7 ms·

Misrepresentation of Fuel Surcharges in Airline Price Advertising

42 points by danielsiders 13y ago

ams6110 13y ago
Splintering the total cost into fare and various taxes, surcharges, and fees is likely an attempt to make direct price comparisons with competitors more difficult. I.e. advertising the base "fare" and only revealing the additional charges at purchase time. Wireless providers, cable/internet companies, etc. all do it too.
- gatehouse 13y ago
  http://en.wikipedia.org/wiki/Confusopoly http://en.wikipedia.org/wiki/Confusopoly
- ubernostrum 13y ago
  Splintering the total cost into fare and various taxes, surcharges, and fees is likely an attempt to make direct price comparisons with competitors more difficult. Not necessarily. Remember that for most passengers there is one and only one factor involved in which airline they fly: the advertised fare. The experience of the industry is that every other factor goes out the window. Time of day is not a factor. Length of flight is not a factor. Number of connections is not a factor. The only factor that matters for getting passengers in your planes is having the lowest advertised fare. This is why things which used to be part of the ticket price are now treated as separate fees. Want to pay by credit card? That's an extra fee. Want to pick seats in advance so you can sit with your companion? Extra fee. Want to check-in at the airport and print your boarding pass there? Extra fee. Check a bag? Extra fee. Carry on a bag (some airlines)? Extra fee. Want a drink or snack? Extra fee. "Unbundling" all of those gets the advertised fare as low as it can go, and lets you publish a number that represents solely the cost to put your butt in a seat and go from Point A to Point B with nothing else included. This is also why Southwest, traditionally considered a "low-fare" airline, now gets dinged for having higher fares on a lot of routes. Their published fare still includes many of those things, while other airlines have fully unbundled, so Southwest's prices are now often higher than other airlines, comparing by advertised fare, despite coming out roughly even when factoring in all the additional fees. Though getting back to your assertion, Southwest also famously refuses to be listed in most travel-aggregation sites, forcing users to explicitly come to Southwest's site and perform a search in which no other airlines' fares are included.
deleted 13y ago
[deleted]
Titanous 13y ago
The DOT ruled[1] against AA and fined them a whole $60,000 after a complaint[2] from Edelman. [1] http://www.regulations.gov/#!documentDetail;D=DOT-OST-2013-0024-0032 http://www.regulations.gov/#!documentDetail;D=DOT-OST-2013-0... [2] http://www.benedelman.org/airfare-advertising/americanairlines.html#complaint http://www.benedelman.org/airfare-advertising/americanairlin...
- bedelman 13y ago
  Indeed. DOT fines tend to be small in this area. On the other hand, it is notable that DOT considered and rejected each of AA's defenses. That could be useful as precedent. Some passengers may also have meritorious claims they'd like to bring against AA on an individual basis.
- judk 13y ago
  > government-imposed fees, For contrast, on your car rental or telecom bill, you find these labeled as "fees permitted by law", in an attempt to obfuscate.
  - eli 13y ago
    Some of them are actually fees imposed by law on the telecom company which they have decided to pass on to you as a line item.
- cabalamat 13y ago
  That's a whole 47 seconds revenue! I'm sure they'll be suitably chastened.
  - deleted 13y ago
    [deleted]
pedalpete 13y ago
I just did some back of the napkin calculations on actual fuel costs for the reported BOS-LHR. I find the OPs description difficult to follow, but assuming a 777 from BOS-LHR 6000 gallons / hour of flight $3 / gallon (currently $2.92) 550 passengers / flight 6 hours flight time Results in an actual fuel cost of $193.36. I'm quite surprised to see that fuel really is a significant price of the total cost of a flight. I always thought the Fuel Surcharge thing was B.S. However, I disagree that it should be allowed to be separated from the cost of the flight. The airline isn't buying the fuel the day you buy your ticket or the day you fly, they're buying the fuel the day they schedule the flight via futures (or if they aren't ,they should be). It also isn't something out of the ordinary in the day to day business. Here in Australia their is 'public holiday surcharges' where you have to pay a surcharge on public holidays because businesses have to pay their employees more. There should be requirements on what can be permitted to be placed as a 'surcharge'. As I see it, there is nothing stopping an airline from doing a complete 'a la carte' offering where every item of your ticket is broken out as a separate charge, but unfortunately, you don't have the option to opt-out of any of it.
- dredmorbius 13y ago
  Fuel is the principle cost of aviation, and fuel prices have climbed markedly. In looking at the "Boeing biofuel breakthrough" a couple of days ago, I happened to look at what actual fuel consumption for the US airline industry has been. Turns out that, although total passenger miles is up since 2000, the fuel consumption for the commercial aviation industry (which may include cargo flights) peaked in 2000. The actual fuel usage for 2012 -52.3% of the 2000 FAA estimated consumption -- they'd predicted 3-4% annual growth over the next 10 years, it turned out to be a 15.9% reduction over the period. Increased load factors (the seats filled on a flight -- increased from 70-83%) and reduced seat pitch (more seats, and passengers, per plane) seem to have staved off an actual reduction in the passenger-miles, but I strongly suspect that by plane-miles flown, we're down net. http://www.reddit.com/r/dredmorbius/comments/1wo2hl/boeings_biofuel_breakthrough_less_than/ http://www.reddit.com/r/dredmorbius/comments/1wo2hl/boeings_...
- rbcgerard 13y ago
  Just an FYI - I think you're high on the fuel consumption - think it's closer to 2-2.5k/gal/hr...http://www.boeing.com/boeing/commercial/777family/environ/index.page http://www.boeing.com/boeing/commercial/777family/environ/in...
judk 13y ago
Ultimately, calling it "tax" isn't really the problem. Not including nationally standard costs in national advertising is the problem.
martingordon 13y ago
I first came across this when I tried to redeem some of my 100k miles I accumulated on British Airways from business travel (at the time AA/BA didn't give AAdvantage miles for transatlantic flights on BA). Almost any time I try to book an award ticket, I'm hit with, for example, an $800 ticket that "costs" $250 with $550 in fuel surcharges. This results in award tickets that cost 50,000 miles + $550. Definitely not worth it and not what I was expecting when I signed up.
- saryant 13y ago
  With BA Avios, avoid redeeming on AA or BA. Fortunately, redemptions on Cathay Pacific and a few other partners still don't involve fuel surcharges. Baring the recent devaluation, this was one of my favorite aspects of United's mileage program—no fuel surcharges on any partner. I'm flying to Berlin in June on Lufthansa first class and the only fees were government taxes.
- bedelman 13y ago
  You should consider filing a formal comment with DOT about your experience, and especially your surprise at the unexpected charges. This is straightforward using the Comment Now button on http://www.regulations.gov/#!documentDetail;D=DOT-OST-2013-0025-0001 http://www.regulations.gov/#!documentDetail;D=DOT-OST-2013-0... . DOT is currently evaluating my complaint against BA on this subject.

42 points by danielsiders 13y ago

Splintering the total cost into fare and various taxes, surcharges, and fees is likely an attempt to make direct price comparisons with competitors more difficult. I.e. advertising the base "fare" and only revealing the additional charges at purchase time. Wireless providers, cable/internet companies, etc. all do it too.

gatehouse 13y ago
http://en.wikipedia.org/wiki/Confusopoly http://en.wikipedia.org/wiki/Confusopoly
ubernostrum 13y ago
Splintering the total cost into fare and various taxes, surcharges, and fees is likely an attempt to make direct price comparisons with competitors more difficult. Not necessarily. Remember that for most passengers there is one and only one factor involved in which airline they fly: the advertised fare. The experience of the industry is that every other factor goes out the window. Time of day is not a factor. Length of flight is not a factor. Number of connections is not a factor. The only factor that matters for getting passengers in your planes is having the lowest advertised fare. This is why things which used to be part of the ticket price are now treated as separate fees. Want to pay by credit card? That's an extra fee. Want to pick seats in advance so you can sit with your companion? Extra fee. Want to check-in at the airport and print your boarding pass there? Extra fee. Check a bag? Extra fee. Carry on a bag (some airlines)? Extra fee. Want a drink or snack? Extra fee. "Unbundling" all of those gets the advertised fare as low as it can go, and lets you publish a number that represents solely the cost to put your butt in a seat and go from Point A to Point B with nothing else included. This is also why Southwest, traditionally considered a "low-fare" airline, now gets dinged for having higher fares on a lot of routes. Their published fare still includes many of those things, while other airlines have fully unbundled, so Southwest's prices are now often higher than other airlines, comparing by advertised fare, despite coming out roughly even when factoring in all the additional fees. Though getting back to your assertion, Southwest also famously refuses to be listed in most travel-aggregation sites, forcing users to explicitly come to Southwest's site and perform a search in which no other airlines' fares are included.

deleted 13y ago

[deleted]

Titanous 13y ago

The DOT ruled[1] against AA and fined them a whole $60,000 after a complaint[2] from Edelman. [1] http://www.regulations.gov/#!documentDetail;D=DOT-OST-2013-0024-0032 http://www.regulations.gov/#!documentDetail;D=DOT-OST-2013-0... [2] http://www.benedelman.org/airfare-advertising/americanairlines.html#complaint http://www.benedelman.org/airfare-advertising/americanairlin...

bedelman 13y ago
Indeed. DOT fines tend to be small in this area. On the other hand, it is notable that DOT considered and rejected each of AA's defenses. That could be useful as precedent. Some passengers may also have meritorious claims they'd like to bring against AA on an individual basis.
judk 13y ago
> government-imposed fees, For contrast, on your car rental or telecom bill, you find these labeled as "fees permitted by law", in an attempt to obfuscate.
- eli 13y ago
  Some of them are actually fees imposed by law on the telecom company which they have decided to pass on to you as a line item.
cabalamat 13y ago
That's a whole 47 seconds revenue! I'm sure they'll be suitably chastened.
- deleted 13y ago
  [deleted]

pedalpete 13y ago

I just did some back of the napkin calculations on actual fuel costs for the reported BOS-LHR. I find the OPs description difficult to follow, but assuming a 777 from BOS-LHR 6000 gallons / hour of flight $3 / gallon (currently $2.92) 550 passengers / flight 6 hours flight time Results in an actual fuel cost of $193.36. I'm quite surprised to see that fuel really is a significant price of the total cost of a flight. I always thought the Fuel Surcharge thing was B.S. However, I disagree that it should be allowed to be separated from the cost of the flight. The airline isn't buying the fuel the day you buy your ticket or the day you fly, they're buying the fuel the day they schedule the flight via futures (or if they aren't ,they should be). It also isn't something out of the ordinary in the day to day business. Here in Australia their is 'public holiday surcharges' where you have to pay a surcharge on public holidays because businesses have to pay their employees more. There should be requirements on what can be permitted to be placed as a 'surcharge'. As I see it, there is nothing stopping an airline from doing a complete 'a la carte' offering where every item of your ticket is broken out as a separate charge, but unfortunately, you don't have the option to opt-out of any of it.

dredmorbius 13y ago
Fuel is the principle cost of aviation, and fuel prices have climbed markedly. In looking at the "Boeing biofuel breakthrough" a couple of days ago, I happened to look at what actual fuel consumption for the US airline industry has been. Turns out that, although total passenger miles is up since 2000, the fuel consumption for the commercial aviation industry (which may include cargo flights) peaked in 2000. The actual fuel usage for 2012 -52.3% of the 2000 FAA estimated consumption -- they'd predicted 3-4% annual growth over the next 10 years, it turned out to be a 15.9% reduction over the period. Increased load factors (the seats filled on a flight -- increased from 70-83%) and reduced seat pitch (more seats, and passengers, per plane) seem to have staved off an actual reduction in the passenger-miles, but I strongly suspect that by plane-miles flown, we're down net. http://www.reddit.com/r/dredmorbius/comments/1wo2hl/boeings_biofuel_breakthrough_less_than/ http://www.reddit.com/r/dredmorbius/comments/1wo2hl/boeings_...
rbcgerard 13y ago
Just an FYI - I think you're high on the fuel consumption - think it's closer to 2-2.5k/gal/hr...http://www.boeing.com/boeing/commercial/777family/environ/index.page http://www.boeing.com/boeing/commercial/777family/environ/in...

judk 13y ago

Ultimately, calling it "tax" isn't really the problem. Not including nationally standard costs in national advertising is the problem.

martingordon 13y ago

I first came across this when I tried to redeem some of my 100k miles I accumulated on British Airways from business travel (at the time AA/BA didn't give AAdvantage miles for transatlantic flights on BA). Almost any time I try to book an award ticket, I'm hit with, for example, an $800 ticket that "costs" $250 with $550 in fuel surcharges. This results in award tickets that cost 50,000 miles + $550. Definitely not worth it and not what I was expecting when I signed up.

saryant 13y ago
With BA Avios, avoid redeeming on AA or BA. Fortunately, redemptions on Cathay Pacific and a few other partners still don't involve fuel surcharges. Baring the recent devaluation, this was one of my favorite aspects of United's mileage program—no fuel surcharges on any partner. I'm flying to Berlin in June on Lufthansa first class and the only fees were government taxes.
bedelman 13y ago
You should consider filing a formal comment with DOT about your experience, and especially your surprise at the unexpected charges. This is straightforward using the Comment Now button on http://www.regulations.gov/#!documentDetail;D=DOT-OST-2013-0025-0001 http://www.regulations.gov/#!documentDetail;D=DOT-OST-2013-0... . DOT is currently evaluating my complaint against BA on this subject.