Can We Clear up the Airline 'Fuel Surcharge' Mess?

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Editor's Note: This story was originally published on October 20, 2008. To see the most recent SmarterTravel articles on related topics, please click on any of the following links: airfare, AskEd & AnswerEd, British Airways, cruise, Ed Perkins, fuel, government regulation, KLM, Lufthansa, Northwest, taxes and fees.

Despite many attempts to clarify the situation—including my own—fuel surcharges seem to remain confusing to many travelers. Airline obfuscation hasn't helped, either. Recent reader questions touch on the topic:

"Why does British Airways charge $162 for a round-trip from Chicago to London, then say that the total is $641?"
"Do airlines that quote airfares exclusive of fuel surcharges violate the law?"
"Why is it that even though oil prices are dropping, airlines aren't lowering their fuel surcharges?"

The short answers are (1) some airlines split their real fare into separate phony base fares plus a fuel surcharge, while others do not; (2) airlines that feature fares without including fuel surcharges do, in fact, violate the law in the U.S., Canada, and several other countries; and (3) whether they call them fare increases or fuel surcharges, airlines that are losing money aren't about to lower real prices unless falling demand forces them to do so.

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Despite clear rules and requirements, many people—including a few travel writers who should know better—insist on treating fuel surcharges as if they were over and above featured fares. A current example may help clarify the situation.

Two 'Base' Fares, One Total

October 9, I checked fares for a trip from Boston to Amsterdam, leaving on October 16 and returning on October 23. Lufthansa and KLM/Northwest both quoted almost the same total all-up fare: $726 on Lufthansa and $719 on KLM/Northwest, the difference almost surely due to variations in passenger charges at connecting airports. But in the fine-print "explanation" of total fares, the two sites displayed sharply different components of their totals:

  • Lufthansa said its fare was a base of $282 round-trip plus taxes and fees of $444.
  • KLM/Northwest said its fare was a base of $562 plus taxes and fees of $157.

What's the difference? Lufthansa said that its $444 "taxes and fees" figure included a fuel surcharge of $280, while KLM/Northwest's "taxes and fees" figure included only government and airport charges. Add Lufthansa's $280 fuel surcharge to its $282 base fare, and the result is—surprise!—the same $562 that KLM/Northwest quoted.

That's the situation in a nutshell: Both lines really had the same $562 base, pre-tax-and-fee fare. Lufthansa chose to split its true fare into two components: an artificial $282 base fare plus an arbitrary $280 fuel surcharge, while KLM/Northwest more honestly said that its base fare was the full $562.

Why do some airlines—including Lufthansa and, presumably, British Airways—elect to split their real fares into an artificially low base plus an arbitrary surcharge? I don't know, but it might have something to do with either reducing the base figure on which they pay various commissions or retaining an ability to add after-the-fact surcharges to negotiated long-term fare contracts.

But this I do know. Lufthansa's real base fare was not really $282 round-trip from Boston to Amsterdam—or anything close to that figure. And if, as a marketing ploy, it decided to drop its "fuel surcharge," the base fare would surely go up by almost as much.

The Law for Airlines Is Clear

U.S. Department of Transportation (DOT) rules require that airlines include any airline fees in the totals they display on the Internet or in print advertising. The only allowable exclusions are specified fees and taxes collected by the airlines on behalf of government bodies and airports. Several other countries have similar requirements. The European Union has recently adopted an even more stringent requirement that airlines must include all the taxes and fees—even those collected for governments and airports. In the last year I haven't seen any airline ads or online postings that violated that law.

The DOT, of course, doesn't care if an airline wants to break down its base fare into various categories in its internal accounting. As I noted earlier, there's nothing to prevent an airline from apportioning its real base fare into a handful of components as long as it doesn't advertise fares that way. Neither you nor the DOT would care even if Lufthansa were to apportion its real $562 base fare into, say, a low-ball base of $100, plus a fuel surcharge of $280, a pilot salary surcharge of $50, an executive golden parachute surcharge of $50, and a just-because-we-feel-like-it surcharge of $82. But in ads, promotions, and fare displays, the airline must show the real total of $562 and not "$100 plus fees and charges."

DOT rules apply to third-party agencies as well as airlines. The DOT has actually fined one large consolidator for advertising fares that excluded fuel surcharges. However, I continue to see smaller online ticket agencies quoting fares that way. Presumably, the DOT will crack down on them in good time.

But Cruise Lines Do it Legally

Featuring a price that doesn't include charges other than government taxes and fees is clearly a case of "bait & switch" advertising. The DOT keeps a close watch on airlines to make sure they don't do that with fuel surcharges or anything else.

But no federal agency exercises similar jurisdiction over cruise lines. Because cruises are such a big deal in Florida—and Florida is such an important cruise market—the Florida Attorney General's office has been able to keep the lid on the worst possible abuses by cruise lines, but, unfortunately, not all of them.

Thus, most cruise lines these days impose fuel surcharges that are not included in the featured prices. Typical charges run from $7 to $15 per person per day, many with a cap around 7 to 10 days. Vacations to Go posts a detailed summary of cruise line fuel surcharges.

Other Suppliers

I haven't seen any widespread use of fuel surcharges by hotels and resorts. They seem content to stick with their own scam, "resort fees." And, of course, travelers have always paid separately for the fuel they use in rented cars.

Guidelines

When you check the airlines' own websites or the large online agencies you won't see any nasty fuel surcharge surprises: What you see is what you pay (except for government charges and any "optional" extras). You see the phony low-ball base fare plus fuel surcharge breakout, if it's there at all, only in the fine print, which you can ignore.

Some third-party airfare promotions, however, are not so straightforward. Unless a promotion comes from the airline or a big agency, you can't be sure the prices are what you really pay.

You're almost sure to encounter a fuel surcharge on top of the advertised prices for a cruise. Figure that into your calculations.

Unfortunately, I suspect you'll encounter other cases of promotions that exclude some mandatory and unavoidable charges. As far as consumers are concerned, they're scams. But don't hold your breath until any government agency does anything about them.

 
 
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