MilesBuzz! - JFK-LHR : more choices this year and some very different "taxes and surcharges"

This year it now possible to fly direct from New York to London Heathrow
on 5 major US/British carriers.
For flights leaving mid-October and returning mid-November you can choose:

British Airways for 50,000 miles and $433.30 in taxes and surcharges
Virgin Atlantic for 22,500 miles and $433.30 in taxes and surcharges
Delta for 50,000 miles and $212.09 in taxes and surcharges
Continental (EWR) for 50,000 miles and $131.30 in taxes and surcharges
American Airlines for 40000 miles and $136.30 in taxes and surcharges

Presumably they are all paying the same US/UK Government fees and the same increased fuel costs, so why the huge differences in taxes and surcharges ?

I guess you have to look at which airline need the money more badly. Seems like the British Carriers need the money to ofset some other costs.

I find it HUGELY interesting that BA and VS are still matching these costs EXACTLY!!??

Fuel Surcharges on the FF tickets BA/VS accounts for most of the difference.
We haven't seen that massive mile devaluation yet on the American-based FF programs to a large extent. DL and NWA is starting the trend though.

There are tons of reasons, however SOME of the ones I can think off right now are:

1- Taxes are based on the full fare of a ticket. Even if the airline discounts a ticket, the same tax amount applies. Therefore if the non-discounted fare varies between carriers (which it certainly does) this wud result in different tax amounts.

2- Surcharges relating to airport fees. Airports tend to get busier at different times of day, and thus, can impose higher fees during peak traffic hours, and lesser fees during less traffic. Not to mention differing departure/arrival airports

3- Surcharges relating to fuel. Size/weight/efficiency of the aircraft, cargo loads differing from week to week,...etc results in more/less fuel consumption, which in turn affects fuel surcharges.

Though I expect its a bit of a headache to keep changing those figures, its possible they do this to attract more traffic.

There are many more reasons, but those give u an idea, how things can affect fees.

There are tons of reasons, however SOME of the ones I can think off right now are:

1- Taxes are based on the full fare of a ticket. Even if the airline discounts a ticket, the same tax amount applies. Therefore if the non-discounted fare varies between carriers (which it certainly does) this wud result in different tax amounts.

2- Surcharges relating to airport fees. Airports tend to get busier at different times of day, and thus, can impose higher fees during peak traffic hours, and lesser fees during less traffic. Not to mention differing departure/arrival airports

3- Surcharges relating to fuel. Size/weight/efficiency of the aircraft, cargo loads differing from week to week,...etc results in more/less fuel consumption, which in turn affects fuel surcharges.

Though I expect its a bit of a headache to keep changing those figures, its possible they do this to attract more traffic.

There are many more reasons, but those give u an idea, how things can affect fees.

None of these reasons make any sense to me. The OP is talking about award tickets, which are generally puchase way ahead of the flight day.

There are tons of reasons, however SOME of the ones I can think off right now are:

1- Taxes are based on the full fare of a ticket. Even if the airline discounts a ticket, the same tax amount applies. Therefore if the non-discounted fare varies between carriers (which it certainly does) this wud result in different tax amounts.

2- Surcharges relating to airport fees. Airports tend to get busier at different times of day, and thus, can impose higher fees during peak traffic hours, and lesser fees during less traffic. Not to mention differing departure/arrival airports

3- Surcharges relating to fuel. Size/weight/efficiency of the aircraft, cargo loads differing from week to week,...etc results in more/less fuel consumption, which in turn affects fuel surcharges.

Though I expect its a bit of a headache to keep changing those figures, its possible they do this to attract more traffic.

There are many more reasons, but those give u an idea, how things can affect fees.

You are falsely assuming the airlines are using a similar equation to come up with their tax amount. They are not using similar equations. sammy7, not one of your above reasons are the correct explanation for the huge differences of award ticket taxes. With number 3, you got close, but were wrongly thinking it might have something to do with what fuel cost the respective airlines. Fuel does not cost BA more than AA; only AA does not see fit to make you pay for the fuel twice.

BA and VS, along with most major European carriers including LH and AF, see it appropriate to add a fuel surcharge to "free" miles redemption tickets. US carriers like Continental and American also have fuel surcharges but do not see fit to charge those of us redeeming miles a fuel surcharge. The fuel surcharges charged by European carriers vary based on route - I have seen them as high as $700 on a roundtrip.

I see the BA, VS, AF, LH, etc practice as ridiculous and a loyalty program killer. In the long run, I think these carriers and any that follow their lead will reduce the loyalty of their frequent customers.

Fuel is a fundamental cost of transporting a passenger. Historically, fuel was always included with a ticket. It is impossible for an airline to transport a passenger without fueling an airplane. Passing on a fuel surcharge to passengers is little different than passing on a "pilot pay" surcharge or "checkin staff" surcharge. Fuel surcharges make sense only as a short term (1-3 month) addition to paid fares until the paid fare amounts can be properly adjusted to account for the airline's new costs for fuel.

See this thread: Award Fuel Surcharges Masquerading As 'Taxes' (http://flyertalk.com/forum/showthread.php?t=807578)

I guess you have to look at which airline need the money more badly. Seems like the British Carriers need the money to ofset some other costs.

BA and most European carriers have MUCH nicer financials than AA and most American carriers.

These fees have nothing to do with costs!

Actually BA's financials have been going down the toilet, and are expected to continue doing so for some time irrespective of fuel price, having lost LHR as a fortress, they are now starting to see real unfettered competition at home. Such knee jerk statements ignore the fact that the Uk for example has almost no domestic market to speak of and that most of their flying is not only international, but in many cases fonly bilateral (two cariers on a route almost fixing their prices), even when there is a thrd or fourth carrier on a route, they often collude on prices and charges (witness the huge fine that BA recently handed out and my surprise above that BA and VS are still charging the exact same fuel surcharge for example). Regarding the only other Euro carriers of decent size and with decent results (AF and LH), it remains to be seen if they would be so good today had they not been allowed to absolutely DOMINATE their local markets,, and has they not had huge "last time" and "last last time" subsidies thrown at them (added to the fact that many costs which US carriers have had to shoulder are absorbed in different ways by European governments themselves rather than the airlines).

Such knee jerk statements ignore the fact that the Uk for example has almost no domestic market to speak of and that most of their flying is not only international, but in many cases fonly bilateral (two cariers on a route almost fixing their prices), even when there is a thrd or fourth carrier on a route, they often collude on prices and charges (witness the huge fine that BA recently handed out and my surprise above that BA and VS are still charging the exact same fuel surcharge for example).
None of your facts support my statement being in error.
Below, I will demonstrate how my statement is fact, not fiction. I challenge you to do the same.
BA and most European carriers have MUCH nicer financials than AA and most American carriers.
I guess you have to look at which airline need the money more badly.
Again, the assertion that European carrier need money more than US carriers is ludicrous, from a fact based perspective.

Join me on a financial comparison of the "big three US carriers" versus the "big three European carriers."

Thesis: Major European carriers are in a much better financial position to cover the costs of fuel than their US counterparts.

1) Who are the big 3?

There are many ways of factoring who the biggest airlines are. I chose the 3 largest airlines from each category based on passenger km - the number of km a carrier carries passengers in total over the coarse of a year. (Figures below from Wikipedia)

Big US 3:
American Airlines 224,330 million passenger km
United Airlines 188,684 million passenger km
Delta Airlines 158,952 million passenger km

Big European 3:
Air France 123,458 million passenger km
Lufthansa 114,672 million passenger km
British Airways 114,896 million passenger km

2) The big 3 US airlines do more transporting for less money.

The big 3 US carriers did 571,966 million passenger km in exchange for $62,278 million USD of revenue.

The big 3 European carriers did 353,026 million passenger km in exchange for $84,947 million USD of revenue.

Last year's revenue figures:
AF revenue - $35,627million USD
LH revenue - $33,095 million USD
BA revenue - $16,225 million USD
AA revenue – $22,935 million USD
UA revenue - $20,143 million USD
DL revenue - $19,200 million USD
(Figures compiled from news articles found using Google searches)

3) The Stock Market proves my case.
Despite the US carriers flying 80% more passenger km per year, the Stock market ascribes a Market Cap value of only $6.87 billion USD to the the big US three compared to $22.32 billion USD to the big European three. A valuation more than 3X proves the European companies are in better financial shape.

American Airlines Market Cap $2.64 B USD
Delta Market Cap $2.62 B USD
United Market Cap $1.61 B USD

Air France Market Cap $7.38 B USD
Lufthansa Market Cap $9.77 B USD
British Airways Market Cap $5.17 B USD

4) The US big 3 lost money last quarter; the European big 3 made money last quarter.

The big US 3 lost $298 million USD last quarter. That is excluding special items. Including special items/accounting charges, the big US 3 lost $3 billion USD last quarter.

The big European 3 made a profit of $845 million USD last quarter. Quite a difference.

Companies that made money last quarter are more able to pay for fuel than those that lost money last quarter.

Most recent quarter:
Air France $262 million profit
Lufthansa $510 million profit
British Airways $73.3 million profit
American Airlines $284 million loss
United Airlines $151 million loss
Delta Airlines $137 million profit

5) Over the last 5 years, the US big 3 have been loosing their shirts while the European big 3 have been making real money.

The European big 3 have earned a combined total of $13.2 Billion USD over the last five years.

The US big 3 have lost a combined total of $21.5 Billion USD over the same period.

American Airlines profit – last five years – $2.1 Billion loss
2003 $1.2 billion loss
2004 $761 million loss
2005, $857 million loss
2006, $231 million profit
2007, $504 million profit

Delta Airlines profit – last five years - $14.4 Billion loss
2003 $773 million loss
2004 $5.2 billion loss
2005 $3.8 billion loss
2006 $6.2 billion loss
2007 $1.6 billion profit

United Airlines profit – last five years – 5 Billion loss
2003 $2.81 billion loss
2004 $1.6 billion loss
2005 $557 million loss
2006 $45 million loss
2007 $403 profit

AirFrance - $6,064 million profit
2004 $356 million profit
2005 $445 million profit
2006 $1,348 million profit
2007 $1,832 million profit
2008 $2,083 million profit

Lufthansa – $3,743 million profit
2003 $1,453 m loss
2004 $596 m profit
2005 $ 852 m profit
2006 $ 1,248 m profit
2007 $2.5 billion profit

British Airways - $3,365 million profit
2004 $240 m profit
2005 $465 m profit
2006 $836 m profit
2007 $538 m profit
2008 $1,286 m profit

Conclusion: The US airlines need money more badly.

Huh? How excatly did you extrapolate what you thought I said from what I have actually said? Yes, we know that the Euro big three are currently in better shape, the question is how they got there.

BA and most European carriers have MUCH nicer financials than AA and most American carriers.

These fees have nothing to do with costs!
Actually BA's financials have been going down the toilet, and are expected to continue doing so for some time irrespective of fuel price, having lost LHR as a fortress, they are now starting to see real unfettered competition at home. Such knee jerk statements ignore the fact that the Uk for example has almost no domestic market to speak of and that most of their flying ....
Huh? How excatly did you extrapolate what you thought I said from what I have actually said? Yes, we know that the Euro big three are currently in better shape, the question is how they got there.
Excuse me for misunderstanding you.

Please explain what you meant.

To me, it sure sounds like you were trying to contradict what I had just said and agree with the post I was responding to. (Remember this thread is about the differences in award ticket costs and why. How does your post connect with the thread topic if you aren't saying BA charges because of their financials?)
I guess you have to look at which airline need the money more badly. Seems like the British Carriers need the money to ofset some other costs.

sammy7, not one of your above reasons are the correct explanation for the huge differences of award ticket taxes. With number 3, you got close, but were wrongly thinking it might have something to do with what fuel cost the respective airlines. Fuel does not cost BA more than AA; only AA does not see fit to make you pay for the fuel twice. [/URL]

And you know this for a fact how exactly, sherlock ??? Unless you have worked on the financials and pricing for ALL airlines and airports, AND have evidence that the points above not one of your above reasons are the correct explanation, then calm down, sit back and don't just blurt out nonsense for the sake of attention.

Fuel does not cost BA more than AA; only AA does not see fit to make you pay for the fuel twice

Are you kidding me!!!! are u that clueless? Do u have no idea that between tax on fuel, transportation costs, storage costs, hedging purchases, and what not, result in differing final cost of fuel to airlines.

None of these reasons make any sense to me. The OP is talking about award tickets, which are generally puchase way ahead of the flight day.

You are right, however the tax/surcharges you are charged are based on the current pricing for the period you intend to travel in. If you buy a ticket today, for travel in 6 months, how do u think they calculate the taxes and surcharges?

Are you kidding me!!!! are u that clueless? Do u have no idea that between tax on fuel, transportation costs, storage costs, hedging purchases, and what not, result in differing final cost of fuel to airlines.
sammy7, not one of your above reasons are the correct explanation for the huge differences of award ticket taxes.
It certainly is true that individual airlines end up with different actual fuel costs. However, when comparing the European carries to the US counterparts, these differences are negligible (especially when compared to the difference in charges when redeeming different FF miles).
No difference in costs is the correct explanation for the huge differences of award ticket taxes.
And you know this for a fact how exactly, sherlock ???
I'm no sherlock, however, I think those who know me could attest that I possess a more researched/informed understanding of the airline industry than most who post around here.

You probably haven't spent thousands of hours every year researching/understanding the airline industry (with an emphasis on FF programs). You made some false assumptions. I corrected you.

I can't count the number of times I have redeemed tickets for mulitiple people by using miles from a US and a European program for identical itineraries and paid a European carrier more than 2X+ in taxes/fees compared to the US carrier. In some cases, the European carrier charges a full 3X+ in taxes/fees the US carrier.
Identical itinerary = 100% of same flights on same airlines on same dates

With identical itineraries, I am curious where you will turn now to argue the airlines had a cost difference to account for the different tax/fees calculations....

You will learn a lot if you read through the thread I linked above.

BA and most European carriers have MUCH nicer financials than AA and most American carriers.

These fees have nothing to do with costs!


I would not say BA's financials are MUCH nicer than AA's. A little, maybe, but BA has been hit hard lately.

I would not say BA's financial are MUCH nicer than AA's. A little, maybe, but BA has been hit hard lately.

OK, you must know things about these companies that I don't. Below is what I know about these companies that would paint MUCH different financial pictures. Please share the facts I am missing that put these companies in a similar boat.


1) Market Cap compared to revenue

British Airways is valued 3 TIMES as high per $ of revenue by the stock market.

IMO, a triple valuation is more than "a little" difference. Your opinion?

AA revenue – $22,935 million USD - Market Cap $2.64 B USD
BA revenue - $16,225 million USD - Market Cap $5.17 B USD



2) Large losses year after year puts a company in a dissimilar financial state to one with significant profits.

AA - $2.1 Billion loss over last five years
BA - $3.4 Billion profit over last five years

IMO, losing 2.1 Billion $ does not put a company on similar footing to one that earned 3.4 Billion $. This is more than "a little" difference. Your opinion?



3) Large losses last quarter puts a company in a dissimilar financial state to one with significant profits.

American Airlines $284 million loss
British Airways $73.3 million profit

"A little" or a lot different? Similar?



4) American Airlines is a much leaner machine than British Airways. This means there are things BA can cut before ceasing to exist; AA has already cut most of these.

AA revenue – $22,935 million USD - 224,330 million passenger km - $.102/passenger KM
BA revenue - $16,225 million USD - 114,896 million passenger km
$.141/passenger KM

When AA transports one person 1 KM, AA gets $.102 to cover expenses. When BA transports one person 1K, BA gets $.141 to cover expenses.
BA has more opportunity to survive.

I realize there are external reasons for the above disparity as well; however I think any extensive research will conclude there are many more cuts BA can make to survive compared to AA.



cda322 - I am anxious to hear the other side of the story I am apparently missing. Please do share.

The above figures and my following the airline industry shows AA, along with most US airlines, in a brutal struggle for survival. They have sold profitable assets, laid off significant percentages of their workforces, cut wages then cut them again, and reduced their flying by hundreds of flights per day. There is a real risk AA, DL, NW, UA, or/and US will liquidate in the next two years. These are companies in trouble that may or may not live.

British Airways, on the other hand, is a company struggling in comparison to the other two of the big Europe 3. They are not as profitable as these peers and have serious challenges ahead they almost certainly will be able to overcome. British Airways is hurting; not gasping for breath like its USA based brethren.

One ailrine has the common cold; the other has drug resistant malaria. Perhaps AA will find a drug this strain of malaria is not resistant to in time and live. If not, the bleeding will continue, and AA will die. Many drugs have been tried so far but the bleeding has continued.

IMO, these situations are not similar. I have presented the facts that led me to my opinion. Please share your opinion along with your supporting facts. To you, a triple market valuation and $2.1 Billion loss versus a 3.4 Billion $ profit does not mean "BA's financial are MUCH nicer than AA's" because _____________?

Thanks! ^ :)

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I urge anyone who wants to understand award ticket "taxes and fees" to read the following thread. Fuel surcharges are the reason European FF awards tend to cost the consumer 2X or 3X , sometimes even more than 4X, what USA FF programs charge for the same exact flights on the same exact airlines on the same exact days.

Award Fuel Surcharges Masquerading As 'Taxes' (http://flyertalk.com/forum/showthread.php?t=807578)

With time and careful reading, they will understand your point
Wannaflyforless, sometime people take the information you give on
our sight as if you are preaching, not all on this sight are aware of
your very insightful and helpful comments you have posted over the
years, for which many of us starter have been very grateful. Keep up
the good work of educating us. Now, what is your next challenge,
last year you did the 100,000 miles in one month, what are you up to
now.

AA revenue – $22,935 million USD - 224,330 million passenger km - $.102/passenger KM
BA revenue - $16,225 million USD - 114,896 million passenger km
$.141/passenger KM

When AA transports one person 1 KM, AA gets $.102 to cover expenses. When BA transports one person 1K, BA gets $.141 to cover expenses.
Based on what conversion rate? BA makes money in GPB, doesn't it? AA definitely makes money in USD. Meanwhile, the GPB:AA conversion ratio has plumetted by around 10% from its recent peak, and is today at levels (1.80) it hasn't seen for over two years. So if you converted BA's income, and thus CPPKM, from GPB to USD at a conversion rate much higher than 1.80, then BA's picture would seem less rosy today than at the time of the conversion rate you used.

That's the problem with doing this analysis: Everything is moving fast, including the price of oil, the conversion between USD and GPB, capacity changes (many of AA's not having taken effect yet as of today, even if they have been announced), the many additional fees only partly having taken effect so far, etc.

And if the UK is going into an economic downturn but somewhat later in time than the US, then BA's worst-case opportunities for reduction in premium cabin bookings might yet materialize even if they haven't in reported quarters yet.

Based on what conversion rate? BA makes money in GPB, doesn't it? AA definitely makes money in USD. Meanwhile, the GPB:AA conversion ratio has plumetted by around 10% from its recent peak, and is today at levels (1.80) it hasn't seen for over two years. So if you converted BA's income, and thus CPPKM, from GPB to USD at a conversion rate much higher than 1.80, then BA's picture would seem less rosy today than at the time of the conversion rate you used.


A voice of reason, thank you. ^

Yes, I agree the equation is complex and the numbers I am using cannot be taken as exact as they change with exchange rates (far from stable).

However, when talking talking about a 300% difference (triple valuation), no matter what exchange rate you use, the big picture remains the same. While there may be other factors that affect the equation in small ways, I think the big picture is clear: BA has a much higher market value compared to AA.

That's the problem with doing this analysis: Everything is moving fast, including the price of oil, the conversion between USD and GPB, capacity changes (many of AA's not having taken effect yet as of today, even if they have been announced), the many additional fees only partly having taken effect so far, etc.

And if the UK is going into an economic downturn but somewhat later in time than the US, then BA's worst-case opportunities for reduction in premium cabin bookings might yet materialize even if they haven't in reported quarters yet.

My analysis was aimed at comparing the current financial state of these two companies. I haven't analyzed if the challenges these companies face going forward are similar or not.

My point is that BA is currently in a strong financial position compared to AA.

This is important to dispel the myth that BA charges for fuel on award tickets when AA does not due to their different financial situations.

You are certainly right that BA has major challenges coming. IMO, the challenges AA has coming are even more dire. But this is getting off topic and perhaps would better be discussed in another thread.

:)

and BA has used its charging fuel surcharges in a predatory and illegal manner, witness the HUGE fines they received for their collusion with VS.

Now, what is your next challenge,
last year you did the 100,000 miles in one month, what are you up to
now.

Flying under the radar. ;)