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Award Fuel Surcharges Masquerading As 'Taxes'.....Time For An 'Inside Flyer' Expose

Award Fuel Surcharges Masquerading As 'Taxes'.....Time For An 'Inside Flyer' Expose

 
Old Apr 3, 2008, 9:12 am
  #16  
 
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aside from award ticket issues, i would just like to see fare (including all the surcharges) + taxes, instead of playing games with the complicated charges and surcharges structure. Make it easier to figure out how much a ticket is like the old days. Looking at fare rules and trying to figure out how a much a ticket will cost is more complicated than doing taxes these days
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Old Apr 3, 2008, 1:26 pm
  #17  
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I recall coming across economy class tickets operated on BA where the cash due on BA award ticket redemptions was +/- 10% of the all-in price of the lowest regular paid economy class ticket for mileage earning flights on the same city pair on the same day -- this was a result of the "taxes and fees" on miles+cash BA bookings on BA flights.

A growing list of airlines have effectively turned a growing number of award redemptions for "free flights" into an opportunity to add revenue to their financial statements.
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Old Apr 3, 2008, 1:37 pm
  #18  
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Originally Posted by Randy Petersen
As for fuel charges, hey, i'm not totally convinced they are justified. They reflect certain airlines inability to mage their own business. To this day do not know why airlines have not hired away fuel hedge employees from Southwest. I'd easily pay that employee $20 million a year to help the airline enterprise save $150 million. And this fuel hedging isn't that new, heck it's been a topic way back to Gulf War #1.

And please don't think i'm soft on this, look at my very public ranting on Delta and the purpose of these mergers in the latest InsideFlyer cover article:
http://www.insideflyer.com/articles/...e.php?key=4461
About the article and because the European airlines tend to be much worse than US airlines when it comes to fuel surcharges, I am just curious how much more expensive aviation fuel charges are in Europe than in the US for the same volume unit of aviation fuel. I ask this because it was my understanding -- mistaken or not -- that: 1) aviation fuel is generally not taxed like for cars in Europe (a treaty actually bans taxes on aviation fuel IIRC); and 2) that arbitrage opportunities would drive the differential in aviation fuel price down toward the same price level + difference in transport & storage costs +/- subsidy (if any).

Last edited by GUWonder; Apr 3, 2008 at 1:46 pm
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Old Apr 3, 2008, 1:40 pm
  #19  
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Originally Posted by Randy Petersen
As for the 50,000 miles and $600 in taxes? Well, imagine the other person who is paying $500 for the ticket and then $600 in taxes. Let's remember, the award redeemer is not being singled out.
Incorrect. That's the bitter pill of this whole movement. The revenue ticket is not $500+$600 in taxes. It's $99+$600 in taxes. So, you burn 50,000 for a coach ticket, and then pony up $600 in taxes. They have often reduced the fares, but jacked up the fuel surcharges and other nonsense so high, to compensate.

What does doing this hurt the frequent flyer? First, it makes awards almost useless. Second, if you're flying internationally with kids under 2, you pay 10% for a lap kid, PLUS $600. Another ripoff, in grand style.

Many corporations have discounts based on a percentage off of tickets. By doing the fuel surcharge end-run, they then are abiding by their contract, but pumping the price up substantially, because the fuel surcharge is not discounted.

If the airlines were forced to be a bit more honest, and list an all in price, then it would be easy to compare apples to apples. I saw a $99 airfare round trip from SJO-SLC this morning. Wow, a great fare. It's on AA. Normal taxes are in the $60-80 range. Still a great fare. Add in $210 in fuel surcharges, more than double the actual fare, and it's up to almost $400. Now it's nothing to get excited about.
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Old Apr 3, 2008, 1:46 pm
  #20  
 
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Sorry for any Ramblings and simpistic views here, just thinking out loud..

If you consider the two parts of a regular airline ticket, in consists of two parts. 1 - The part the airline has no control over and must pay over, taxes to governments and airports lets call these 'forced charges', and 2 - The fare paid to the airline to cover their costs (airplane, maintance, crew, meals, fuel) and make a profit.

Now think to airlines before the age of the fuel surcharge. They calculated how much it cost to operate the flight, be it the cost of buying and maintance of plane, crewing, operations, providing customers with food and crucially to this argument, how much the fuel cost. The airline then made sure they charged enough to each customer to cover this. Then they added the taxes they were forced to pay.

Recently, fuel has gone up and airlines margins were squeezed so they needed to charge more. It was clearly somebodys brainwave that this cost falls into the first bracket of what I call 'forced charges', and not the original fare secion of the ticket. This results in two advantages to the airlines, A) Their fares do not increase on the initial part of the booking form making the customer still think they're getting good value (I accept in europe this is largely now included in the first price of the ticket you see) and (B) theyre able to fleece more on redemption tickets.

If the bus timetable said 4 and you got on the bus and they asked for an extra 1 as fuel surcharge there'd be an outcry (here anyway!!)

Basically, I think this is just a cost the airline has a control over, and every airline will be able to control to different efficiency, and management of this is a part of their expenditure on a flight and is not a fixed tax imposed on everybody.
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Old Apr 3, 2008, 1:52 pm
  #21  
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Originally Posted by Jaimito Cartero
Incorrect. That's the bitter pill of this whole movement. The revenue ticket is not $500+$600 in taxes. It's $99+$600 in taxes. So, you burn 50,000 for a coach ticket, and then pony up $600 in taxes. They have often reduced the fares, but jacked up the fuel surcharges and other nonsense so high, to compensate.

What does doing this hurt the frequent flyer? First, it makes awards almost useless. Second, if you're flying internationally with kids under 2, you pay 10% for a lap kid, PLUS $600. Another ripoff, in grand style.

Many corporations have discounts based on a percentage off of tickets. By doing the fuel surcharge end-run, they then are abiding by their contract, but pumping the price up substantially, because the fuel surcharge is not discounted.

If the airlines were forced to be a bit more honest, and list an all in price, then it would be easy to compare apples to apples. I saw a $99 airfare round trip from SJO-SLC this morning. Wow, a great fare. It's on AA. Normal taxes are in the $60-80 range. Still a great fare. Add in $210 in fuel surcharges, more than double the actual fare, and it's up to almost $400. Now it's nothing to get excited about.
If it weren't for the airlines' disintermediation of (and subsequent emascalation of) travel agents as effectively as has happened, then would there be a more effective challenge against the airlines doing these fare display games?
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Old Apr 3, 2008, 6:12 pm
  #22  
 
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I just, for the "fun" of it did a search on Delta.com because I noticed that they have jumped on the surcharge band wagon in February.
Routing DUS-ATL-MSP r/t costs about 230 Euros in "taxes" aka fuel surcharges. If you book it MSP-ATL-MSP it runs you 140 USD. Pretty strange, if you ask me.
It is also masked as "international surcharges". I just call it BS.

What is even worse though is if you try to book an award ticket with FB miles on NW going from the US to Asia. Then you still pay over 240 Euros although NW only charges around 50 USD...
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Old Apr 4, 2008, 3:38 am
  #23  
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Let's take a quick example of a BA LHR-JFK ticket in Economy (because the average miles collector does redeem in Economy, and London to New York is a very typical redemption choice):

4-11 June, the BA Y fare is £358. This comprises £162 of 'fare' and £196 of 'taxes'. Of the taxes number, £108 is BA's fuel surcharge.

Anyone redeeming miles here would be sacrificing 50,000 miles for £162 of value - a ludicrously bad deal - and still be facing a bill of £196. There is something very wrong here.
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Old Apr 4, 2008, 12:30 pm
  #24  
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I chip in a small data point.

A friend went shopping around for me last week for a C/F award PDX-BEG with a stopover in MUC end of June/early July. UA wanted $138 while Flying Poo somewhere in the mid-$400s. Not sure what LH Miles&More wanted, or any of the other US-based airlines. But from what I gather, had the availability been AA vs. LH (for example) the cost differential b/w the US-based FF award and the non-US based award would've likely been similar.

On the one hand, the T&Cs of all FF programs are subject to change w/o notice. So what the airlines *can* do (in the contractual sense) w/r/t fuel surcharges is not really subject to debate. Of course, what a functional loyalty program could and should do is another matter. But these are not functional times for big airlines. Thus, we have a classic Is-Ought Gap problem.

Last edited by essxjay; Apr 4, 2008 at 12:38 pm
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Old Apr 5, 2008, 4:44 am
  #25  
 
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Originally Posted by Randy Petersen
As for the 50,000 miles and $600 in taxes? Well, imagine the other person who is paying $500 for the ticket and then $600 in taxes. Let's remember, the award redeemer is not being singled out.
My main program is LH Miles & More, and I think I have seen instances there where it seems that the paid ticket would have been cheaper than an award plus "taxes and fees". I am not 100 % sure, but I think that LH adds more mysterious "taxes and fees" to award tickets sometimes than they do to paid tickets. But perhaps I am remembering it incorrectly.


Edit: OK, I just tried it out with LH. Flight MUC-CDG-MUC either with "Ready to Fly" special weekend offer or as an award. And the "fuel and security surcharge" is NOT the same - they charge € 20 for the paying passenger and € 50 for the award passenger - exactly the same flights:

München (MUC) nach Paris (PAR) : Abflug: Fr 11 Apr - Rückflug: So 13 Apr
Datum Von Nach Flug Dauer Klasse
Fr 11 Apr 08:50 München, Franz Josef Strauss 10:20 Paris LH4242 1h30 Economy
So 13 Apr 21:15 Paris 22:45 München, Franz Josef Strauss LH4255 1h30 Economy

Here's the paying passenger:

Steuern, Gebühren & sonstige Zuschläge (pro Person)

Hier sehen Sie eine Auflistung aller anfallenden Steuern, Gebühren und sonstiger Zuschläge pro Person
Treibstoff- und Sicherheitszuschlag (YQ) EUR 20,00 --> this is the "fuel and security surcharge"
Flughafensicherheitsgebühr (DE) EUR 4,85
Passagier Service Charge (International) (QX) EUR 8,00
Andere Steuer/Gebühr (IZ) EUR 1,00
Flughafensteuer (FR) EUR 3,92
Flughafensteuer (FR) EUR 9,63
Passagier Service Charge International (RA) EUR 14,24
Summe EUR 61,64



-----------

Here's the award passenger:

Steuern, Gebühren & sonstige Zuschläge (pro Person)

Hier sehen Sie eine Auflistung aller anfallenden Steuern, Gebühren und sonstiger Zuschläge pro Person
Treibstoff- und Sicherheitszuschlag (YQ) EUR 50,00 --> this is the "fuel and security surcharge"
Flughafensicherheitsgebühr (DE) EUR 4,85
Passagier Service Charge (International) (QX) EUR 8,00
Andere Steuer/Gebühr (IZ) EUR 1,00
Flughafensteuer (FR) EUR 3,92
Flughafensteuer (FR) EUR 9,63
Passagier Service Charge International (RA) EUR 14,24
Summe EUR 91,64


----------------

Comes out to € 88.64 + 14.00 "Ticket service charge" = € 102.64 for the paid ticket and 15,000 miles + € 91.64 for the award ticket.
So, Randy, they are indeed singling out the award redeemer. This was just the very first example I checked, I am sure there are more.

Last edited by Football Fan; Apr 5, 2008 at 5:01 am
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Old Apr 5, 2008, 6:25 am
  #26  
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Here's my concern. European and many Asian programs have had these sorts of charges for awhile. They haven't been a part of US programs. But Delta has started tacking on fuel surcharges to Air France itineraries. Once it takes hold there, it's a matter of time before it spreads to other Skymiles redemptions, and before other US programs copy them.

In other words, we're at a crossroads where -- if there isn't pushback -- we'll see the cost of award redemption from US programs begin to go up dramatically.

In a few days I'll be flying BA to BCN in Clubworld on an award, and the fees were > US$360 for the roundtrip. I'm using CX AsiaMiles, and made a clear choice to do that (since the AsiaMiles were expiring soon) but it's a lot more than I'd be paying using my UA miles and connecting through, say, FRA or MUC on LH.

US programs represent a wonderful value relative to their European and Asian counterparts. But we're on the verge of losing that.

And - entirely separately - I suspect that most frequent flyers don't realize when they're earning the miles that there is a big difference in the value of those miles. Not just variances in the award chart but in the cash cost to redeem.

One point of competitive difference between the programs is the cost to the consumer to utilize the benefits. And it's really worth publicizing the programs that do a good job for their members in keeping those costs down, that should win business for those programs! And I think this is undermarketed, and underpublicized.

So perhaps the role of Inside Flyer is in helping frequent flyers understand the benefits of different programs, giving consumers the best information possible so that they can make the best decisions for themselves when choosing where to accumulate their miles.

I usually think about

* How easy is it to earn miles? (Partnerships, bonuses, and of course the % of flown miles earned based on cost of ticket)

* How easy is it to redeem miles? (Availability of seats on the carrier and their partners, and the cost those seats on the reward chart -- huge variances across programs, "not all miles are created equal" or put a different way one mile doesn't always equal one mile)

* What is the cash cost to redeem those miles? Here taxes and fees vary greatly...
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Old Apr 5, 2008, 6:29 am
  #27  
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And attorney28's point above is an important one, we've seen over and over on Flyertalk that these supposed fixed fees aren't really all that fixed.

If we've already lost the battle on these surcharges (and with US programs I don't think we have, but we truly could) then the calculations should never be opaque, they should be disclosed up front, and they should not be higher than for regular paying passengers. In other words, there should not be an award tax!
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Old Apr 8, 2008, 1:00 pm
  #28  
 
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Originally Posted by gleff
Here's my concern. European and many Asian programs have had these sorts of charges for awhile. They haven't been a part of US programs. But Delta has started tacking on fuel surcharges to Air France itineraries. Once it takes hold there, it's a matter of time before it spreads to other Skymiles redemptions, and before other US programs copy them.

In other words, we're at a crossroads where -- if there isn't pushback -- we'll see the cost of award redemption from US programs begin to go up dramatically.
You're too late Gleff!

Starting 04/01 DL now charges a massive fuel surcharge for award flights on their own metal ex-EU.

Try out a CDG-JFK award booking on DL metal and you'll discover the whopping $350 tax.
JFK-CDG is only $80.

How long until DL starts charging fuel surcharges on award tickets for their own metal ex-US?
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Old Apr 8, 2008, 1:25 pm
  #29  
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Originally Posted by ctownflyer
Try out a CDG-JFK award booking on DL metal and you'll discover the whopping $350 tax.
JFK-CDG is only $80.
That is utter garbage.
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Old Apr 8, 2008, 1:38 pm
  #30  
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Surcharge is just an gimmick to collect additional fare

From DL: International Surcharges
Carrier-imposed surcharges pursuant to applicable international tariff filings International YQ/YR up to
$260*
each way

I'm having a hard time digesting Randy's comment about "As for the 50,000 miles and $600 in taxes? Well, imagine the other person who is paying $500 for the ticket and then $600 in taxes. Let's remember, the award redeemer is not being singled out"

If I'm paying for an int'l flight I'm going to do a search; iad>lhr RT, using DL and 7/15>7/22 and up will pop a list of possible Itins and lets say I search by price for simplicity. I realize going the other way will result in more taxes but for simplicity and just adding a fuel charge in below, I'm trying to make my point.

I'm going to get the following:

lowest fare with 1 stop in large numbers $839 and in small numbers + taxes and fees $156.98 and a total of $996.78 so with one click of the submit button, I know what I'm going to PAY in cash for this trip.. $996.78 and I will decide based on that amount if I want to pay that much for this trip. I do not know how much of this is fuel surcharge, nor do I care nor do I suspect most pax care, all I know is that my OOP is $997 bucks. DL can allocate any way they want in their books but in the end the $839 is all booked to SALES or REVENUE and whether they use some sort of subsidiary account for fuel surcharges or not does not matter, its a total sales of $839 with the passthru costs as $156 in taxes.

for reward travel using the same dates:

I get 100K miles and $143.38 in taxes which to me is close enough

however if you all of a sudden put $300 in fuel surcharges into that $839 base fare then the purchased flight is the same to me as i stated above I don't care how DL allocates my money but if you make it 100K plus 443.38 in taxes and fees then its a different ball game.

why is DL giving away all these miles? I'm sure there are a few reason but they know if they can get awards redeemed, they will also collect not only the money from 3rd parties for selling the miles but also the fuel surcharges.

As some one stated above, surcharges are a temporary fix. Remember the energy surcharges at the start of the decade in hotels, I don't see them any more, probably b/c they are buried in the rates; cabs used to have a $X surcharge too; they disappeared although they are starting to return; the point is, that you add these on until you can adjust your billing system to accomodate the additional costs or you think it will be something temporary where you can rescind the surcharge in the future. Airlines are doing neither. They are not building into their fare basis and this is where they rightfully belong; Fuel Surcharges are indeed part of the FARE; you don't see depreciation surcharges, labor surcharges, maint. surcharges, procurement surcharges, subcontract surcharges, just fuel. Fuel is part of the Cost of Goods Sold and this is what the price should cover.

Regarding the fed ex example; I'd be curious to know if they had a frequent shipping program if they would add these on; Ive never seen a program like that (that doesn't mean it doesn't exist) so thats not really a fare (punn intended) example. Ditto for the plumber. If you buy 100 pipes does he give you the 101st free? if so, would that have a surcharge? thats the only way to compare this stuff.

for those who say its a gimmick to get around corp agreements I agree but I also put the blame on corporations who do not negotiate against the surcharges. Business travelers fares are what they live for and if enough major companies start pushing back then you might get somewhere. I participate on one of the travel councils for a $32B in sales (and we don't bill surcharges) company and one of my recommendations was to start pushing back on the fuel surcharges (regarding discounts applying to them)

to summarize, I do feel that this (surcharge) is nothing but a gimmick to squeeze more revenue out of the so called award pax and corporations who don't get a discount off surcharges.

finally one question; the 7.5% fed exc tax is on the fare basis right? do they pay the excise tax on fuel charges? if yes, then its part of the fare? if no, maybe uncle sam should be auditing this system of fuel charges and stopping this accounting gimmick.

Last edited by TrojanHorse; Apr 8, 2008 at 1:52 pm
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