Chiguire
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Oilprice Down - What About The Fuel Surcharges?

Sat Sep 23, 2006 6:41 am

Since some weeks we are now experiencing a constant decline of the oil price. From the maximum of about 74.50 to now about 67.
Isn't it time for the airlines to reduce the fuel surcharge step by step ?
 
Leskova
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RE: Oilprice Down - What About The Fuel Surcharges?

Sat Sep 23, 2006 6:55 am

Well... in theory, yes... but I don't think we'll be seeing any reduction in them for quite a while still: they're just too much of an easy money-maker for airlines to be reduced nearly as quickly as they were increased.

It's just like regular fuel prices: whenever the Dollar increases in value, the oil companies (well... at least here, where the Dollar isn't the local currency) increase prices and give the increase in the Dollar's value as the reason; when the Dollar falls again, prices remain high, with the explanation being that the exchange rate isn't the only factor that's decisive...  Wink

In short: no surcharge falls even remotely as fast as it goes up.
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LAXintl
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RE: Oilprice Down - What About The Fuel Surcharges?

Sat Sep 23, 2006 7:08 am

United appropriately lowered its fuel surcharge last week.
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Chiguire
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RE: Oilprice Down - What About The Fuel Surcharges?

Sat Sep 23, 2006 7:11 am

Quoting Leskova (Reply 1):
It's just like regular fuel prices: whenever the Dollar increases in value, the oil companies (well... at least here, where the Dollar isn't the local currency) increase prices and give the increase in the Dollar's value as the reason; when the Dollar falls again, prices remain high, with the explanation being that the exchange rate isn't the only factor that's decisive...

I know this very special German explanation. But even there you can now see a drop of prices at your local gas station....

The point is, that it is know very little, that the fuel suppliers at most airports have dropped their fuel prices. And this is the basis for the airlines. USD-EUR exchange or not:
Sorry, only in spanish:
http://www.correodelcaroni.com/compo...n,com_wrapper/Itemid,162/?id=43623

But basically: because fuel suppliers charge less, Aeropostal reduces the fuel surcharge. An example to follow !
 
Avianca
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RE: Oilprice Down - What About The Fuel Surcharges?

Sat Sep 23, 2006 7:27 am

Quoting Chiguire (Reply 3):
But basically: because fuel suppliers charge less, Aeropostal reduces the fuel surcharge. An example to follow !

they should follow on the cargo sector Aeropostal is charging even for short routes extremly high fuel-surcharges, 0,75 USD per kg, other local airlines 0,30 USD per kg...

regards
Colombia es el Mundo Y el Mundo es Colombia
 
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RE: Oilprice Down - What About The Fuel Surcharges?

Sat Sep 23, 2006 7:43 am

One thing you have to keep in mind is that the airlines are not 100% sure if the fuel prices will rise sharply in the short to long term. Airlines should lower their surcharges a little but keep some of the surcharges incase the price goes up again and then they have money saved to cover it for a while before putting up fuel surcharges again.
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Stitch
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RE: Oilprice Down - What About The Fuel Surcharges?

Sat Sep 23, 2006 7:49 am

They will only drop it when they absolutely have to. UA dropping it will probably spur the others to do so, as well.
 
N174UA
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RE: Oilprice Down - What About The Fuel Surcharges?

Sat Sep 23, 2006 8:23 am

With the fall/winter season upon us, they really have no choice.
 
ZKOJH
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RE: Oilprice Down - What About The Fuel Surcharges?

Sat Sep 23, 2006 9:04 am

most airlines are keeping an eye on it, however the price has to stay at the same price or around it for a min of 30 days for the airlines to start taking of fuel ser charges - point said above it could go back up to 75$+ and then u would have to put it back on again ..
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georgiaame
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RE: Oilprice Down - What About The Fuel Surcharges?

Sat Sep 23, 2006 12:08 pm

Fuel surcharges have absolutely nothing to do with fuel prices. If you do the arithmetic, they are grossly disproportional to the increase cost of fuel per passenger. They do, however, generate substantial revenue. Therefore, I think it is quite safe to say that the "fuel surcharge" is here to stay, even if jet fuel were to drop to 10 cents a gallon.
"Trust, but verify!" An old Russian proverb, quoted often by a modern American hero
 
Aviator27
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RE: Oilprice Down - What About The Fuel Surcharges?

Sat Sep 23, 2006 10:34 pm

Oil prices are even lower.

September 22 close for October delivery for a barrel of oil at the main commodities market are:

NyMex Crude Future: $60.55
Dated Brent Spot: $59.08
WTI Cushing Spot: $60.08


Average Jet Fuel prices per gallon for the week ending September 15 are:

Asia and Oceania: $1.805
Europe and CIS: $1.827
Middle East and Africa: $1.799
North America: $1.748
Latin and Central America: $1.721

You will realize airlines are fast to raise fuel surcharges and a bit slow to lower them. However, with the 25% decline in oil prices they will be under pressure to lower their surcharges or face regulatory scrutiny. After all, it is a "fuel surcharge".
 
ltbewr
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RE: Oilprice Down - What About The Fuel Surcharges?

Sat Sep 23, 2006 10:55 pm

With the economic condition of many airlines today along with the competition on price, I would suspect that the 'fuel surcharges' will continue as gives airlines a cushion if prices spike up again.
 
Ned Kelly
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RE: Oilprice Down - What About The Fuel Surcharges?

Sat Sep 23, 2006 11:02 pm

Why don't they just incorporate the price of the fuel into the advertised price of the ticket? When the price of fuel goes up they put the price of the ticket up, when it goes down the ticket price goes down!

Or is that too simple!
 
Aviator27
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RE: Oilprice Down - What About The Fuel Surcharges?

Sat Sep 23, 2006 11:27 pm

Quoting Ned Kelly (Reply 12):
Why don't they just incorporate the price of the fuel into the advertised price of the ticket? When the price of fuel goes up they put the price of the ticket up, when it goes down the ticket price goes down!

Or is that too simple!

It is too simple Ned. From a marketing standpoint, airlines have found that passengers are less resistant to fuel surcharge increases than ticket price increases even though they are the same. People tend to identify with rising gasoline prices. It is working because many airlines have returned to profitability with the help of this tactic.
 
ANother
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RE: Oilprice Down - What About The Fuel Surcharges?

Sat Sep 23, 2006 11:32 pm

Price of oil per bbl is irrelevant. Have a look at the price of aviaiton fuel here. Only a 7% drop from this time last year. Click on through and you will see that Asia costs have actually increased while N. America has reduced by over 14%

IATA's analysis here suggest that the airlines should be prudent. I agree.
 
Wsan581
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RE: Oilprice Down - What About The Fuel Surcharges?

Sun Sep 24, 2006 12:23 am

Quoting Aviator27 (Reply 13):
Quoting Ned Kelly (Reply 12):
Why don't they just incorporate the price of the fuel into the advertised price of the ticket? When the price of fuel goes up they put the price of the ticket up, when it goes down the ticket price goes down!

Or is that too simple!

It is too simple Ned. From a marketing standpoint, airlines have found that passengers are less resistant to fuel surcharge increases than ticket price increases even though they are the same. People tend to identify with rising gasoline prices. It is working because many airlines have returned to profitability with the help of this tactic.

Keep in mind, most of the majors have hedged oil at a higher rate.So most of them are not able to take advanage of the lower rates yet.
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