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Fuel costs trickling down, but travelers aren't getting soaked

News, Tips & Bargains | TRAVEL INSIDER

Competition prevents U.S. airlines from adding hefty surcharges. Ground transport firms have hiked fares a bit.

December 12, 2004|Jane Engle | Times Staff Writer

You're paying more to travel as airlines, taxi and ferry companies pump up prices to counter high fuel tabs. Filling up your car costs the most in nearly a decade: $1.36 per gallon, on average, in the U.S.

Wait ... only $1.36? Well, yes, that was the case in 2000 when we had another run-up in fuel prices. With a gallon of gas recently pushing $2 nationally, and more in California, it's hard to believe it cost so little nearly five years ago, when rising prices prompted airlines and others to introduce fuel surcharges.

Just as in 2000, travel suppliers in 2004 have raised prices to cover increased fuel costs. But not as much as you might think -- or as much as they would like. The sputtering-but-improving U.S. economy, the ascendance of low-cost air carriers and the price-comparing power of the Internet have conspired to limit price increases.

We're paying more. But not as much as we might.

In January 2000, Continental introduced a fuel surcharge of $20 per round trip, added on to the regular fare. Other airlines quickly followed, and by the end of that year, many had doubled the charge.

This year, despite record increases that have added billions to their fuel bills, U.S. airlines have tried but mostly failed to add surcharges. Where they have, it's generally been route by route, not across the board.

The big reason is competition. Northwest Airlines matches competitors' sales city by city and even fare by fare, spokesman Kurt Ebenhoch said. As a result, some Northwest fares carry a fuel surcharge and some do not.

The week of Nov. 29, Northwest matched two sales, involving Independence Air, Frontier, AirTran and others, that didn't have the surcharge, he said. When US Airways posted an Internet sale with the surcharge, Northwest matched that fare.

Many low-cost carriers have shunned surcharges, turning up the heat on the so-called legacy carriers such as American, Continental, Delta, Northwest and United, which used to dominate the industry.

At Southwest Airlines, which has kept fuel expenses down by buying contracts that lock in prearranged prices, fares have increased only $1 to $3 each way on some routes to cover these costs, said spokesman Ed Stewart. As for separate surcharges, he said, "We don't believe in playing those games."

Under federal rules, airlines must wrap fuel surcharges into fares they advertise to the public, not list them separately in fine print. So there's not much practical difference between a surcharge and a simple fare increase in the U.S.

Not so abroad. Foreign airlines this year have added round after round of fuel surcharges. In some countries, they routinely omit these charges, which can reach $40 or more per round trip, from advertised fares. Be sure to ask before booking.

U.S. carriers have mostly matched the higher fares on international routes. They have also turned to cost savings to offset the price of fuel, typically their No. 2 expense, after salaries.

American Airlines' jets, for instance, are carrying less fuel. Six months ago, they arrived at domestic destinations with 104 minutes' worth of extra fuel, on average, during good weather. Now they average 84 minutes, said Capt. Steve Chealander, manager of flight operations efficiency.

When asked whether planes risked running dry, he said, "We don't even get close to where the safety margin is." He added, "We're still cutting."

By burning less fuel, buying it at cheaper destinations and using other strategies, American is saving $50 million this year. That's still far short of the $1 billion it needs to cover the gap between what it budgeted for fuel this year and what it will pay -- a 37% increase.

So airlines whittle away at personnel and other costs -- and keep trying to increase prices.

To a lesser degree, other travel suppliers are facing this dilemma. Among them:

* Taxis: In several cities, a fuel surcharge is being added to fares. Ask about it before you get into the cab. In Los Angeles, the surcharge has recently been 50 cents, the level allowed when the average gas price in Southern California hits $2.22. If it hits $2.68, the surcharge climbs to $1.

* Airport shuttles: SuperShuttle, which operates at more than 20 airports, has imposed a $1 fuel surcharge in Austin, Texas; Baltimore; and Miami and Tampa, Fla., said Ken Testani, vice president of marketing in Scottsdale, Ariz. Other cities, such as Los Angeles, are getting piecemeal fare increases, by ZIP Code.

In many places, the company can't raise fares by much, Testani said, because "people don't like to pay more than $20" and will book a cab instead.

* Buses: Dallas-based Greyhound Lines, which claims to be the nation's largest scheduled inter-city bus carrier, increased fares 3% on average in April, partly to offset fuel costs. But that's been about it.

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