Understanding Fuel Surcharges

As travelers, air fares are not served to us straight up, but rather are mixed much like a cocktail, with a variety of elements which, when put together, result in a final cost (the price we actually pay to fly).

Generally, there are three elements which make up that cocktail; first, a base fare – this is the “fare” filed with governmental authorities by the airline on a periodic basis. Next, taxes and other government mandated charges are added, like the September 11th security fee, departure taxes (yes, as amazing as it sounds we actually have to pay to leave the U.S.), plus fees to pass through the airports we use. And last, but far from least, is the Fuel Surcharge, an additional charge which is added to the base fare, taxes and fees, reflecting the higher cost of fuel, and which significantly inflates the cost to fly.

Airlines, with some high risk exceptions, have little control over the price they pay for fuel. For those of us who choose cars as our everyday method of transportation, we are faced with steeling ourselves daily for the sticker shock which accosts us at the gas pump. It is routine to fill up on Monday at one price, only to find that when we return on Thursday, the price has increased significantly. And just try telling the attendant that you want to pay Monday’s price on Thursday. We are forced to either pay the higher price for fuel or not drive at all. The airlines (fortunately for all of us who love to travel) don’t have the luxury of sitting idle when fuel costs rise. As businesses vital to public commerce, they must continue to service the routes they have pledged to fly. But no business can continue to operate in the face of rapidly escalating costs without passing on some of those costs to the end user. Fuel and labor costs run a close one, two in terms of the most costly elements of operating an airline. In the third quarter of 2007, fuel costs amounted to almost 27% of the airlines’ overall costs. Add to that the fact that in the past year alone, the cost of jet fuel has increased OVER 100% and you get the picture.

So what does an airline do to offset some of these uncontrollable costs? The system they’ve set up (and one which the federal government has given its stamp of approval to) is called “the fuel surcharge”. As part of a very complicated process, as the price of fuel rises, the airlines ultimately decide that the time has come to offset their increased costs with an incremental fuel surcharge. Unfortunately travel operators like Club ABC Tours are given little if any advance notice of when these fuel surcharges will be adjusted upward. Yet the U.S. Department of Transportation mandates that in fairness to the consumer, all fuel surcharges be reflected in the cost of any advertised package. As a result, we show tour pricing in our brochures and other sales materials inclusive of all known fuel surcharges at the time of printing, leaving us to verbally communicate any subsequent increases or decreases when quoting or booking. This, however, still leaves a period between when you book and when you make final payment during which those surcharges can escalate dramatically, and then manifest themselves as a very unwelcomed surprise on your final invoice.

Traveling with Club ABC tours, however, lessens the sudden shock of these periodic fuel surcharges simply because we print a new brochure every six to seven weeks and up-to-date fuel surcharges are included in the printed prices – leading to smaller surprises when you call. Because other operators only print one or two catalogues annually, they can go for months or even a year without showing adjusted prices in writing. Therefore, when they quote, their adjusted prices may include up to 12 months of accumulated fuel surcharges.

Bottom line, Club ABC Tours never charges you, the consumer, for increased fuel costs. Instead, we simply collect the increases mandated by the airline and pass them along.