For the first time since late 2008, U.S. airlines are adding fuel surcharges to ticket prices. They've already raised fares five times since December.to offset a 25 percent increase in the price of jet fuel. For those with spring and summer travel plans, it's a one-two punch.
Right now, the surcharges on U.S. routes are only between $3 and $5 each way. Back in 2008, surcharges started slightly higher, then jumped as high as $60 when oil hit $147 in the summer. Many estimates have oil moving slightly above $100 this year. Even a one-way $15 surcharge adds more than 4 percent to the average domestic ticket price of about $340. And on international flights, fuel surcharges at their peak can more than double the price of a ticket.
- Adding fuel to the fare
American Airlines last week added a fuel surcharge of about $5 each way on most U.S. routes. United and Continental applied a charge of $3 each way. Others are expected to follow. JetBlue tacked on $35 to $45 for trips to the Caribbean and Puerto Rico.
Besides raising fares system-wide, individual airlines are hiking fares further on popular routes. That helps boost revenue, but airlines aren't sure it's enough. Airlines generally expect to pay at least 15 to 25 percent more for fuel this year. Estimates vary because carriers use different financial strategies for rising fuel prices. Oil topped $92 per barrel last week, the highest level since October 2008.
- Where (and why) you'll find them
Fuel surcharges are traditionally an easier way to raise fares. An increase to a base fare isn't always tolerated by customers. They can switch to a rival or force an airline to lower fares again to keep them. Fees are complicated and can drive passengers away, too.
Airlines also believe passengers are more forgiving of price increases for specific reasons.
"I think our customer understands fuel surcharges because they see their energy costs rising as well," JetBlue Dave Barger said in an interview with The Associated Press.
- Now you see them.
Surcharges are wrapped into the base fare on U.S. flights - you won't incur a separate fee at booking. And they must appear in all promotions and advertisements.
But on international flights fuel surcharges are often hidden during an initial fare search on online travel sites and the airlines' own websites. They can exceed the ticket price. Surcharges for international flights reached $350 on a trip to Europe in 2008. They dropped, but never went away like domestic charges did in the recession.
Fuel surcharges are labeled with an "F'' code on your final booking statement of airfare and taxes. Peak travel day surcharges, which airlines introduced soon after domestic fuel fees disappeared, have a "Q'' code. It's unclear whether travelers will incur both fees this summer.
- More to come?
Few airline executives expect costs to drop this year, so travelers should prepare for higher fuel surcharges. Southwest CEO Gary Kelly said fuel will be the airline's biggest hurdle to staying profitable this year. Fuel is often an airline's biggest expense next to labor. It accounts for about one-third of an airline's total costs, on average, according to the International Air Transport Association.
Rick Seaney of FareCompare.com predicts airlines will apply fuel surcharges much more slowly this year to avoid the resistance they encountered two and a half years ago.
But that's not to say airlines wouldn't raise fuel surcharges higher than in 2008. With the economy growing and more people flying, analysts suggest that fares and fees should climb steadily this year.
"They'll keep rising until the point where the consumer says 'I'm not buying a ticket anymore,'" Seaney said.