IATA: Fuel Surcharges Will Come Down “Very Quickly”

IATA CEO Tony Tyler says that as savings from lower oil prices reach airlines, fuel surcharges will begin to come down.

The head of the airline industry’s global trade group insists that fuel surcharges are not only directly tied to fuel costs, but that passengers should expect to see a reduction in fuel surcharges if the current trend of oil prices continues.

“In many cases, airlines operate now with a basic fare and a fuel surcharge of some kind and the fuel surcharge in many airlines is directly linked to the price they’re paying for fuel,” IATA CEO Tony Tyler told reporters this week at the Toronto Global Forum. “You’ll see the fuel surcharge very quickly come down.”

Given the seemingly arbitrary amounts airlines charge under the heading of fuel surcharges, it isn’t unreasonable to wonder how much these fees actually relate to fuel costs. Following Tyler’s address, The Globe and Mail discovered that the fuel surcharges on select upcoming Air Canada flights to Europe make up more than half of the total fare.

When asked why fuel surcharges have yet to decrease, Tyler explained that prices for aviation fuel lag the price of oil by about a month and many airlines have hedged their fuel costs.

Fuel surcharges have been advantageous for airlines that hide the fee as a hidden cost that is considered separate from the airfare. Few U.S. carriers charge fuel surcharges, and regulations require airlines to include fuel surcharge fees in advertised fares. Some U.S. airlines, such as Delta Air Lines, only add fuel surcharges on flights originating overseas, as those are not subject to certain U.S. pricing regulations.

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