After hours spentsearchingthe internet you’ve found the cheapest air ticket to a far away escape. It’s the quickest route, the carrierhas good reviews, and if you’re really lucky there will be onboard WiFi(if only in name).
The confirmation email arrives. You can feel the warm air of your destination as you open it. Line-by-line you read the emails seemingly endless breakdownof costs that go into the total price paid for the ticket.
Taxes, duty, surcharges… passenger facility charges.
Andfor just a second all excitement is lost as you remember mathematics lessons from teenage years.
There is much debate around the wording and inclusion of such a long list of additional charges. For most consumers they are a non-issue, because theyre part of the overall fare
Oneof the line items that most intrigues me is the Fuel Surcharge— something most people incorrectly confuse as the actual cost of fuel.
“A fuel surcharge is a way of adjusting the amount paid to move freight [persons] by taking into account significant variation in fuel prices, compared to historical levels. It is a method for sharing or transferring risk.” http://www.supplychain247.com/
Whilst a Fuel Surcharge is designedto cover the fuel cost of flying you to your destination, it is not the actual fuel cost.
If you think about this more deeply, charging an actual fuel cost would be impossible due to fluctuations in fuelprice paid by the airline. Aircraft fuel has fallen by over 60% in the last two years alone.source: http://www.indexmundi.com/commodities/?commodity=jet-fuel&months=60
After recently booking a trip from London (LHR) to Bangkok (BKK) via Doha (DOH) I decided to examine the difference between the Fuel Surcharge charged for my ticket, and the estimatedactual fuel cost of the journey.
My journey consists of two legs:Departure Arrival Aircraft Miles Nautical Miles LHR DOH Boeing 787-8 Dreamliner 3259 2832 DOH BKK Airbus A380-800 3288 2857
To obtain the additional data required I turned to:
I was charged $230.68 USD inFuel Surcharges for this route which includes return flights. Whilst the estimatedactual fuel costsareas follows:Gallons Needed p/Pax Gallons Needed Total Fuel Cost (USD) p/Pax Fuel Cost (USD) Total Boeing 787-8 37.03 8,814.11 37.44 8,718.21 Airbus A380 45.26 23,763.54 45.76 23,504.99 One-way 82.30 Gal 32,577.66 Gal $83.20 $32,223.20 Round-trip 164.60 Gal 65,155.31 Gal $166.41 $64.446.40
Myticket was booked within 3 weeks of outbound travel (7 weeks of return travel). Given a Fuel Surcharge“takes into account significant variation in fuel prices”,I would have expected the estimated actual fuelcost to vary slightlygiven the current market conditions.
According to my calculations I am being overcharged for fuel by $64.27 USD($230.68 -$166.41) — if we consideraFuel Surchargeis only fuel cost.
Assuming perfect conditions, that is all passengers on the plane were charged the same Fuel Surcharge, this would be a combined overpayment of at least $15,000 USD ($64.27*238 seats on 787-8)— about 25% offuel cost required to make the entire round-trip.
One of the most likely causes foroverpayment is that airlines factor in high historic oil prices toFuel Surcharge calculations,because mostairlines hedge fuel purchases(although a potentially weakening argument).
If this is correct, 2017 could offer even cheaper airfares! Did I choose the wrong year to travel?
Other important notes on analysis:This analysis assumes the figuressupplied by the aircraft manufacturer with flightsoperatingat 100% capacity.There are also thousands of factors that affect actual fuel economy: payload weight, weather conditions, delays, airport charges to refuel, required additional fuel for safety regulations, etc.
Your airline isprobably overcharging you for fuel (if we assume aFuel Surchargeis only fuel cost).
Figures updated 07/02/2016 12:20 GMT: Fuel Surcharge quoted is for a return journey. Originally I calculated Fuel Surcharge for round-trip against one-way fuel costs.