Time to put an end to dishonest fuel surcharges?

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When my client had to cancel an intra-Africa ticket because of a canceled business meeting, she expected it to be nonrefundable. And it was, but Kenya Airways, like many international airlines, does allow passengers to get tax refunds.

And since out of a $648 ticket, $209 showed as the combined tax total, that looked to be a significant amount of money to get back. In theory.

Unfortunately, in the fine print was this line: “FOR NON REFUNDABLE TICKETS THE YQ YR CARRIER IMPOSED SURCHARGE WILL NOT BE REFUNDED.”

Translation into English: The fuel surcharges, which are listed as taxes — YQ and YR — are also nonrefundable.

So she only got back about $70 on the ticket.

And had our agency refunded all the taxes and fees, including the fuel surcharge, Kenya Airways would have billed us, quickly.

But if you don’t fly on a plane, presumably they don’t need to use fuel for you. So what’s the point? The point, once again, is because they can. And, because everyone is doing it.

Fuel surcharges are repugnant. Airlines first introduced them in 2003 in response to a spike in oil prices. However, they have kept them for years. Now, whatever happens to the price of oil, the fuel surcharges always increase. The original surcharges were trivial; I remember $10 with United Airlines and then a $5 increase — back when oil prices were $40 a barrel.

Now oil is around $100 a barrel, but as a travel agent looking at a fare display for a September roundtrip from San Francisco to London, I see fares starting under $400. The fuel surcharge, however, is $458. (About double that in business class.) “Amazingly,” it’s the identical surcharge for, say, a nonstop on United, and a connecting flight on Air Canada via Toronto and on British Air and American Airlines via Chicago, although the distances vary by several hundred miles.

Some people may think it doesn’t matter how airlines break down the fare, but with refund issues it clearly does matter. It also matters sometimes with mileage tickets — many airlines charge the fuel surcharge even on “free” tickets.

It’s also very confusing with the new mileage program rules that require a certain dollar amount of revenue for elite status. What counts, what doesn’t?

In addition, fuel surcharges are non-discountable. This affects not only children’s fares and corporate discounts, but travel agency and tour operator deals for commissionable or bulk fares. So, in the end, the consumer pays more.

If airlines did have to refund all taxes and fees when a passenger doesn’t travel, my guess is that fuel surcharges would suddenly be added into the ticket price pretty quickly.

But for now, from an airline perspective, these surcharges are pure gold, unrefundable gold. They don’t have to explain fuel surcharges, they don’t have to refund them, and even if oil prices suddenly fell by half overnight, they don’t have to reduce them.

Is it time to put an end to nonrefundable fuel surcharges?

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  • John Baker

    Please … Can someone make the argument for fuel surcharges?

  • Graham Harrison

    What used to be the “Tax” box on an IATA ticket was changed at least 10 years ago so that it is now defined “Tax/Fee/Charge”. It doesn’t change the thrust of your argument but I, for one, would appreciate accuracy.

  • B4988

    The airlines also like to list them in the “tax” box to avoid paying taxes on them!

  • RobertB

    You may have hit it on the head – If the YQ/YR charges were rolled up into the fare of a non-refundable ticket they would still be non-refundable. So we have to ask the question, why do airlines add the YQ/YR charges seperately with government taxes? One reason may be, as you state, to avoid other taxes. Janice also hit on one reason – airlines don’t offer corporations discounts or pay commission/overrides on the fuel surcharge but they sometimes do on the base fare. Charlie Leocha would also argue that airlines want to advertise the cost of a base fare without taxes or fees and by rolling up fuel costs with taxes that they will advertise an artificially low fare. Airlines would make the transparency argument, so we can see where the money goes in the cost of an airline ticket, which is a weak argument, indeed. As Janice points out, fuel surcharges don’t usually go up and down along with the cost of fuel as they should if the transparency argument was honest. Whatever the reason for the YQ/YR charges on a ticket, there is little consumer benefit. It’s just one more way to add to an airline’s bottom line.

  • TonyA_says

    It can be “gamed”.

  • janice

    RobertB, exactly! And it’s not as if the fuel surcharge is exactly what fuel costs.

  • TonyA_says

    FYI, these are called Carrier Imposed Fees (CIF). They are not necessarily Fuel Surcharges. Only CIFF are Fuel. Some are CIFI (insurance) or CIFM. Some US carriers code them as CIFM (M for Miscellaneous).

  • jim6555

    I tried to vote and instead of seeing the current tally on my screen, received the message “Failed To Verify Referrer”. What’s going on?

  • Marcin Jeske

    My understanding, besides being great for making a fare seem cheaper than it really is, and avoiding certain kinds of taxes…

    … is that fuel surcharges exploit both a failing and a feature of the GDS systems airlines use to sell their tickets. Basically, every time an airline wants to change the cost of a given fare, it has to pay a fee to the GDS. When multiplied by hundreds of flights and many types of fare codes, the fees become a significant cost if you want to frequently change your prices to react to market competition and changing costs.

    Enter the fuel surcharge, which as a single value used across a whole class of flights, can be adjusted as needed at a much lower cost, but affects all ticket prices. That’s a big part of the reason fuel surcharges have little relation to the actual market price of fuel or the distance traveled.

    So that’s the argument for fuel surcharges… they help the airlines cheat the consumer about the real price, cheat the government out of taxes, and cheat the GDS out of fees for changing prices. A winning argument for the airlines.