Blog: Over a barrel

By CNN's Richard Quest

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(CNN) -- Posted: October 13, 2006

I am sorry I didn't blog last week; I was trying to sort things out -- and well, you know how that goes. Firstly my thanks to those of you who wrote to wish me a speedy recovery -- that was kind of you -- and I am pleased to say I am on the mend.

So back to business. Last week a story caught my eye. Air France KLM announced they were reducing their fuel surcharge added onto ticket prices because the price of oil has fallen. Today announcements have come from Singapore Airlines, Lufthansa and Virgin Atlantic that they will do the same.

This encouraged me enormously. After all, what goes up should come down and the price of fuel has fallen by more than 20 per cent since its all-time high in August, so surely its common sense that the fuel surcharge should also fall with it.

Common sense and the airlines rarely go in common. I thought more than this handful of airlines would follow, if for no other reason than good PR. I am a fool.

Most have stubbornly maintained their position. It is usually phrased in words like: "We keep the surcharges under review and will remain competitive" -- for which you can read, we 'aint cutting it until we have to.

Or another form of words you'll see: "The fuel surcharge doesn't cover the full cost of the extra fuel" -- for which you can read, we 'aint cutting it until we have to. And so on.

The airlines do have a point -- not much of one -- but it is true that they have absorbed much of the cost of rising fuel charges into their profit margins.

They haven't passed the total cost onto the consumer. However, most airlines have introduced at least three fuel surcharges over the past year, as the price has risen.

Let me give you one example. In the past 18 months one international airline increased its fuel surcharges four times, as the prices rose from around $56 per barrel to over $75 dollars.

The reasons were well documented; the need to recoup the greater costs incurred. However in the last four months the price of oil has fallen by around 22 per cent and there has not been one reduction in its surcharge. Nothing.

Since Air France KLM took the lead and actually shaved something off, only a few others have followed. As for the other airlines. Silence. Deafening.

Of course we know what they are doing -- they are using the increased surcharge revenue to offset the fact they are still paying horrendously high fuel bills -- but then be honest, come out and say it -- we are keeping surcharges because...Will they? Not a hope!

Why? Because they hope we will have forgotten they were ever there in the first place, and that the surcharge will become embedded in the ticket price.

Frequent flyers know what is going on and we are not happy about it. But there is nothing we can do about it. Airlines have to repair their balance sheets and they are going to do on our backs.

Let's see how they fare once the cold, northern winter sets in and fewer of us fly to save costs! Funny old business, this travel industry.

Next week I start some mammoth travels, around the globe. If you see me at an airport, do come up and say hello. And, as always, wherever your travels take you I hope it's profitable and safe.

Email me your thoughts on fuel surcharges and the other hidden costs of flying: quest@cnn.com

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