What's happening with Fuel Surcharges?

[fozzyo]

Posting this got me thinking about fuel surcharges.

Are they still in place? And if so when are we going to see a reduction in them? Oil prices have dropped loads recently, we are paying a lot less at the petrol station pumps and yet airlines seem to remain very very quiet.

[Neil]

Originally posted by fozzyo
Posting this got me thinking about fuel surcharges.

Are they still in place? And if so when are we going to see a reduction in them? Oil prices have dropped loads recently, we are paying a lot less at the petrol station pumps and yet airlines seem to remain very very quiet.

Thats a good point, I have just re-negotiated (downwards) a fuel surcharge we were been charged because the Bunker price has dropped quite significantly in the last month, no doubt if it was the other way the airliners would be rushing to impose it.

I was thinking exactly the same thing this morning. The airlines all seem quick to put up their fuel surcharges when oil prices go up, but not so quick to reduce them again when they come down.

Personally I don't agree with the surcharges - if airlines have to charge more because their costs have gone up, then it should be in their base fare.

Originally posted by fozzyo
Posting this got me thinking about fuel surcharges.

Are they still in place? And if so when are we going to see a reduction in them? Oil prices have dropped loads recently, we are paying a lot less at the petrol station pumps and yet airlines seem to remain very very quiet.

I think the markets for petrol and aviation fuel are different. Petrol prices are, I think, much more tied to the behaviour of the spot markets and are also subject to local competitive pressure (particularly if your local superstore cuts their margin on petrol to b*gger all to attract customers into the store).

Aviation fuel is hedged with the airlines fixing the price of fuel for future delivery (a) for stability of price over a period and (b)to reduce the risk of being hit by enormous cost increases. It sometimes goes a bit pear shaped as Ryanair have found. It will depend on the nature and length of those future contracts.

As always, ISTBC.

Paul

Its worth baring in mind that the fuel surcharge only covers a small proportion of the previous raise in fuel costs... and because of hedging airlines might not feel the reduction in fule prices for some time.

Though ultimately the fuel surcharge should be affected by all market conditions... so if one airline decides to ditch it, I'd guess others will follow.

[Neil]

I get what you are saying Paul - but I have just negotiated the surcharge on both UK & European Road Haulage and on Shipping, which are ultimately linked the Oil Bunker Prices, and I know that on the UK Road Haulage they are now paying nearly 14p a litre less in Oct then they were in September, which is a big difference.

Neil:)

Originally posted by V-Ben
Its worth baring in mind that the fuel surcharge only covers a small proportion of the previous raise in fuel costs... and because of hedging airlines might not feel the reduction in fule prices for some time.

Though ultimately the fuel surcharge should be affected by all market conditions... so if one airline decides to ditch it, I'd guess others will follow.

It would be great to see some transparency on this issue. There are plenty of suggestions that the fuel surcharges do the opposite of the above. As it is, I for one suspect the surchage will remain for a long time (and therefore = profit), next year VS and BA and other airlines will post increased profits, and yet hedging deals will work through to better ones ... I'd go so far as to place a little wager on this [}:)]

I believe one or more of the charter lines have already begun reducing surcharges. One financial consultant columnist now reports that oil prices will slump to the lowest for some time. But you know what journo's will print!

Hedging sucks! What that essentially means is that they missed the ball early on and now need to make even more money than they have been to ensure there annual profit returns are higher than predicted. When was the last time anyone took a bus ride and paid the fare plus a fuel surcharge?

And for what it is worth, did the airline cite the rise is oil prices as the reason for fuel surcharges, so I think they are tied into this ultimately. It is a case of raise and drops when it suits them.

Paul

What would be really enlightening would be a graph of crude "bunker" price equivalent that airlines pay versus their fuel surcharge prices; I can garuantee what it'll look like - it'll look like interest rates versus mortgage rates i.e. quick to go up, but slow to come down.

However because mortgage rates are subject to high street demand, they are probably quicker to change than something like a fuel charge; consumer have little choice by comparison; fewer providers and more of a cartel style of behaviour.

If anyone has the data, I'd love to see the graph.

[Neil]

To be fair to all companies that have imposed fuel surcharges, the costs they were paying has continually gone up since April 2005, and only from the 3rd October this year has the first decrease occured. So to be fair to VS and the other airlines they haven't had much time to review and change their fuel surcharge policy's (although I am sure they aren't in any rush), and from what I understand the likelyhood is that it will go back up before the end of the year again anyways.

Neil:)

Paul Charles was on (I think) Working Lunch yesterday and pointed out that the last time VS increased Fuel Surcharge Oil was $45 a barel... I think today its still over $60.

I think that the airlines don't inclide the extra surcharge in the base price as it means they can "pass the buck" for the increase in price to others.

VS.

Originally posted by VS045
I think that the airlines don't inclide the extra surcharge in the base price as it means they can "pass the buck" for the increase in price to others.

VS.

There is that; very much like the US view on purchase taxes.

Interestingly KLM have already reduced their surcharge as have BA for their cargo operations.

Paul

I had a PE LGW-MCO UCS MCO-LGW a couple of weeks ago, and the fare was broken down as follows;

FARE (GBP) £1,326.00
Taxes/Fees/Charges/Surcharges GBP £40.00
UB GBP £7.60
XT GBP £102.80

Total GBP £1,476.40

About 11% being "additionl" charges. Can anyone explain further what the breakdown of the 40GBP is and what the UB and XT charges are?

Also, how come we don't pay VAT on tickets - not that I want to you understand...

Viz.

And now they've been reduced a bit....

http://news.bbc.co.uk/1/hi/business/6049382.stm

Making the change so late on a Friday leaves VS the whole weekend at a lower rate before BA get a chance to reduce on monday morning.

Originally posted by vizbiz
Can anyone explain further what the breakdown of the 40GBP is and what the UB and XT charges are?

Also, how come we don't pay VAT on tickets - not that I want to you understand...

Well the Government decides who pays VAT, so I wouldn't put it past them at one budget in the future!

In the tax calculation, UB is the code for the ground handling fee for BAA, YQ is the Fuel Surcharge, YR would be Insurance Surcharge introduced after 9/11 (Not sure VS charge this), XT stands for 'Extras' (as on the paper tickets it wasn't possible to list all the taxes so they got lumped under XT). The £40 is the UK Government tax which would be £20 for Economy and £40 for Premium and Upper class.

I'm sure the Sunday times mentioned a Government review of adding VAT to flights back in late July (just prior to the security squeeze...) Cannot find the link right now.

In the mail today, it announced Virgin were lowering fuel surcharges by £5 per passenger.

[Decker]

Thanks for that Sunsational and welcome to V-Flyer. Incidentally V-Ben did post a link to the BBC version of that story on page 1 of this thread.

Does this mean that I can ask for a refund on my flight next week?

[preiffer]

Originally posted by Spidey
Does this mean that I can ask for a refund on my flight next week?

No, just as you wouldn't expect them to ask you for any extra if the surcharge went UP after you booked it.

That's the problem with cake - you can't have it AND eat it...