The modern habit of taking annual family holidays abroad is under further threat after the UK’s biggest holiday companies announced fuel surcharges that could add as much as £160 to the price of a long-haul trip.
The charges come as oil prices soar to a record high of $114 a barrel, pushing up the cost of fuelling aircraft and cruise liners alike.
Package giants Thomson and Thomas Cook are adding the supplements for customers of their charter airlines, ranging from £15-£40 a person depending on the duration of a flight. Other companies are likely to follow suit.
The increases follow hard on the heels of British Airways’ unveiling of fuel surcharges of between £75 and £125 a person.
Rochelle Turner, head of research at consumer organisation Which? Travel, said many families will think twice about whether they can afford a holiday.
“It is a lot of money to find for just getting to your destination. With all the uncertainty surrounding Libya and whether the unrest could spread to Saudi Arabia and other big oil producing countries, the price of oil could easily escalate further. People might find they won’t be able to travel anywhere, never mind just going on holiday.”
Turner predicts a new mindset among families with an annual trip likely to be saved for as a special treat, as in previous generations. “Families are facing job cuts and higher energy and food prices, and now this. With the weak pound also making some holidays more expensive they may even question whether they can afford to go away,” she said.
On the plus side, the UK economy may benefit with more families holidaying at home instead. Tourist organisation Visit England said it was encouraged by signs that more people are planning to stay at home.
Thomas Cook has slapped on the surcharges for all new bookings, while Thomson and its First Choice division will apply theirs on 4 March. Both operators are charging an extra £15 a person on short-haul flights (less than three hours) to destinations such as Spain and Portugal, adding £60 to the cost for a family of four.
Trips to the likes of Greece and Egypt will attract an extra £25 a person, while long-haul vacations with flights, such as to the US and Cuba, will add £40 a person or £160 to the bill for a family of four.
Thomas Cook said its hand was forced by the 40% rise in aviation fuel over the past year. Ian Ailles, chief executive of Thomas Cook UK & Ireland, said: “We’ve worked hard to keep the impact of the rising fuel costs on our holidaymakers to a minimum, but the fuel levy is an unavoidable result of the rising price of oil.”
The company previously applied surcharges in 2008, but reduced them to between £5 and £15 for bookings for summer 2009 and none were applied in 2010.
The International Air Transport Association said that the impact of rapidly rising oil prices is a serious threat to earnings in the airline industry. It predicts net profit will fall from $16bn in 2010 to $8.6bn in 2011. Although IATA predicts passenger numbers will rise by 5.6% this year, it fears profit margins will be hit, putting carriers under further pressure
British Airways increases fuel surcharge
British Airways has increased its fuel surcharge on long-haul flights for the second time in less than two months.
By Oliver Smith (Telegraph)
04 Feb 2011
From February 8, the total surcharge for economy class flights lasting longer than nine hours will rise from £76 per person per one-way flight to £88; for flights less than nine hours it will rise from £63 to £75.
The surcharge on premium economy flights will rise from £94.50 to £106.50 for flights longer than nine hours, and from £73 to £85 on flights less than nine hours.
The rise is even greater on premium class services, from £108 to £125 on flights longer than nine hours, and from £88 to £105 on shorter flights.
A family of four travelling to Cape Town, for example, will now pay between £704 and £1,000 in fuel surcharges, depending on the class of travel, an increase of between £96 and £136.
Surcharges on short-haul flights, currently £12 per person per one-way flight, will be unaffected by the changes.
BA’s fuel surcharge on flights shorter than nine hours is now just £3 less than it was in June 2008, when the price of a barrel of Brent crude oil peaked at more than $140 a barrel. The price this week rose to $103, driven by unrest in Egypt, and subsequent concerns about the security of energy supplies in the Middle East.
“The move reflects the continuing substantial increase in the price of oil and a 14 per cent rise in the spot price of jet fuel since our last fuel surcharge increase in December 2010,” said a spokesman for the airline.
“Fuel is our single biggest cost. We have a strong hedging strategy in place and try to off-set the rising cost of fuel where we can, but regrettably we have to pass some of the costs on to our customers.”
Its fuel surcharge on long-haul flights rose by £10 per person per flight in December.
The additional charges come after the most recent rises in Air Passenger Duty, in November, added between £50 and £60 to the cost of long-haul return flight in economy class.
BA’s fuel surcharge (per person, per one-way flight)
Flights less than nine hours
|June 2008 (oil price: $140)
|December 2010 (oil price: $90)
|February 2011 (oil price $103)
Flights longer than nine hours
|June 2008 (oil price: $140)
|December 2010 (oil price: $90)
|February 2011 (oil price $103)
Brent Crude costs around $105 on 20th December 2011.
Buying an airline ticket: what the taxes, fees and surcharges all mean
We take a look at an example fare on British Airways from London to Los Angeles in March, travelling in economy.
Airline pricing can put our heads in a spin at the best of times. We’re not talking about ancillary fees, either: those add-on charges such as pillows or blankets that don’t make up the ticket cost.
We’re referring to the frustrating feeling when we see a great headline airfare and rush off to book up tickets, only to be stung with a rack of compulsory taxes, fees and surcharges as weâ€™re handing over a credit card.
While EU regulations requireÂ European carriers to show a breakdown of the airfare for customers, not many of us understand all the components that make up an airfare.
Even in the US, where regulations require airlines to include surcharges in the advertised fare, it means nothing if you don’t understand the basic fare structure.
But if you can think like an airline executive and understand how airlines are tailoring their fares, you can compare prices between airlines more easily andÂ make more informed decisions.
Understanding the basic fare structure
No matter which airline you choose to fly with, the fare breakdown will have a similar structure, but the fees will always vary.
We take a look at a random fare on British Airways from London to Los Angeles in March, travelling in economy class.
On ba.com, for travel dates from March 24-31, the headline or base fare is advertised as Â£147.00 on a round-trip basis. Deceptively cheap!
If you can think like an airline executive and understand how airlines are tailoring their fares, you can compare prices between airlines more easily andÂ make more informed decisions.
The cost of this base fare goes straight to the airline. When the taxes, fees and surcharges are added on separately, the final return ticket cost leaps to Â£446.70.
So what has happened to make the fare jump by almost Â£300?
Take a closer look at BA’s published breakdown of the taxes, fees and surcharges for the route, below:
|Government, authority and airport charges
|Air Passenger Duty – United Kingdom
|Passenger Service Charge – United Kingdom
|Customs User Fee – USA
|Transportation Tax(Departure) – USA
|Transportation Tax(Arrival) – USA
|Animal & Plant Health User Fee (Aphis) – USA
|Immigration User Fee – USA
|Passenger Civil Aviation Security Service Fee – USA
|Passenger Facility Charge
|Total government, authority and airport charges*
|British Airways fees and surcharges
|Insurance and Security Surcharge**
|Total British Airways fees and surcharges
|Total taxes, fees and surcharges per person
Are you still feeling confused?
We thought so.
The biggest single fees to look out for are the “fuel surcharge” and the Air Passenger Duty (APD), as we explain below:
The fuel surcharge
Airlines say the â€œfuel surchargeâ€ is an attempt to make their fees and charges clearer to customers, as we can see how much the carrier is allocating for fuel. However, the fuel surcharge is also a clever tactic to give us the impression that this tax is unavoidable.
An airline’sÂ fuel surcharge is not a government-imposed tax, but has always been an optional fee -Â imposed and collected by airlines to help recover fuel costs and stem losses.
While we know airlines have been forced to hike fares in response to the jump in oil prices, you may be surprised to learn that BA has added a Â£171 â€œfuel surchargeâ€ to this ticket.
This high surcharge is not uncommon among airlines and is always in a state of flux, reflecting the shift in oil prices.
If youâ€™re travelling in business or first class on this route, the airline ups the fuel surcharge to Â£245 (return) on this route.
If you’re doing the maths, the airlineâ€™s Â£147 base fare and Â£181 fuel surcharge combined brings the true cost of the economy airfare to Â£328, which goes directly to the airline.
In an ideal world, we would know what portion of the surcharge is being guzzled up in fuel costs. In theory, if oil prices are dipping, the fuel surcharge should fall to reflect the lower price.Â But this hasn’t always happened, as we have seen when 21 major airlines – including British Airways, Virgin Atlantic, Lufthansa and Air France-KLM – were fined after a massive price-fixing scheme to inflate passenger [and cargo] fuel surcharges between 2000 and 2006.Â We hope the airlines concerned have learnt their lesson.
Air Passenger Duty (APD)
You may also be surprised to learn that because this flight originates from the UK, a Â£60 Air Passenger Duty (APD) tax has been added to the economy fare, which is then passed onto HM Revenue and Customs. If youâ€™re sitting in premium economy, business or first class, the tax doubles to Â£120 on this particular route.
This controversial UK aviation tax- which has been consistently hiked- only applies to flights originating or arriving at a UK airport.
It is worth noting that if you are flying through Europe and need to make a connection at a UK airport, the APD tax does not apply. However, if you choose to stop over in the UK, the tax kicks in and is bundled into your fare.
It is worth brushing up on some basic APD facts if you often make flights to/through the UK, as this is the highest aviation tax in Europe and can add a substantial amount to an airfare.
At the time of writing, the APD tax Â – Â introduced by the UK government as a supposed “green tax” – is split into four price bands, increasing based on the flight distance from London.
It ranges from a Â£12 levy for flights to Europe, Â£60 to the US or Hawaii, Â£75 to the Caribbean and Â£85 for a return flight to countries including Singapore or Australia.
Don’t forget that governments around the world also impose their own aviation taxes – Â but they’re not likely to be as high as the UK’s APD tax.
Other taxes, fees and surcharges
BA has allocated the remaining Â£68.70 of the Â£446.70 fare to pay off other “little extras” in the way of taxes, fees and surcharges. This includes an insurance and security charge, which many airlines have been levying since 9/11, to cover the increasing insurance costs, as well as customs and immigration fees and a Â£23 “passenger service charge” for you to use London Heathrow’s facilities. All airports collect such a fee.
If you’re paying this much, isn’t it about time you made the most of your airport experience?