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-   -   Time for AA to drop Fuel Surcharges (https://www.flyertalk.com/forum/american-airlines-aadvantage-pre-consolidation-usair/879066-time-aa-drop-fuel-surcharges.html)

WingedWorldExplorer Oct 20, 08 1:01 pm

Time for AA to drop Fuel Surcharges
 
I am in the process of planning a trip for 5 people to Brazil. JJ (TAM) and UA have dropped their QY fuel surcharges to $ 60-$ 65 , but American Airlines is still at $ 250. For 5 people that is almost $ 1000 of unnessesary expense. If TAM and United have been able to drop Surcharges, then American Airlines must also be able to do so. Current JET A1 fuel prices are down 30% - 45 % from when these surcharges were imposed and I am sure AA buys its fuel at least as cost-efficiently as JJ or UA , if not better. Wake up AA, with new expanded service to Brazil, now is not the time to play Mickey Mouse with fees and charges making AA tickets $ 200 more expensive . Hope some AA exec reads FlyerTalk

FWAAA Oct 20, 08 1:21 pm

I disagree. It's time for AA to make some money. For the first nine months of 2008, AA has lost over a half billion dollars (excluding special items) and has produced negative cash from operations. I want AA to survive - actually thrive - so that my status and accumulated miles are worth something. With premium revenue tanking, now's not the time to drop any fees, IMO. YMMV.

lurcher Oct 20, 08 1:31 pm

AA's fuel hedging has it likely paying more than the current daily spot price - such is the risk of doing this. It will take them weeks/months to get out from under these to where they are paying sufficiently lower rates again. Only then would it make sense for them to drop the surcharges.

But of course - the "surcharge" is only compensating for the cost of fuel - therefore should not allow them additional margin - yea right...

Either way, don't hate the player - hate the game....

Michael

njvandy Oct 20, 08 1:40 pm


Originally Posted by FWAAA (Post 10548532)
I disagree. It's time for AA to make some money. For the first nine months of 2008, AA has lost over a half billion dollars (excluding special items) and has produced negative cash from operations. I want AA to survive - actually thrive - so that my status and accumulated miles are worth something. With premium revenue tanking, now's not the time to drop any fees, IMO. YMMV.

I would tend to agree with this sentiment; we are all stakeholders in the longterm success of AA and have a vested interest in a return to profitability. I know crude futures have dipped but I think it will take a prolonged period of lower prices for AA to start eliminating fees. We all know how energy prices can be volatile and the last thing AA wants is to lower YQ and then see jetA back up to July levels.

UnitedSkies Oct 20, 08 1:46 pm

This article gives good reasons why prices are always "sticky downward" regardless of the change in material/fuel costs.

FWAAA Oct 20, 08 1:48 pm

$70/bbl to $80/bbl oil prices may still be higher than the level that allows AA to be profitable under its current model. It's even worse when you consider than oil's fall from $147 to its current price of about half that has been accompanied (maybe even caused by) an impending worldwide slowdown in economic activity. AA's facing a very bleak winter, as are all six (soon to be five) US legacy airlines.

What I find curious is that oil recently fell from historic highs to merely expensive levels (when compared to prices for the last couple of decades) - airline losses are rolling in - and posters are demanding that fuel surcharges be dropped or reduced immediately. Doesn't matter that oil could rise again in the next few months or that airline revenue is heading into the toilet - they want immediate gratification NOW!

If oil had fallen to $30/bbl a year or two ago and airlines were awash in billions of dollars of profits, then I could understand the urgent demands for surcharge reduction. But it's only been a few weeks, people.

MiamiAirport Formerly NY George Oct 20, 08 1:55 pm


Originally Posted by FWAAA (Post 10548693)
$70/bbl to $80/bbl oil prices may still be higher than the level that allows AA to be profitable under its current model. It's even worse when you consider than oil's fall from $147 to its current price of about half that has been accompanied (maybe even caused by) an impending worldwide slowdown in economic activity. AA's facing a very bleak winter, as are all six (soon to be five) US legacy airlines.

What I find curious is that oil recently fell from historic highs to merely expensive levels (when compared to prices for the last couple of decades) - airline losses are rolling in - and posters are demanding that fuel surcharges be dropped or reduced immediately. Doesn't matter that oil could rise again in the next few months or that airline revenue is heading into the toilet - they want immediate gratification NOW!

If oil had fallen to $30/bbl a year or two ago and airlines were awash in billions of dollars of profits, then I could understand the urgent demands for surcharge reduction. But it's only been a few weeks, people.

Also, OPEC is looking at cutting production to get prices stable and there are a number of unfriendly US oil producing countries (Iran, Venezuela) that want to get oil back to $100.

777lover Oct 20, 08 3:39 pm

BS.

AA decided to link and justify these fuel surcharges based to th escalating price of oil. Thus, they should be reduced as oil drops.

Now, had they decided to just raise their fares. Fair. They don't have to reduce their fares. But AA went the fuel surcharge route, so they should be reduced as fuel declines.

I think that competition will bring these idiots in line.

tom911 Oct 20, 08 4:05 pm


Originally Posted by 777lover (Post 10549239)
AA decided to link and justify these fuel surcharges based to th escalating price of oil. Thus, they should be reduced as oil drops.

Would you factor fuel hedging in there somewhere? Seem to recall that UA lost $500 million 3rd quarter when they were hedged at $110 a barrel. I don't know what hedging AA has in place, but I bet it's not for $74 a barrel oil.

AAir_head Oct 20, 08 4:18 pm

Here's an interesting link on aa.com: https://www.aa.com/content/amrcorp/c...urements.jhtml

According to their example, they operated at a loss of 0.6 cents/mile last year. Perhaps that was mitigated by other income, but I don't know.

In any case, that was last year...this year has definitely been worse for AA and others. As has already been stated, airlines provide a service and even for what they're charging now it's relatively cheap. I know for certain I can't drive the places I want to go--on the schedule I want to do it in--for as little as it costs me to fly. And I'd be surprised if that weren't the case for most of us.

I am quite invested in AA; I am also quite willing to pay reasonable prices to keep them in business--so far, they haven't disappointed. YMMV, etc., etc.

cheers!

Dave Noble Oct 20, 08 4:56 pm


Originally Posted by FWAAA (Post 10548532)
I disagree. It's time for AA to make some money. For the first nine months of 2008, AA has lost over a half billion dollars (excluding special items) and has produced negative cash from operations. I want AA to survive - actually thrive - so that my status and accumulated miles are worth something. With premium revenue tanking, now's not the time to drop any fees, IMO. YMMV.

I disagree. If the price of fuel has dropped , then the fuel surcharges should be dropped. If the fares are too low, then the actual base fares can be raised, not use fuel as a pretence

Dave

justforfun Oct 20, 08 5:00 pm


Originally Posted by Dave Noble (Post 10549693)
I disagree. If the price of fuel has dropped , then the fuel surcharges should be dropped. If the fares are too low, then the actual base fares can be raised, not use fuel as a pretence

Dave

I completely agree. AA painted themselves into a corner. They should have just increased fares to avoid the backlash when the price of fuel drops but their fuel surcharges don't.

rupert_s Oct 20, 08 5:05 pm


Originally Posted by AAir_head (Post 10549455)
I am quite invested in AA;
cheers!

You'd have to change your handle for a start...

brp Oct 20, 08 5:10 pm


Originally Posted by Dave Noble (Post 10549693)
I disagree. If the price of fuel has dropped , then the fuel surcharges should be dropped. If the fares are too low, then the actual base fares can be raised, not use fuel as a pretence

Dave

But what matters here- the price of a barrel of oil on the open market, or what AA are actually paying for the fuel? Others here know all the right places to look for this information, and I don't...but I have a strong suspicion that AA are not "reaping the benefits" of the recent drops in their fuel charges. If they're still paying a lot, does the reduction in the open market price still mandate that they drop prices? Perhaps not.

Cheers.

hillrider Oct 20, 08 5:11 pm


Originally Posted by Dave Noble (Post 10549693)
I disagree. If the price of fuel has dropped , then the fuel surcharges should be dropped. If the fares are too low, then the actual base fares can be raised, not use fuel as a pretence

Well said--it's called integrity and honesty and that's something that especially those with "vested interest" should be screaming for.


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