Federal Politician Joins Flight Centre's Call for Lower Fuel Surcharges

26 April 2013

Flight Centre's call for airlines to lower or remove fuel surcharges has gained momentum with a federal politician urging the Australian Competition and Consumer Commission to investigate price-gouging.

"Flight Centre has found that, on average, jet fuel prices are three times higher than in 2004, when the surcharges were first introduced," said Senator Nick Xenophon. "But the surcharges are now up to 12 times higher than they were in 2004."

 Questions Raised Over Fuel Surcharges

Following Flight Centre's observation, Senator Xenophon pointed to the example of a Qantas return flight to London, which originally had a fuel surcharge of $60 when it was first introduced.

"That same surcharge now adds $760 to the same return ticket. If that price accurately reflects what Qantas is paying in fuel for that route, they need to find a better deal. In real life, the price of jet fuel fluctuates. But the surcharges usually don't. They just keep going up and up."

Flight Centre is currently offering a return low season Qantas fare to London from $1809 from Sydney. The price includes a $760 fuel surcharge, a $728 base fare and $321 in taxes. In this instance, the actual base fare only represents 40 per cent of the ticket price.

Graham Turner, Flight Centre's managing director, who issued the call only yesterday, noted that recent jet fuel reductions, which had seen prices fall to the lowest levels in more than 12 months, should lead to widespread changes to airlines' complicated fuel surcharge structures.

"At the very least, surcharges should be lowered immediately. I stress the word 'should' because history has shown that airlines have been much more likely to increase surcharges than they have been to decrease them in response to fluctuating oil prices. A more sensible approach would be to remove these complicated surcharges entirely and to treat fuel in the same way as other operating expenses are treated by simply incorporating it into this base fare," said Mr Turner.

"This would create a much simpler fare structure and it would also benefit members of the various airline reward programs, as members are often required to pay the airfare's fuel surcharge component when they redeem points for travel. This can represent a significant expense, as in some instances fuel surcharges are now higher than the airlines' base fares."

In 2004 airlines introduced modest fuel surcharges after oil prices topped $USD40 per barrel. Since then, oil prices have tripled. Many airlines have, however, increased fuel surcharges at a significantly higher rate. Fuel surcharges do vary from airline to airline and from route to route.

Air New Zealand does not apply a fuel surcharge and Emirates has a relatively small fee, but many other carriers are charging travellers hundreds of dollars in extra charges.

British Airways ($763), Malaysia Airlines ($590), Virgin Atlantic ($580), Singapore Airlines ($571) and Cathay Pacific ($532) charge more than $500 in fuel surcharges on a return flight from Australia to London. Singapore Airlines introduced a $USD20 surcharge on return flights to London in June 2004. Today's surcharge - $USD520 - is 26 times that amount.

Senator Xenophon has written to the ACCC to ask them to investigate whether consumers are being ripped off.

"When you see figures like this, it's hard to believe airlines aren't using these surcharges as an opportunity to skim a little off the top," said Senator Xenophon. "The ACCC has to look into this and make sure consumers are still getting a fair deal."

"If the surcharge is for fuel, then that's all it should cover."

Lyndon Barnett

Guided by curiosity and a sense of adventure, Lyndon travelled independently to 69 countries on six continents. As such, travel is Lyndon's only addiction. He enjoys with equal measure - scaling the peaks of a South American mountain at altitude, attending opera in a European Opera House or hunting for a bargain in an Asian market.