMR) Delta, Continental (CAL) and US Airways (LCC) — at least doubled since last fall.
How charges can add up
Fuel surcharges can make up a large percentage of an international ticket’s cost. For example, All Nippon’s cheapest Washington-Tokyo ticket on Oct. 22 was $1,417, which included $710 in airfare, $630 in fuel surcharge and $77 in taxes and fees.
All Nippon’s fuel surcharge is based on the average jet-fuel price in Singapore during a three-month period. The Japanese airline’s fuel surcharge for the first three months next year will be based on average prices in Singapore from August through October this year, spokesman Damion Martin says.
Singapore Airlines has a fuel surcharge of $360 round trip for non-stop U.S.-Singapore flights, $440 for one-stop flights and $660 for itineraries with a flight beyond Singapore. Fuel surcharges don’t cover the “dramatic increase in fuel prices,” says airline spokesman James Boyd.
Northwest Airlines’ (NWA) increased costs related to fuel prices “continue to exceed the surcharge levels in place,” according to spokeswoman Michelle Aguayo Shannon.
“Many of our fuel surcharges were not in place when oil was at its record high of more than $147 per barrel,” she says. “We’re still trying to make up for those costs.”
American, the largest U.S. carrier, has fuel surcharges on five routes that are 90% or more higher than they were a year ago, FareCompare.com’s analysis shows. For example, the fuel surcharge on American’s cheapest Chicago-Dublin ticket increased 172%, from $92 to $250.
American changes its surcharges to match competitors, but the airline will not “get into a market-by-market discussion of fuel surcharges,” spokesman Tim Smith says.
Jet-fuel prices have not come down as dramatically as oil prices, and fuel costs “continue to bounce around, both up and down, on a daily basis,” he says.
Delta Air Lines, which has increased its fuel surcharges 161% between Los Angeles and London, and 150% between New York and Dublin, has a similar view.
“While fuel has come down from the all-time high in July, it continues to be high and volatile,” spokeswoman Betsy Talton says. “Delta continuously monitors multiple market factors and remains competitive in the marketplace.”
In many cases, fuel surcharges “don’t have anything to do with the price of oil nor the distance of the trip,” Seaney says. “It’s about competition and the price of a ticket.”
Of the routes analyzed by FareCompare.com, the longest was 16,536 miles round trip between Chicago and Auckland, New Zealand. Air New Zealand’s coach fare on that route had a $220 fuel surcharge — just $10 more than a year ago.
The shortest route in the sample was 6,528 miles round trip between Philadelphia and Dublin. US Airways’ coach fare on that route had a $230 fuel surcharge — $70 more than a year ago.
Seaney believes declining oil prices are causing a public relations dilemma for airlines.
“Airlines were able to justify raising ticket prices by pinning it on oil prices, but now they have a public relations headache,” he says. “Jet-fuel prices are dropping, and they’re keeping the surcharges to try to recoup massive financial losses.”
Frequent flier Rip Russell, an accountant in the motion picture industry who lives in Manhattan Beach, Calif., says he thinks fuel surcharges are a “tactic that the airlines have been using to hide the true cost of a ticket.”
Some industry consultants and airline-securities analysts side with the airlines.
Aviation consultant Michael Boyd says consumers are not getting cheated by fuel surcharges. With airlines facing billions in losses, “Consumers should feel lucky there’s anybody who wants to run an airline.”
Ray Neidl, an industry analyst for Calyon Securities, also sees the need for fuel surcharges. Airlines are “still under-pricing their product,” and costs “are still exceeding revenues,” he says.
Barbara Beyer, president of Avmark, an aviation consulting firm, cautions that the oil market is unstable, and airlines might not want to react too quickly to lower prices.
“Airlines are probably thinking it is better to leave an accepted charge in place — as unpopular as it may be — than yo-yo back and forth with the charges and annoy their customers all over again.”
Good news for fliers?
Airfare expert Tom Parsons sees some hope for fliers.
For the first time this year, U.S. and foreign airlines during the past two weeks have cut fuel surcharges on many routes, he says. The rollbacks are on flights to and from Europe and South America.
Airlines “are finally making adjustments to fuel surcharges on European routes due to the lack of demand for travel to Europe,” says Parsons, who runs Bestfares.com, an online ticket wholesaler that identifies fare bargains for consumers.
Parsons expects fuel surcharges to drop further because of a weakening euro. European consumers will pressure European airlines to reduce fuel surcharges, and U.S. carriers will match their foreign competitors, he says.