Tear Down This Fuel Surcharge!

Virgin Australia Fuel Surcharge (YQ) was a bad thing. And now it’s gone. Yey?

If there is anything we, miles and points junkies, hate–and I mean really hate–it’s fuel surcharges. Revenue flyers don’t care about fuel surcharges because they are not really a surcharge; they are a virtual accounting trick. Fuel surcharges have nothing to do with the real cost of a revenue ticket. For an award seat, however, a fuel surcharge is very real and can run hundreds of dollars for a supposedly free ticket.

So yes, it is always a good thing when an airline is getting rid of it. Tip of a hat to Kenny from Miles For More.

Whether or not it going to change the way you are flying to Australia, that’s another story. Kenny has done great research about it, and he believes so. He likes it that you can use Virgin Atlantic miles and fly to Australia without fuel surcharges.

But, much to the agent’s surprise, the fuel surcharges are gone! I was quoted 94,000 miles and $28.60 for a one-way business class ticket from Los Angeles to Australia…

To me, however, this is not a game changer. I simply don’t see a reason to spend 188,000 miles for a trip to Australia, while I can spend 160,000 miles for the same flight with Delta (and availability is excellent, by the way!). I also don’t see a viable option to rack up 200,000 Virgin Atlantic miles without flying.

But there is a credit card for that?

Indeed, there is a Virgin Atlantic credit card sign up bonus, which can get you up to 90,000 miles or even more, but let’s look deeper into this option. Here are the terms:

• 20,000 Flying Club bonus miles after your first retail purchase
• 50,000 additional Flying Club bonus miles after you spend at least $12,000 in qualifying purchases within 6 months of your account open date
• Earn up to 15,000 additional bonus miles upon anniversary
• Earn up to 5,000 Flying Club bonus miles when you add additional authorized users to your card
• Earn 3 miles per $1 spent directly on Virgin Atlantic purchases and 1.5 miles per $1 spent on all other purchases

In fact, due to 1.5X, you will earn 93,000 Virgin Atlantis miles even if you don’t stick too long (until the first year anniversary, whereas you will probably have to pay the second annual fee). That’s, roughly speaking a one-way ticket to Australia. But let’s look at the hidden price of doing this.

If you spend $12,000 simply on A 2X AMEX Fidelity or Citi Double Cash card, your $12,000 spend will get you $240. Add the annual fee of $90 and you are looking at $330 for a one-way flight in business class.

Is it a bad price for this kind of flight? No! It’s a great price, but why not use Delta SkyMiles instead (sorry, can’t call them SkyPesos anymore) and get down under for the price of taxes?

Besides, I know that many of you are doing much better than 2X on your MS spend. So, for you especially, this deal would be a non-starter.

So it doesn’t matter then?

Who said it doesn’t matter? It’s always a good thing when a company is doing something positive. In the very least, it adds to peer competition, whereas others feel the pressure to do the right thing, too. Although in this particular case, I think the pressure has to do more with regulators–Australian regulators in particular–who are questioning the reason why airlines keep employing these bogus surcharges, even during the unprecedented global drop in the cost of fuel.

The Australian Competition and Consumer Commission had been investigating airline fuel surcharges in an attempt to determine whether they had engaged in deceptive and misleading conduct in relation to them.

Be it the peer or regulators’ pressure, Qantas has also reduced their YQ charges, although they still remain too rich for my taste.

Qantas from Wednesday will cut the fuel surcharge on its US routes by $55 each way, or $110 return in all classes, leaving frequent flyers with a remaining fuel surcharge of $285 each way or $570 return. It has also cut the fuel surcharge on fares to South America, Asia, South Africa, Japan, Asia and Honolulu.

In the meantime, Aer Lingus might move in a different direction.

Aer Lingus currently has very small fuel surcharges for flights to Europe, about $80 roundtrip. That and its close proximity to Dublin from Boston and New York has made it one of the best options for redeeming Avios. But it can change in the future.

Ireland considers Aer Lingus offer from BA owner IAG

Irish airline Aer Lingus has said it is willing to accept a €1.36bn (£1bn) takeover offer from British Airways owner IAG.

But Aer Lingus said before it formally recommends the offer, IAG must “address the interests of relevant parties”.

That is thought to mean its two biggest shareholders – the Irish government and Ryanair – and the unions.

As you and I know, British Airways impose draconian fuel surcharges to flights between Europe and North America. Does it mean that Aer Lingus is going to become useless to us?

I don’t think so for several reasons.

1. This is not a done deal. And even if it comes through, who knows how long it would take to finalize everything and satisfy all the parties.
2. British Airways is still facing the lawsuit in the US. They’ve even renamed Fuel Surcharge into Carrier Imposed Surcharge. Yeah, right!
3. The British Airways parent IAG also owns Iberia, which has much more reasonable fuel surcharge that British Airways. That means, we don’t know whether or not IAG assigns the same draconian surcharge to Aer Lingus flights. The truth is, we don’t know pretty much anything at this point, but…
4. British Airways has just recently reduced fuel surcharge between Europe and North America by about 10%, and they have eliminated  the surcharge for short haul flights within Europe (HT to Raffles)! And another excellent post on the same topic.

On Monday night, the fuel surcharge on a long-haul economy flight was cut from £229 to £209.  It had already been reduced by £10 in December but no-one noticed!  It was £239 before Christmas.

The fuel surcharge on a long-haul premium class flight was reduced from £359 to £329.

Of course, this is still a lot of dough, and my personal pledge not to use British Airways to cross massive bodies of water remains in full force. But, considering how many airlines all of a sudden have decided to do something about this ridiculous fuel surcharge means a lot already. Baby steps!

So Who Else?

Quite a few, actually. Philippine Airlines, Air Asia, Cebu Pacific have dropped all fuel surcharges, but they don’t even have frequent flyer programs (AFAIK), so we don’t care, really. But there are some familiar names, as well.

• China Airlines (SkyTeam) and Eva Airways (Star) have cut fuel surcharges by 40% in the past six months.
• Japan Airlines (One World) will reduce fuel surcharge (by 1/3 to North America) after Feb. 1, 2015.
• Qatar Airlines (One World) and Emirates have said they will cut the fuel surcharge (but not when or how much).

I think, the trend is obvious. Travelers, media, regulators, well, pretty much everyone hates this bogus surcharge, and airlines are starting to get it. That doesn’t mean, of course, that the fares are going to become any cheaper, but it means that we might catch a break on award tickets. However, there’s also a danger. The danger is that airlines might compensate the loss of their “free ticket” revenue with higher redemption levels, blackouts, and what’s not.

Tell me what you think in the comments section.

Same instructions with pictures