Adrian Loveridge, Peach and Quiet

The Adrian Loveridge Column – Airlines Maybe Overcharging

Gasoline prices continue to rise in Barbados

Oil price remains low

Having clocked over 1,500 miles in a rental car during a recent trip to the state of Kentucky in the USA, it was fascinating to see the huge variation in fuel prices. I filled up only four times and the per gallon (US) cost varied from US$1.96 up to a high of US$2.57 for 3.8 litres. Ironically the lowest price was on a very rural secondary road, miles from any major city, fuel storage facility or refinery.

[…]

I have never really understood how prices are arrived at, when the cost of a barrel of oil rises, it seems that within mega-seconds higher charges are passed on, but conversely when the price decreases, it appears to take an eternity until the customer benefits.

And this introduces the subject of airline fuel surcharges. We know many ‘hedge’ or buy forward based on market predictions or simply gamble on what the eventually cost of aviation spirit (Jet A-1 and Jet A) will be at the time of actual consumption. A leading travel agency group has written to the international airline body (IATA) to ask why some carriers are continuing to add fuel surcharges to ticket prices when the cost of fuel has plunged.

The United Federation of Travel Agents (UFTAA) pointed out that that the cost of a barrel of oil has fallen from over US$110 last year, to US$40, yet most airlines are continuing to charge an additional US$25 to US$450 per ticket for fuel. In an open letter to IATA, it claimed that even using their own sources it estimated that airlines fuel bills would fall this year by US$4 billion.

While not directly drawing a parallel, it reminds of a time in the nineteen seventies when I was a tour operator in the UK, specialising in motivational travel. We had put together a group to fly to one of the Spanish islands and at the last minute, the charter British airline had imposed what appeared at the time, a disproportionate fuel surcharge. I sat down with a calculator and worked out what was the A1 cost for the entire return based on a nearly full plane. Woe and behold the surcharge amounted to more than the total fuel needed. I wrote to the airline’s managing director for an explanation and copied it to the general British media. Many newspapers carried the letter as headline news and within hours most of the additional surcharge was removed.

The special YQ code on airline tickets was introduced to allow carriers to surcharge when there was a sudden increase in oil prices, so theoretically it is easy for a traveller to identify the amount. UFTAA have not minced their words stating ‘generally the cost for the fuel should as soon as convenient be included in the general operation cost e.g. air fare (no air-plane can fly without fuel)’. ‘However, airlines continue totally shamelessly to misuse this ticketing loophole and thus manipulate the transparency of the ticket price’.

Adding ‘the ‘tax box’ on the tickets has increasingly become a vehicle for various extra charges not included in the basic air fare either to distort the price transparency or perhaps to serve as a loophole for tax evasion’. The letter closes with ‘how long will this charade be tolerated by the consumers’.

Of course there are always at least two sides to every story and perhaps it’s now finally time for the airlines to respond?

Tags:

6 Comments on “The Adrian Loveridge Column – Airlines Maybe Overcharging”

  1. ahzoo September 21, 2015 at 5:56 AM #

    Several airlines were recently taken to court in the US for AGREEING to overcharge and keep fares hugh on transpacific routes. Some have settled out of court, otgers are still holding out. I believe there are a few other cases like this currently in train (or in plane as the case may be…haha).
    We may have to face the fact that the airlines deliberately conspire. A small charter airline recently quoted me a fare to St. Vincent that included a 40usd fuel surcharge per person on the charter as well as a 108usd fare one way for an infant (inclusive of a 44lb bag allowance for said infant). Liat at least only charges 10 usd for the infant. Even if I travelled with an extra bag the cost wouldn’t be as high.

    Like

  2. SITH September 21, 2015 at 8:50 AM #

    One of the reasons for cheaper fuel and many other things in the USA compared to countries relates to taxes applied at point of purchase. The USA does not have a nation wide sales tax such as VAT at 17.5% in Barbados which is also between 20 and 24% in Europe. Point of purchase sales tax in the USA differ by state but average about 6.5%.

    This will account for some of the difference in air fuel surcharges.

    Like

  3. Artaxerxes September 21, 2015 at 9:16 AM #

    Let’s examine LIAT’s airfare for a trip to St. Vincent from Thursday 26 to Monday 30, November, 2015.

    LIAT’s total “Web Saver” return fare is BD$313.40:

    Air fare………………………………….……………….$120.00
    Barbados taxes and fees………$106.90
    St. Vincent taxes and fees…….$86.50
    Total taxes and fees………………………………….$193.40

    Total airfare………………………………………….…$313.40

    On the other hand, LIAT’s high end “Fully Flexible” return fare for the same period of stay is BD$985.86:

    Air fare…………………………………………………..$288.00
    Barbados taxes and fees………$253.08
    St. Vincent taxes and fee………$156.78
    Total taxes and fees…………………………….……$431.86

    Total air fare…………………………………….….….$985.86

    In the above scenario, LIAT cannot be considered as being guilty of overcharging. Blame must be apportioned to regional governments for high rates of taxes and fees that are applied to the cost of travel.

    However, LIAT has made it possible for clients to access low fares, albeit under some very peculiar conditions. To be able to take advantage of the “Web Saver” fares, clients must book the flight on-line and pay for the ticket within ½ hour of booking at LIAT’s airport operations.

    Since the airline closed their Bridgetown office, customers that do not have credit cards will be at a disadvantage because it may take more than half an hour to reach the airport and they may be confronted with having to wait in long queues.

    Like

  4. Colonel Buggy September 24, 2015 at 4:25 PM #

    During Crop Over there was a Bajan-American ” Donald Trump” who was highlighted in the Nation News. He had great plans to organise an inter -island ferry service. Wonder how these plans are going

    Like

  5. David September 24, 2015 at 8:54 PM #

    Griffith getting some praise from his old employer.

    http://www.royalgazette.com/article/20150924/NEWS/150929860

    Like

  6. Artaxerxes September 25, 2015 at 12:44 PM #

    Colonel Buggy September 24, 2015 at 4:25 PM #

    “During Crop Over there was a Bajan-American ” Donald Trump” who was highlighted in the Nation News. He had great plans to organise an inter -island ferry service. Wonder how these plans are going…”

    An inter-island ferry service is what the Caribbean needs, especially in these times. I remember when the “Windward” used to sail from Barbados to St. Lucia, St. Vincent, Trinidad and Venezuela.

    Many Barbadians used this ship on a regular basis to travel to St. Lucia. I knew people who used to travel to this island every week, because the fare was very cheap. A cabin went for as much as BD$170.

    Like

Join in the discussion, you never know how expressing your view may make a difference.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: