Oil is down, but U.S. airlines’ fuel surcharges and fees aren’t. Of course, the relationship isn’t linear. After all, fuel isn’t their only expense. And even if we limit discussion to the fuel, airlines hedge the cost, and sometimes, they screw up. Even Southwest wasn’t immune, registering its first quarterly loss in 17 years.
Now, Senator Bob Menendez of New Jersey is getting in on the act of criticizing the industry, calling on the airlines to drop the fees and surcharges. An excerpt:
“I understand that you need to recoup the losses incurred while prices were rising, and that the economic downturn is impacting your industry,” Senator Menendez wrote. “But American families are struggling as well, dealing with job losses, falling home values, and a financial market that is erasing their retirement savings. It is crucial that you pass on the savings seen from falling fuel prices as quickly as possible.”
He added, “Now is not the time for Americans to be priced out of traveling — that is simply unfair to families who want to spend the holidays with their loved ones and it is bad for our economy in need of a boost.”
Sure, it may be grandstanding, but it’s not coming out of the blue. People see the price of gasoline dropping, but air travel hasn’t gotten any cheaper. And travelers are pissed off.
Will one senator’s pronouncements affect anything? Don’t count on it. Airlines are free to set their prices, and set their prices they will. Where Menendez and his colleagues in the upper house might have some sway is here:
Senator Menendez, who held a news conference this morning at Newark Airport, said consumers at least were owed some clarity from the airlines about the fees they were paying on their tickets. The federal government does not require airlines to follow a uniform method in disclosing those fees on their Web sites. Some airlines state them up front as part of the ticket price, while others quote the fare separately and add the fees before a purchase is completed.
Amen to that. Prices can go up and can go down, but they need to be transparent.
United’s stock briefly sinks to a penny on accidental republication of 2002 bankruptcy article
Some folks with sell stops got taken to the cleaners yesterday, and someone with a low-ball limit order made a ton of cash. (Not me, alas. For the record, I haven’t invested in any airline stocks, long or short, except for a brief dalliance in 1998.) Shares of UAL Corp. went from $12.16 to $0.01 when a 2002 Chicago Tribune article with the headline “United Files For Bankruptcy” appeared today. With today’s date. Oops. Perhaps we can find a way to blame fuel prices for the error.
Elite beggars staying at five star hotels
A sweep of Abu Dhabi for beggars during the month of Ramadan has found some particularly successful panhandlers staying at some of the city’s top hotels. Clearly, if they’re making the kind of bank that puts them in the Ritz, I’m doing something wrong. Maybe I should have put in that limit order to buy UAUA at a penny.
Boston fires up the juice
Benet Wilson, who admits that she travels with a power strip, reports that Boston’s Logan International Airport has added 520 power outlets and 520 USB ports under terminal seats and tables for you to charge your electronics. The juice isn’t everywhere yet, but you’ll find it at Terminals A, C and E and near Gate 37 in Terminal B. And yes, the airport is looking for companies to sponsor the power outlets, so the juice stays on and free.
But the car already HAD Bondo on it when I rented it!
You gotta appreciate the renter’s moxie here:
The blue Ford Focus left the lot back in June. The renter paid every 30 days until the middle of August. Rental Manager Brittany Aldrich reported it stolen Tuesday and the car showed up the next day damaged, to say the least. But the damage had been “fixed” by the renter, with Bondo and blue spray paint.
Fuel surcharges CAN be reversed
Air France/KLM and El Al are doing the unthinkable: They’re rolling back the fuel surcharges that they tacked on weeks ago. So is Singapore Airlines. Now that oil has slid back, closer to $100 than to $150, the charges were no longer justified. Could you see that sort of thing happening among U.S. airlines? Neither can I. Hmm, that brings us to…
Continental adds a fee for the first checked bag, worsens OnePass program
Citing higher fuel costs, cough cough, Continental has added a $15 fee for those checking their first bag, eliminated the 500-frequent-flyer-mile minimum, reduced elite bonuses, and raised the mileage cost for frequent flyer ticket redemptions on certain routes. What a surprise.
I’ve been in South Carolina these past few days. When the Lundberg Survey of gasoline prices in the United States comes out, South Carolina is often near the bottom. (Tulsa, Oklahoma was last week’s winner.) But falling oil prices plus lower taxation/distribution costs make fuel cheap here. ($3.49 is the lowest I’ve seen.) These low gas prices got me thinking:
With fuel prices dipping lower, the primary justification for the airlines’ litany of fees and customer-unfriendly policy changes is melting away. Every airline CEO has blamed fuel prices for the need to nickel-and-dime the self-loading cargo known as “passengers.” But with oil entering a bear market (a 20% correction from its peak), will we see some of those fees rolled back?
Ok, stop laughing.
Believe it or not, in the past, airlines actually have lowered fuel surcharges when the cost of oil has dropped. But those are fuel surcharges. Not the ticket-change fees, baggage fees, or pillow-and-blanket fees.
Yes, airlines have been posting losses for longer than oil was at its peak, so they’ve got some catching up to do with fees, in order to balance the books. And yes, lower fares plus higher fees will suck more people in to buying their product, unwittingly paying more than they shelled out at first. So, from the airline’s perspective, fees are a way to maintain demand and shore up the balance sheet. I get it. But the airline PR logic of “high fuel = more fees” is, on its own, dishonest.
If airlines had simply increased fares or added fuel surcharges, they could have rolled them back readily when prices dropped. But that was clearly never the intention. These fees are pure opportunism, using fuel as an excuse.
A recent article on fuel surcharges offers a hypothetical scenario of what consumers might expect in coming months or years:
“If fuel continues at this level, you may have a situation where an airline prices a ticket absent fuel,” said Terry Trippler of TripplerTravel. “Other than that they really don’t have a lot of options (to offset higher fuel costs).”
Much recent innovation in pricing in the travel industry (not just at airlines) has centered on the concept of “a la carte” buying. Pay only for what your use, not for a package of all the services available. So unbundling the cost of fuel isn’t entirely out of the realm of possibility.
Cruise lines and hotels have already done something like this, requiring a fuel surcharge that wasn’t included up front at the time of reservation. Travelers were shocked with a bill at the time of check-in. Shady? Yes.
But if fuel wasn’t a surcharge, and was simply a charge that everyone paid in full at the time of check-in, it might be less offensive to multitudes of travelers.
So what might this look like? You’d buy a ticket that covers the privilege of getting onboard, much like you pay a fee for renting a car. Your ticket would reflect your class of service, and any “amenities” you chose (food, baggage, early boarding, legroom… whatever) but the cost of the fuel wouldn’t be included up front. You might pay for the fuel at the time of check-in, or the carrier might give you the option of pre-paying (hedging?) and locking in a rate.
By charging the passengers for fuel on the day of travel, the airline would avoid the fluctuations of the oil market almost entirely. Fuel hedging strategies would be moot. Airlines that did this could sell seats without worrying about the price of Jet-A kerosene. And in a sense, this is logical: Hertz and Avis aren’t really affected by changes in oil prices, so why not Continental and jetBlue?
Of course, this would be awful for consumers, whose ability to predict the actual cost of travel would be flushed down the toilet. Budgeting would be harder. Travel expenses would be much more fluid, and the net effect on prices would likely be upward. And upward by a bit, since the fuel bill on a 7000-mile trip can change substantially with small shifts in the price of oil. “Low fares” would be a thing of the past, unless the airlines started “free fuel” promotions.
The saving grace for consumers is that it would take some cartel-like coordination to see all the major airlines start treating fuel this way. If it’s a single major airline that’s the first mover, there is bound to be a strong negative reaction in the media. But as the article cited above notes, it wouldn’t be the first time someone tried this:
If airlines do unbundle fuel costs from ticket prices, it would not be the first time. During the energy crisis of the late 1970s, charter airlines had separate fuel charges that were set just before takeoff.
Yesterday, it was charter airlines. Today, I wouldn’t be surprised to see Skybus or Spirit try something like this, since they’re already nickel-and-diming their customers and they’re known for doing anything to make a buck.
But either way, look out. Unbundled fuel could be coming your way, and you shouldn’t be happy.
Update: No kowtowing to teetotaling taxicabs
Remember the cabdrivers who were refusing to transport passengers from Minneapolis-St. Paul International Airport if they suspected the traveler was carrying alcohol? The airports commission has wisely reversed its earlier plans to label taxis as “wet” or “dry.” If a cabbie refuses a fare for any reason, he now has to go to the back of the line. Good. If you don’t want to transport people whom you find objectionable for whatever reason, don’t be a cabdriver. Simple enough.
Economy Parking, Premium Skycaps
Chicago’s O’Hare airport is getting skycaps at Economy Parking Lot E. The new service, run by BAGS, Inc., will allow parkers to check in and drop off their bags ($5 fee) before they head back to the terminal via the train. But you’re expected to drop off the bags a whole 2 hours before your flight. That seems like a stretch.
More airlines lower fuel surcharges
Lufthansa and Singapore Airlines are rolling back fuel surcharges for longhaul flights. Good for them, and for us.
Singapore Airlines’ gift from above
A large metal bolt fell off a Singapore Airlines 747 and hit an Australian man’s house. (He should be glad it wasn’t a DC-10 overhead.)
Behind the scenes at American Airlines
Peter Greenberg spent a week checking out American Airlines’ operations behind the scenes. The result is a CNBC special which aired Wednesday. I missed the first showing, but it’s being re-run on Sunday. Plus, clips from the show are available for download here. Will there be coverage of the mice that seemingly infest their planes?
Europeans: ask for your travel records
Privacy advocate Ed Hasbrouck advises Europeans to find out what’s in their travel records. In Europe, you own the rights to your data. In the U.S., the company that holds the data owns the rights. Might as well have a look, to see if there are errors. Much like looking at your credit report to look for fraud…
Ryanair revises fine print, battles its own employees
Britain’s Office of Fair Trading is forcing Ryanair to change the fine print in its ticketing contract. The changes make it easier to file a claim against the airline for lost, damaged, or delayed luggage, as well as expenses due to flight cancellation. This comes on top of employee actions, including unionization threats, promises of a strike by baggage handlers in Spain, and the refusal of Italian crew to sell food on board. (See here for the unionization campaign’s homepage.)
Via Boingboing: a liquid whose name deserves all the TSA scrutiny it can handle. Best to pack this on in your carry-on, if you absolutely, positively need to bring central American cleaning supplies through an airport.
Taking his work home with him? A Los Angeles plane mechanic has turned his front lawn into a mock airplane crash site for Halloween. It uses real aircraft parts from a Gulfstream. Considering it’s in LA, trick-or-treaters might be unfazed and think he’s running a filming location for “Lost.”
Sharkey strikes back
NY Times travel columnist Joe Sharkey, who survived the midair collision in Brazil a few weeks ago, and whose blog was peppered with hate-filled comments after he posted a short statement of concern for the fates of the pilots of his aircraft, lashed out against his (largely Brazilian) critics in a recent post. The investigation into the accident and the surrounding controversy has become quite the drama. Thusfar no word on his site on whether or not he is, in fact, Robin Leach.
Around the world, the issue of fuel surcharges has been getting a bit of press, and increasingly, its day in court.
In New Zealand, Qantas got nailed with a fine for false advertising, thanks to 122 convictions of “not disclosing the full cost of a fare, or imposing extra charges such as a fuel surcharge which should have been included in the price.” Air New Zealand was already convicted of similar charges months ago.
In Germany, on the other hand, consumer protection groups lost a battle. The discount airline Hapagfly (part of the TUI travel conglomerate) was found not guilty of charges fundamentally similar to the Qantas case in New Zealand. (Link is in German… keepin’ it local!) That decision contradicts another German court’s ruling against the carrier LTU which was found guilty of false advertising by virtue of excessively small print in newspaper advertisements. The Hapagfly case is going to a higher court.
Here’s hoping the tide is turning in favor of more accurate and transparent pricing.