Go Back  FlyerTalk Forums > Community > Only Randy Petersen
Reload this Page >

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 1, 08, 8:51 am
  #1  
Original Poster
 
Join Date: Apr 2000
Location: Cleveland
Programs: AF/KLM Plat For Life/UA Million Miler-PremEx For Life/SPG Gold
Posts: 5,054
Award Fuel Surcharges Masquerading As 'Taxes'.....Time For An 'Inside Flyer' Expose

Good Morning Randy-

I am perplexed about the ability and reasonableness of European and Canadian airline programs to include fuel surcharges in their 'tax' calculations for award tickets. And I am obviously equally concerned that our US-based lemmings, I mean programs, are poised to join their European brethren in adding the fuel surcharge to award tickets.

I am fully aware of the verbiage of all the programs that essentially gives them the RIGHT to make such carte blanche decisions. I suppose my issue is whether it merits having some kind of article in "Inside Flyer' that at least analyzes this issue, if not actually championing its repeal.

I am sympathetic with the plight of the airlines and understand that when purchasing airline tickets, one needs to brace for these fuel surcharges. And, obviously, we all want the airlines to survive, if not thrive...so that the programs and our miles stay intact.

I am hopeful that 'InsideFlyer' will choose to take the initiative to 'look under the hood' at the airlines' methodology on award ticket fuel surcharges.

With fuel surcharges on long haul travel exceeding $250 and top of the myriad patchwork of taxes, a $600 cost for an award ticket is a startling and unwelcome reality.

You have the bully pulpit.....will you chooose to use it?

Thanks!

Last edited by beaubo; Apr 3, 08 at 6:53 am Reason: edited out 'conspiracy theory' content!!
beaubo is offline  
Old Apr 1, 08, 12:37 pm
  #2  
 
Join Date: Feb 2007
Programs: AC Elite
Posts: 592
Agree - great idea!
propofol is offline  
Old Apr 1, 08, 1:00 pm
  #3  
PJK
 
Join Date: Feb 2004
Location: AMS
Programs: KL/AF FB Plat, Hilton Silver, La Quinta Gold
Posts: 1,159
I agree on the interesting subject, with a maybe side note: I suspect (at least with KLM) that with every fuel surcharge increase, the base fare on competitive routes is equally lowered, so that the allin price comes out to the same. eg: cheapest economy AMS- NYC has been around €450 for years, even though the fuel surcharge was increased several times.

This eventually means the frequent flyers booking awards on that route are hit extra hard, as the miles only cover the base fare.

Maybe we could pull up some historical numbers to see how bad the devaluation of the miles is since the introduction of the fuel surcharge.
PJK is offline  
Old Apr 2, 08, 4:40 am
  #4  
 
Join Date: Aug 2007
Location: MAD, ORY, CDG mostly
Programs: AF/KL silver, Sixt Plat., BMI *G, Northwest Gold, Iberia nothing, Spanair Blue
Posts: 171
Originally Posted by PJK View Post
I agree on the interesting subject, with a maybe side note: I suspect (at least with KLM) that with every fuel surcharge increase, the base fare on competitive routes is equally lowered, so that the allin price comes out to the same. eg: cheapest economy AMS- NYC has been around 450 for years, even though the fuel surcharge was increased several times.

This eventually means the frequent flyers booking awards on that route are hit extra hard, as the miles only cover the base fare.

Maybe we could pull up some historical numbers to see how bad the devaluation of the miles is since the introduction of the fuel surcharge.

Agree

We could also include the 'class surcharge' airlines also now include in their fares which is simply a second base fare. For detailed results, I recommend ITA Software website which breaks down all details of a fare on request.
NicolasPARMADff is offline  
Old Apr 2, 08, 5:48 pm
  #5  
 
Join Date: Jun 2002
Location: Formerly known as attorney28
Programs: BA Gold, LH SEN, LC Aur, Hyatt Dmd, Mar/SPG "Lifetime" Plat, HH Dmd, IC Amb, Sixt Dmd
Posts: 6,416
fully agree with beaubo
Football Fan is offline  
Old Apr 2, 08, 6:42 pm
  #6  
Founder of FlyerTalk
 
Join Date: May 1998
Location: Colorado Springs, CO
Posts: 6,538
Thanks beaubo:
A few things for more information. The thing about having a bully pulpit is to use that pulpit in a manner which when making a point or a an issue of an issue actually commands respect on the quality of the POV. With that in mind, let's gather some information because there's something you say here that just doesn't ring very valid to me.

In this statement, "I'm starting to get the distinct impression that tactics like the fuel surcharges are just another subtle strategy to erode the value proposition of mileage redemption tickets." I'm interpreting that you think this fuel surcharge is a scam and that it is has an intent to erode the value.

Here's where i get a little stuck in this approach. FedEx doesn't have an awards program for me but yet i am still applied roughly a 15% fuel surcharge for each invoice. That's 15% on each invoice. Airlines have a fuel surcharge much lower than a flat 15%.

Now, somehow, given that other industries other than frequent flyer programs that are involved in transportation. For instance, I ordered something the other day online from a plumbing company. Yes, they added a 3% "transportation fuel surcharge." This is a plumbing company.

The point being here, and not an argumentive one, is that I'm losing your point that the fuel surcharge is there as a strategy for the airlines to erode the value of the tickets.

These patchwork of fees have long been part of the landscape, since the early days of PFCs and then the sneaky fee to pay for our own miles from car rental companies. Do I like it? Certainly not.

But where I'm getting stuck is that major media and "talky" types say that no one can ever redeem their miles. If no one can ever redeem their miles, then where is the problem of taxes and surcharges. And don't get me started on the "federal excise tax" on miles. Our enemy may not just be the airlines, but banks, plumber stores, FedEx and Hertz. The reality is that airlines gave away more than 22 million (earned) free tickets last year. Use any portion of math you want to apply and that is some boatload of money. Even with it being applied airlines just can't seem to be very good businesses, except for Southwest Airlines. So, as we prepare for any bully pulpit, if you're going to raise a ruckus, raise a remedy as well.

What is the solution? you yourself say that we do owe it to ourselves to keep them in business and we didn't do a good enough job at Aloha airlines, which I feel terrible about.

With the movement toward paying with miles, i suppose we could propose that all airlines allow members to pay for any and all of their fees by using miles. Actually several airlines already to that internationally. This way we would not have to part with wallets.

The chicken and the egg is a very tricky path here. So, can we have more input?

But beaubo, i just can't buy the argument that it is a strategy to erode the value of frequent flyer awards, sorry, that one is just too far out there in the X files.

Originally Posted by beaubo View Post
Good Morning Randy-

I am perplexed about the ability and reasonableness of European and Canadian airline programs to include fuel surcharges in their 'tax' calculations for award tickets. And I am obviously equally concerned that our US-based lemmings, I mean programs, are poised to join their European brethren in adding the fuel surcharge to award tickets.

I am fully aware of the verbiage of all the programs that essentially gives them the RIGHT to make such carte blanche decisions. I suppose my issue is whether it merits having some kind of article in "Inside Flyer' that at least analyzes this issue, if not actually championing its repeal.

I am sympathetic with the plight of the airlines and understand that when purchasing airline tickets, one needs to brace for these fuel surcharges. And, obviously, we all want the airlines to survive, if not thrive...so that the programs and our miles stay intact. But, I'm starting to get the distinct impression that tactics like the fuel surcharges are just another subtle strategy to erode the value proposition of mileage redemption tickets.

I am hopeful that 'InsideFlyer' will choose to take the initiative to 'look under the hood' at the airlines' methodology on award ticket fuel surcharges.

With fuel surcharges on long haul travel exceeding $250 and top of the myriad patchwork of taxes, a $600 cost for an award ticket is a startling and unwelcome reality.

You have the bully pulpit.....will you chooose to use it?

Thanks!
Randy Petersen is offline  
Old Apr 2, 08, 7:31 pm
  #7  
Moderator, Hilton Honors
 
Join Date: Nov 2003
Location: hopefully travelling
Programs: up in the air
Posts: 70,766
Originally Posted by Randy Petersen View Post
Here's where i get a little stuck in this approach. FedEx doesn't have an awards program for me but yet i am still applied roughly a 15% fuel surcharge for each invoice. That's 15% on each invoice. Airlines have a fuel surcharge much lower than a flat 15%.
True fuel surcharges are not flat % applied. Generally fixed $ amount based on type of flight (domestic, shorthaul, longhaul with some exceptions for certain countries that have impeding regulations such as Hong Kong SAR). However, it is fairly easy to find examples where the fuel surcharge is much more than 15% of base air fare.

As someone based outside North America I have experienced fuel surcharges on many airlines for several years. Over this time, the effect of ever increasing fuel surcharges being applied to awards is like a substantial increase in the miles required (and some programs have certainly done that too). Where the flights are costing more over time for paid tickets, that is fair enough though I might argue over (and do complain about) whether the extent of the increase seems justified. Personally I'd prefer the FFPs increase the mileage to compensate for the higher costs and not apply fuel surcharges to awards, but others may feel differently.

What I think beaubo is complaining about is where fares are not increasing and thus the relative value of awards is worsening. While a glass half full person might look at it as the paid tickets are good value when airline costs are continuing to increase, a glass half empty person sees the award tickets as poor value.

Finally, some examples might illustrate. Recently I had a choice between a paid ticket for $59 and an award. Even with a special half price awards discount to 8000 miles, the award was not close to being worth it due to the taxes (which of course includes fuel surcharge) of about $40. There are other examples that are even worse - last year a choice between $398 for paid ticket or an award of 20,000 miles + "taxes" (including fuel surcharge and booking fee) of $410. In that case I'd be paying $ to use my miles!
Kiwi Flyer is offline  
Old Apr 2, 08, 7:55 pm
  #8  
Original Poster
 
Join Date: Apr 2000
Location: Cleveland
Programs: AF/KLM Plat For Life/UA Million Miler-PremEx For Life/SPG Gold
Posts: 5,054
Hi Randy-

Thanks for your reasoned and timely response.

Upon reflection, my implying a conspiracy theory might have inadvertently distracted from the core of my concern. So, let me right off the bat, retract that part of my issue.

I'd like to absorb your response a bit before posting more in depth.

But I will say that Kiwi Flyer's observations articulate my concerns, well quite articulately!!!! If airlines simply INCLUDED increased fuel costs into the CORE cost of an airline ticket, award tickets would not be subject to the up to $280extra cost. So, it feels like award tickets are being penalized by an accounting sleight of hand.

....more soon.
beaubo is offline  
Old Apr 2, 08, 8:02 pm
  #9  
FlyerTalk Evangelist
 
Join Date: Nov 2002
Location: All over
Programs: Most
Posts: 10,833
Tend to agree with the poster that said that the price of the ticket is about the same as few years back. The fuel surcharge part of the total fare in some instances is far greater than the base fare itself i.e. LH intra Europe tickets.
holtju2 is offline  
Old Apr 2, 08, 8:13 pm
  #10  
Original Poster
 
Join Date: Apr 2000
Location: Cleveland
Programs: AF/KLM Plat For Life/UA Million Miler-PremEx For Life/SPG Gold
Posts: 5,054
Hi Randy-

Just to make sure that you are comfortable that my arguments are for the good of the community and not particularly self-serving..........

I typically redeem awards for intl. Business or First Class awards that normally cost anywhere from $5500-$11,000. So, while I'm not thrilled paying upwards of $600 in taxes and fuel surcharges (ie- AF: JFK-CDG-BOM in FRT and BD: CLE-ORD-FRA-MAD in F RT), I can at least rationalize that I'm still getting a pretty damn solid value.

But paying 50,000 miles AND $600 in taxes/fuel surcharges for an intl Economy award ticket (ie-US-Europe) that could normally cost $600-$900, is not an 'efficient' usage of a mile.


On a separate note, while savvy consumers are aware that fuel surcharges are indeed SEPARATE from taxes, the airlines collectively have essentially 'packaged' fuel surcharges as TAXES, so the perception is that these charges are byond their control. If you are convinced that such fuel surcharges are indeed jjustified, surely you can agree in the truth-in-labeling call for the FFPs to charge SEPARATELY and IDENTIFY SEPARATELY X in taxes and Y in fuel surcharges, so the customer knows what they are paying for.

Last edited by beaubo; Apr 3, 08 at 6:57 am Reason: hopefully clarity!
beaubo is offline  
Old Apr 3, 08, 2:11 am
  #11  
A FlyerTalk Posting Legend
 
Join Date: Jul 2003
Location: Yiron, Israel
Programs: Bates Motel Plat
Posts: 61,745
Originally Posted by beaubo View Post
But paying 50,000 miles AND $600 in taxes/fuel surcharges for an intl Economy award ticket (ie-US-Europe) that could normally cost $600-$900, is not an 'efficient' usage of a mile.

Tell me about it! El Al uses points, not miles, and charges 900 points (which represents a lot more flying than 50,000 miles would) for a r/t ticket TLV-MXP-TLV. In addition, you have to pay $491.

I just bought the ticket without using any points and paid 10 cents less.
Dovster is offline  
Old Apr 3, 08, 2:24 am
  #12  
FlyerTalk Evangelist
Four Seasons Contributor Badge
 
Join Date: Feb 2004
Location: London
Programs: BA, EK, IHG, SPG
Posts: 25,550
There is no doubt that, at least in Europe, this situation has gone beyond a joke.

The British Airways fuel surcharge is now £128 ($250) for an ECONOMY long-haul return flight over 9 hours duration.

Now, you have to ask - given that air fares are reset every 6 months with the issuance of a new timetable - how can a surcharge go on for 3-4 years??!! A surcharge is, by definition, an additional charge added to the list price of a product to counteract a SHORT TERM increase in input costs.

There is, in my mind, NO JUSTIFICATION for a fuel charge existing beyond the issuance of a new timetable and therefore a new filed list of fares. I cannot think of any other 'real world' example that comes close to this. About 10 years ago the UK increased sales tax from 15% to 17.5% and, for a short time - literally a couple of months - some stores repriced their products by putting a sticker over the published price to include the higher tax. Within a couple of months, though, stores readjusted their published prices and the surcharge disappeared into the general price.

If you looked at any other example of a surcharge, it would be laughable. If BA gave its staff a 3% pay rise on Thursday they wouldn't add a 'staff pay rise' surcharge to its fares on the Friday .....

Oil is $100 a barrel. Get used to it. There are very few people who think it won't remain at $100 a barrel for the next few years. The fuel surcharge is not a surcharge, it is a cost of doing business.

Remember that the UK now also has Air Passenger Duty, which adds £80 ($160) to a long-haul business class ticket. Add in BA's $250 fuel surcharge, plus the standard airport taxes, and you've got a pretty chunky bill to pay.
Raffles is online now  
Old Apr 3, 08, 2:25 am
  #13  
FlyerTalk Evangelist
 
Join Date: Sep 2003
Location: DL Silver, HH Diamond, IHG Plat, BW Diamond
Posts: 25,761
I'm definitely in the the Beaubo camp on this one. Many airlines use the fuel surcharge solely as a revenue enhancement. If fuel goes down $30 a barrel does the fuel surcharge get reduced proportionally? Usually not.

I sometimes read the European FF forums, and regularly read of people paying $300-$500 in taxes and fees for Y tickets. I have no problem if I have to pay the airport taxes on a reward ticket, and legitimate federal fees, but nothing more.

Take for instance, a AF ticket, booked with NW miles originating in Europe. The taxes may be $60-$80. The same ticket booked through AF is hundreds of dollars more. If this type of highway robbery comes to the US, as a whole, our miles are almost worthless.

All the flying we do to get miles is to reward us. When we go to redeem our precious miles (Say precious in Gollums voice, please.), and then are hit with taxes and fees 40, 60 or even 80% of a purchased fare, it just feels like we've been robbed.
Jaimito Cartero is offline  
Old Apr 3, 08, 3:11 am
  #14  
 
Join Date: Jan 2007
Location: RTM
Programs: DiamondClub (rip), Currently an Alliance Treble Champion (BA, A3, AZ)
Posts: 1,686
There is a lengthy post elsewhere about how airlines hedge their fuel prices anyway, so this surcharge business is a bit of a ruse anyway.

I expect airline fares to increase in price due to reducing oil reserves driving up price.

However, I am aggrieved that airlines are choosing to lower base fares and increase the "tax" portion of the ticket as it hits frequent flyer rewards the hardest.
OttoMH is offline  
Old Apr 3, 08, 8:37 am
  #15  
Founder of FlyerTalk
 
Join Date: May 1998
Location: Colorado Springs, CO
Posts: 6,538
And I am part of that community, and i pay the very same taxes as anyone else who redeems similar rewards, so i certainly don't feel the issue is self-serving at all. As noted, I'm not that happy either with these types of fees.

Now, having said that and i hope others reading in understand, my role is to help you crystalize the exact points which make this an issue. As noted, I wasn't that convinced of the conspiracy angle! So understand, I actually have no POV yet (well, i have my personal POV which if you've read editorials over the years know that I have not been happy with some surcharges by partners and others) on this issue and will do my best to bring out the best points you and the other members have to put forth.

Again, my job is to first make you think beyond the emotional perception and then we'll really have something to rally around and put forth to those who will listen. We did SaveSkyMiles, we can do something else, but it always has to be once we've had a chance to separate the haze and emotions from the issue.

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

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.

Anyway, more great dialogue and this is a great topic, thank you.


Originally Posted by beaubo View Post
Hi Randy-

Just to make sure that you are comfortable that my arguments are for the good of the community and not particularly self-serving..........

I typically redeem awards for intl. Business or First Class awards that normally cost anywhere from $5500-$11,000. So, while I'm not thrilled paying upwards of $600 in taxes and fuel surcharges (ie- AF: JFK-CDG-BOM in FRT and BD: CLE-ORD-FRA-MAD in F RT), I can at least rationalize that I'm still getting a pretty damn solid value.

But paying 50,000 miles AND $600 in taxes/fuel surcharges for an intl Economy award ticket (ie-US-Europe) that could normally cost $600-$900, is not an 'efficient' usage of a mile.


On a separate note, while savvy consumers are aware that fuel surcharges are indeed SEPARATE from taxes, the airlines collectively have essentially 'packaged' fuel surcharges as TAXES, so the perception is that these charges are byond their control. If you are convinced that such fuel surcharges are indeed jjustified, surely you can agree in the truth-in-labeling call for the FFPs to charge SEPARATELY and IDENTIFY SEPARATELY X in taxes and Y in fuel surcharges, so the customer knows what they are paying for.
Randy Petersen is offline  

Thread Tools
Search this Thread