Millions Milked From Consumers By Airlines' Fuel Surcharge Scheme

Government A Spectator To Misleading Trade Practice

Airlines have milked from consumers, since 2003, millions of dollars of extra revenue in a misleading advertising scheme called the “fuel surcharge”. In 2005 the U.K. Office of Fair Trade and the U.S. Department of Justice investigated or prosecuted well-known European and U.S. carriers for fixing the amount of fuel surcharge under antitrust laws. These actions resulted in the imposition of hefty fines against some of the accused airlines in the United States and the United Kingdom. While other prosecutions followed in the European Community and Eastern Asia over alleged unfair trade practices by airlines, Canada appears to be the only developed country where passenger air carriers are getting away with it all in spite of appeals made by travel agency and consumer groups to stop the unfair trade practice.

This is how it works. In 2003 the price of crude oil started to jump to unprecedented levels, affecting the market price of gasoline and aviation fuel. Operating at a very slim profit margin at the best of times and most of them in the red most of the time, airlines had no choice but to pass on these costs to consumers by hiking air fares, an option they were loath to do in the face of cutthroat competition. While some airlines honestly included their increased fuel costs in the fare, most did not. Hence, the “fuel surcharge” was born. How do you know that the extra fee you are required to pay in addition to your air fare is in fact the extra cost of fuel and not just a vehicle for raising extra profits? You don’t. Has the fuel surcharge been reduced in proportion to the decrease of oil price within the past 12 months? No, not at all in most cases, or not really.
In Canada all published fares have to be approved by the government. The fares are then distributed for ticketing through the Air Tariff Publishing Company (ATPCO) in Washington, DC and the International Air Transport Association (IATA) in Montreal. With the silent acquiescence of the government the ubiquitous fuel surcharge has acquired the status of a tax that must be collected with all other taxes levied by governments on a passenger’s itinerary. One of the purposes of collecting the extra revenue like a tax added to the other taxes and not including it in the fare is obvious, to mislead the consumer into thinking that the fare is lower than it actually is, and to be able to advertise lower fares. Most people won’t mind paying the extra tax instead of a higher fare since they think the money goes to the government, and because there’s nothing you can do about a tax. This is why sometimes the “taxes” you have to pay on a round-trip ticket say from Vancouver to London, England (in the vicinity of $500 in low season) almost equal or may even exceed the air fare, and most of it is the fuel surcharge.

Although there are federal or provincial laws and regulations in place that prohibit hidden levies or misleading advertising and trade practices, don’t expect any interference from the Canadian Transport Agency or the Competition Bureau any time soon. The federal government has had a hands-off policy for the past two decades even if it means bending or ignoring the law. Provinces of Ontario and British Columbia, where the travel industry is supposed to be regulated, are busy hounding easy targets such as travel agencies to pay lip service to consumer protection. In 2004 the BC Government abolished the Travel Registrar’s Office and the consumer protection department and privatized consumer services under a corporation that doubles as the government or an independent NGO, as befits the occasion. Private corporations worry about what the private sector is about, raise revenues and pay executives well, and if you are leery about big government, you don't even want to think about a corporation with the power of government.

As always, Canada leads the U.S. in taxing the consumer, something like 6 to 1 or more. The fuel surcharge on an overseas ticket may run as high as $300 or more. If you're wondering about how much you paid on your last ticket, look under code YQ (may be a different code in the U.S.)

http://www.smartertravel.com/travel-advice/Fuel-surcharges-scam-returns.html?id=12904

http://www.huffingtonpost.com/blake-fleetwood/airline-fuel-surcharge-ri_b_147846.html