Airlines must be forced to be fair on fuel surcharges
With the summer now upon us, the holiday rush has begun. Airports are packed as millions of Brits jet off for their vacations abroad.
Families across the country work hard to pay for these holidays, which can sometimes cost several thousand pounds. However, consumers are being conned by airlines.
And that is the only way to describe airline fuel surcharges. A cheat. A con. Introduced to combat high oil prices, they are now a relic of an energy market which no longer exists.
Over the course of the 2000s, the price of oil rose dramatically. At the start of 2002 the price of oil stood at $20 a barrel. But by mid-2008, it had risen to $140. In response, commercial airlines began to impose fuel surcharges on customers to cover the costs of fuel which had spiralled out of control in just a few short years. This was perfectly understandable and indeed smart business.
Although the price of oil crashed during the financial crisis, it recovered soon afterwards and spent the next few years hovering between $80 and $100 a barrel – historically still very high. Two years ago, however, the price of oil plummeted to under $50 a barrel and has remained locked there ever since ? it?s currently around $45 a barrel. Even without adjusting for inflation, oil prices have not been this low for a sustained period of time in well over a decade. We have re-entered the age of cheap oil – at least for the time being.
However, these surcharges still persist. What was once an understandable and transparent move aimed at insulating the industry from forces outside of their control has turned into an unfair penalty for customers. So, a ?528 return flight to New York from London with Lufthansa incurs a surcharge of ?183, or 35% of the total fare. Meanwhile, the fuel surcharge makes up ?364 of a ?1,380 flight from London to Sydney with Emirates Airlines.
While surcharges vary from airline to airline (with a few having dropped them altogether), the basic premise is the same. Worse yet, these fees are not always obvious and in some cases are carefully camouflaged under different names such as a "carrier charge". British Airways is one of these offenders.
Of course, this Government has a clear aim to encourage an environment for businesses to thrive in a competitive and free market. This means keeping regulations and interference to a minimum. However, the Government also recognises the need for consumer protection.
Overseas, there are precedents for governments taking action on this issue, with varying degrees of success. In 2012 the US Transportation Department ruled that fuel surcharges should accurately reflect the price of fuel. However, some airlines worked around this by simply removing the word "fuel" from their surcharges. In Japan fuel surcharges have long been heavily regulated with much more success; a model that we ought to emulate here in the UK.
So the time has come for our Government to intervene and ensure that flights entering or departing the UK are priced fairly. This means that additional surcharges should accurately reflect the added cost per passenger.
Fuel surcharges must be linked to the cost of fuel and British airlines, as well as airlines like Lufthansa, must be transparent clearly showing – without the need for a detailed search – how much the fuel surcharge is. Only then will both consumers and airlines be protected from the fluctuations of the global energy market.
At some point in the not too distant future, fuel prices will once again rise. Four years ago the price of oil was over double what it is now. Nine years ago it was triple. The present weakness in the pound will drive the cost of fuel upwards.
This fickleness of the oil market is precisely why action must be taken while prices are low. If these zombie surcharges remain, it is quite possible that when the next oil price rise comes there will be new fuel surcharges tacked onto the old ones, which are themselves a remnant of the late 2000s energy crisis.
Fuel surcharges should be an emergency measure, not an excuse to inflate ticket prices indefinitely. The airlines were quick to react to price spikes – now they must show that same swiftness in the wake of the recent oil crash.