More than a decade since airlines first had travel agents and passengers up in arms with the introduction of fuel surcharges, it seems the aviation industry is ready to give the controversial fuel surcharge tax the boot. Or at least that’s what the travel trade hopes for.
Last week, Singapore Airlines announced that it would no longer charge a separate fee for fuel and insurance, opting for a single base fare that “folds in” these costs. It is the latest airline to do so, joining Qantas, Qatar Airways and Cathay Pacific, among others. The trend follows drastic reductions in the price of fuel and the subsequent pressure from industry associations and international authorities.
“The folding in of fuel and insurance surcharges into base airfares will be implemented progressively by region, starting from March 28 … This will not result in immediate changes to all-inclusive fares, which will continue to be determined by market supply and demand, but is intended to provide a more simplified fare structure for customers,” said Singapore Airlines in a statement.
Sally George, Market Development Manager of Singapore Airlines, expects the “simplified fare structure” to receive a positive response from consumers and travel agents.
And she’s not wrong. Jonathan Gerber, Director at TAG, says: “We couldn’t be happier. A transparent, open and proper fare is being charged, not a smoke and mirrors ‘fuel surcharge’ or increased tax.”
Although the axing of fuel surcharges does not translate into lower fares, it still has many benefits, say industry players. Sean Hough, CEO of Pentravel, says: “[It] makes quoting easier as taxes are quoted in foreign currency and change daily. It’s better for travellers redeeming loyalty miles [as there will be] less to pay in and commissions are earned on the entire ticket.”
Club Travel Yield Manager, Sharon Schierhout, says the 1,01% commission is also given a boost as the value is taken from the fare total. “It makes it more beneficial to sell SQ over other carriers.” She said the value of the discounts on individual corporate deals could be greater now that fares included surcharges.
But, for Asata, the elimination of fuel surcharges is about transparency for the customer. Asata CEO, Otto de Vries, says: “Consumers are often not aware that the fuel surcharge or carrier-imposed surcharges are not a government-levied tax and would perhaps be less content to pay these if they knew it was an attempt by the airline to recover what essentially is a direct cost to them doing business. They do not specify a surcharge for a pilot and crew, so why should fuel be a separate surcharge?”
De Vries says international governments are increasingly putting pressure on airlines to scrap controversial fuel surcharges as the price of oil is at an all-time low. He cites Hong Kong as an example. Last year, the Hong Kong Civil Aviation Department (CAD) ruled that airlines could no longer levy fuel surcharges on flights originating from there. He says in South Africa airlines often argue that any reduction in the price of oil is offset by the fact that operating costs are in dollars, with some even changing the name to “carrier-imposed” surcharges. “The announcement from the Hong Kong CAD showed at the time it was not impossible for airlines to scrap the surcharge. On its Hong Kong route, SAA scrapped the fuel levy under pressure from the Chinese government for all flights,” adds de Vries.
