US Edition 
Airlines accused of 'profiteering' from fall in price of fuel
Price of jet fuel has fallen 70 per cent in past two years, yet average cost of a transatlantic airline ticket cut by just two per cent over same period
Airlines have been accused of “profiteering” and “exploiting” passengers after failing to pass on the full savings in the price they pay for jet fuel to their customers.
Latest figures show the price of jet fuel has fallen by 70 per cent in the past two years, yet the average cost of a transatlantic airline ticket has been cut by just two per cent over the same period.
Some airlines are even continuing to impose a fuel surcharge on certain routes, a mechanism originally intended to be used when the price of fuel goes up unexpectedly.
Graham Stringer, a Labour member of the Parliamentary transport select committee, said it should be “exposed what a rip-off air fares are at the moment” so that consumers can make an informed choice.
“It’s a matter for the market and the consumer to choose and move away from those airlines that are exploiting the situation,” he said.
The United Federation of Travel Agents’ Associations (UFTAA) sent an open letter to airlines in September, accusing the industry of being “shameless” in including fuel surcharges in their prices.
Birger Bäckman, UFTAA Executive Administrator, told the Sunday Telegraph not enough progress had been made since the letter was sent.
“I think it’s as wrong as it was last year,” he said. “It’s actually getting worse - the price [of fuel] has gone further down.”
In February 2014 aviation fuel was priced at $986.50 per metric tonne. By this time last year that figure had dropped to $599.25. This month the price reached $300, a 50 per cent reduction year-on-year.
But data from flight search website Skyscanner showed average fares for flights from the UK to popular destinations had only seen modest drops.
The average cost of a flight to the United States fell by two percent from £688 in 2013 to £671 in 2015.
A flight to Portugal cost six per cent less in 2015 than two years earlier, while flights to Italy fell by 12 per cent and to France by 13 per cent. The biggest drop in fares was for flights to Ireland, which fell by 25 per cent.
Average fares to Spain rose by 10 per cent over the same period.
Some transatlantic fares still include a fuel surcharge, first introduced when the cost of oil rose rapidly.
A return fare to New York from London with Virgin Atlantic includes a “YQ” charge, code for fuel surcharge, of £143.
British Airways claims to no longer apply fuel surcharges on flights out of the UK, but a new “carrier imposed charge” introduced last October also comes to £143 on a return ticket to New York.
The contrast between the drop in jet fuel costs and the relatively small cut in airline ticket prices is likely to lead to renewed political pressure on the airlines.
George Osborne, the Chancellor, warned airlines at the start of last year that he wanted to see a drop in air fares for UK travellers in line with falling oil prices. At the time the Treasury said it would be watching the airlines “like a hawk”.
But this month transport minister Robert Goodwill defended the industry, saying the drop in the price of crude oil “would not have the same effect in aviation as it does in, for example, petrol stations”, because of the “long-term hedging contracts” airlines have.
The airline industry claims it is locked into such ‘hedge’ deals in which it buys fuel in advance at a certain cost in order to protect itself from sudden fluctuations in price.
The industry says this means it cannot simply pass on savings whenever the price of fuel drops because it is still paying for it at a higher price, but that at some stage in the future the ‘hedging’ element will drop away and savings will be passed on.
Joel Hanley, of the energy market analysts Platts, said: “European airlines in particular hedge their exposure to fluctuation in fuel prices to protect themselves. That means they might be locked into paying a higher price when the cost of fuel drops and they don’t feel the benefit of that drop as much.
“These hedges ‘roll off’ and fall out of play so at some point travellers should see greater benefits. Furthermore, at the moment some airlines are living fairly hand to mouth so they are loath to pass on savings immediately.”
Airlines say they also have to take into account the value of the dollar, the currency in which fuel is traded, and the other expenses of operating a flight, such as staff wages, according to the International Air Transport Association (IATA).
Chris Goater, spokesman for IATA, said: “Although fuel is a very important part of airlines’ costs - it’s around 25 to 30 percent - it’s only one cost and the other costs are either going up or are static, like salaries and cost of equipment.”
He added: “Pretty much since the dawn of the aviation age ticket prices have fallen and we expect that trend will continue.”
However, politicians believe more action needs to be taken.
Conservative MP Martin Vickers, who sits on the Transport Committee, said: “I suspect that many transport companies are similar to energy companies and rather reluctant to pass on the falls as quickly as they pass on the increases. I will be raising the matter with transport ministers.”
Robert Flello, Labour MP for Stoke-on-Trent South, said: “The price of fuel in the UK is not far off rock bottom, but all the way through the chain from oil producer to airline passenger or a person buying something delivered by a haulage company, customers are being ripped off pretty much at each level.”
He added: “It seems that almost everyone down the chain is taking their bit of profiteering.”
A spokesperson for British Airways said: “British Airways does not apply a fuel surcharge on flights out of the UK and Europe. Carrier imposed charges were introduced in October last year in response to a variety of factors.
“These include changing industry practices and to be consistent with changes that have been in place for flights originating in the USA for a number of years.”
Virgin Atlantic said it aims to give customers “the most competitive price possible”. A spokesperson said: “As a result our prices have reduced by £70 per trip per person since fuel prices began to fall.”
Fuel surcharges and “carrier imposed charges” on flights to the USA
1. British Airways
Carrier imposed charge = £143
On total return fare to New York of £491.55
2. Virgin Atlantic
“Carrier imposed surcharges” - code YQ (which means fuel surcharge) - £143
On total return fare to New York of £422.55
3. American Airlines
“Carried imposed fees” £143
On total return fare to New York of £524.55
4. United Airlines
No designated fuel surcharge or carrier imposed charge
On return fare to NY £491.55
5. Delta
“Carrier-imposed International Surcharge” £143
On return fare to NY £557.55
(All figures for return flights in March 2016)
The decline in the cost of fuel
Cost of aviation fuel on:
10/02/2014 986.5 $/mt
10/02/2015 599.25 $/mt
10/02/2016 300 $/mt
(Source: Platts)
Difference in cost of air fuel between February 2014 and February 2016 = 70pc reduction (Source: Platts)