Oil prices are dropping but airline fees are not

Some airlines have rolled back the fuel surcharges they imposed on cargo shipments, but passengers have not seen any relief from the surcharges they’ve been paying for months now. Airlines cite the volatility of fuel prices and the fact that fuel costs are still significantly higher than they were a year ago as the reason for not reducing or eliminating the charges.

Many see a more fundamental change occurring at airlines, in that most carriers are now actively finding ways to pull more revenue out of their customers than just what they pay for airfare. The financial crisis brought about by fuel prices this year has prompted the majority of carriers to start charging fees for individual services on an “a la carte” basis.

US Airways has put in place a “pay-for-what-you-use” approach, which is in fact a “business model transformation.” In this model, the airline has decided that rather than spreading the cost of baggage handling among all passengers, they would specifically charge those using the service – charging a fee to those who check luggage for the flight.

Airline industry insiders are saying that they believe airline executives feel a need for a financial cushion because of the volatility of oil prices. The cash reserves built by fees offer a measure of protection against the volatility and are not likely to be done away with. The president of US Airways, Scott Kirby, echoes this sentiment: “The industry is evolving to a more a la carte model,” he noted. “Airlines can’t continue to operate as they did.”

www.usairways.com