Why is the DOT Wasting Time With Fuel Surcharges?

Another week, another wasted effort by the Department of Transportation (DOT). This week, it’s a look at the latest guidance on fuel surcharges. Surcharges aren’t understood very well by much of the traveling public, and it seems like the DOT has some of those same misconceptions. I just can’t believe the department is bothering with this.

The DOT has now decided that fuel surcharges “must accurately reflect the actual costs of the service covered.” What exactly does that mean? Well, if you read the text of the notice from February, you’ll see it explains that the fuel surcharge must “reflect a reasonable estimate of the per-passenger fuel costs incurred by the carrier above some baseline calculated based on such
factors as the length of the trip, varying costs of fuel, and number of flight segments involved.”

In theory, this effort makes some sense. If an airline is going to have a fuel surcharge, then it should be directly tied to fuel. But in practice, this is impossible, it’s just going to create more work, and there is zero impact on the customer. Seriously. Here’s what a fare display looks like on Delta.com right now:

Delta Availability with Price

Do you know what the fuel surcharge is, if any, on this ticket? No, because it has been years since airlines were allowed to display a price net of surcharges. Anyone who says, “I saw a $400 fare but then they tried to screw me with $400 in surcharges” in recent years is either lying or not from the US. That hasn’t been legal here in years. If there is a surcharge, it’s baked into that price anyway.

What will the airlines do with this clarification? They’ll probably kill fuel surcharges, since we all know that it’s just about impossible to get a reasonable estimate on the price of fuel. It can take pages just to explain an airline’s hedging strategy, and the idea that an airline could know months in advance how much fuel will cost is silly.

So what will happen instead? They’ll just change the name. In that Delta example from above, here’s the breakdown that you’ll see only if you click the link for the specific fare breakdown:

Delta Fare Breakdown

See that “International Surcharge”? It’s filed the same way as other airlines file a fuel surcharge but it just has a different name. And since this flight is international, it’s not lying to say that it’s an international surcharge.

In other words, nothing is going to change. You aren’t going to see some huge windfall with ticket prices plunging or anything like that.

I know what you’re wondering. Why not get rid of this silliness and just increase the base fare instead of using a surcharge? It’s mostly because it’s just easier to do it this way. The way the systems work, it’s so much easier to just slap on a surcharge than it is to change a bunch of fares or even file new ones in thousands of markets.

For most travel purchasers, there is no difference anyway so it shouldn’t matter which method the airlines use. The only potential impact is for those corporate clients that have discounts which apply to the base fare but don’t apply to fuel surcharges. But that’s a business issue and certainly nothing for the regulators to get involved with.

In short, this will mean absolutely nothing for the average traveler, but it will probably give the DOT a reason to hire a bunch of new audit employees. Meanwhile, the airlines will just ditch “fuel” surcharges and replace them with something else. What a waste of time and effort.

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