BTC petitions DOT on surcharges

WASHINGTON US-based Business Travel Coalition has urged the US Department of Transportation to investigate airline fuel surcharges that it claims contravene DOT guidelines.
“Consumers were sold on the need for fuel surcharges based on the sharp rise in jet fuel costs.”
“As oil prices have dropped some 50%, many international carriers have eliminated fuel surcharges or have reduced them to better align with the lower input costs,”said BTC founder Kevin Mitchell.
“Japan Airlines, for example, has reduced surcharges by 50%, or more, and will adjust surcharges bimonthly based on the cost of jet fuel. In contrast, US airlines have told analysts that they do not plan to lower their fuel surcharges because demand is strong. Rather, they plan to use the windfall to offset other costs that have risen or return cash to shareholders,” added Mitchell.
inside no 10BTC argues that frustration is mounting among consumers, corporate travel managers and policymakers who sense a basic unfairness, a betrayal of trust when travellers continue to be surcharged for a cost input that they supported and that can add 40% to the price of a ticket, but that has fallen by half.
“Airlines that did not hedge their future fuel costs are experiencing a windfall.”
BTC estimates it could amount to a saving of USD5 billion for American Airlines in 2015.
For airlines that did hedge and had to pay to unwind those hedges, savings are still substantial. It estimated Delta Air Lines saved USD2 billion after absorbing hedge losses.
The petition to DOT argued that whether an airline hedged or not, or how they planned to use the savings, was irrelevant.
In its 2012 Guidance, DOT made the point that to avoid being an unfair or deceptive practice, charges imposed on passengers as supposed “fuel surcharges” must bear a reasonable relationship to the per passenger cost of fuel.
That Guidance states: “When a cost component is described as a fuel surcharge, for example, that amount must actually reflect a reasonable estimate of the per-passenger fuel costs incurred by the carrier above some baseline calculated based on such factors as the length of the trip, varying costs of fuel, and number of flight segments involved.”
In its letter to DOT, the Coalition urged DOT in its investigation to hold the airlines assessing fuel surcharges to account — by requiring them to substantiate on a route-by-route basis that the fuel surcharges do indeed reflect the actual costs of fuel per passenger over some baseline amount.

sourced:ttrweekly.com