A resident of Austin was complaining on a local TV station about continuing energy surcharges — on prices of airplane tickets, electricity, and other things — at a time when oil prices have tumbled.
Presumably, instead of raising nominal prices, companies imposed surcharges last year to convince customers that the increases were temporary; but with the average variable cost of production down, why hasn’t competition forced prices down?
My advice to the woman is: wait, it will. We saw recently that US Airways backed down from charging for soft drinks; and I expect that as product demand declines further, some firm will break ranks and cut out surcharges — and others will follow shortly.
Consumers seem generally convinced about the existence of conspiracies; yet experience repeatedly shows us that it doesn’t take very many firms to get to a competitive solution — including the removal of surcharges when input prices fall back down.
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I believe that the surcharges did not occur as a response to high oil prices in the past, rather companies realized they had to dig themselves out of this massive hole they were in. Once they realized that they could charge for some services without altering the quantity of tickets sold, they began doing so. Maybe people have become more sensitive to these surcharges with the downturning economy.
Didn’t the airlines recently get sued for inflated fuel surcharges — and lose? https://www.airpassengerrefund.com/
Speaking of surcharges, how about those ATM fees? There are major label bank ATMs here in San Francisco that will gladly let you withdraw your own money for $3.00, with a $20 minimum. That’s a 15% tax if you’re only withdrawing $20, and those fees can really add up for somebody on a fixed income.
If I remember correctly, banks started increasing ATM fees so that they could “be more competitive.” Think there’s any chance of these fees getting lowered/abolished?
I fly AA, for the miles program for the most part, and they’re still doing their funny bit where each seat costs a different amount. Honestly people understood why the surcharges where there when oil was $145 a barrel, now at 40 its a bit harder to see the need.
If airlines wern;t so hostile to each other, or in such a competitive market, i could see them keeping it, people have in a sense gotten used to the prices, but if one breaks ranks AND CUSTOMERS FIND OUT ABOUT IT, then everyone wil have to, unless they are, like the conspiracy theorists believe, simply moving the charges somewhere else. I’d like to see a graph of price vs time over the past 6 months.
but i think teh key to why customers haven’t come running yet is because many of them are not aware or book flights in advance. Personally, i don;t expect this to last too long if sites like expedia do their job right.
The story I was given is that they are not yet paying current prices because of futures contracts at the old price. No answer when I asked why there wouldnt be some reduction for the portion of fuel bought at existing prices though…
But if it is a case of hedging rather than just taking advantage then you may be right.
I have to disagree with the authors, surcharges are going to stay in the airline business and in probably all other sorts of businesses that currently have them. We the economic crisis, firms need all the source of revenue possible to stay afloat. I cannot see and company cutting on revenue to please customers who in the end will surely keep buying the tickets.
My opinion is that they will switch around were they charge you a little bit extra or where they save a little money, but in the end flyers will have to keep paying the same amounts.
I think its ridiculous all these things they decide to charge us for that we never used to get charged for…maybe I wouldn’t be upset if I had always been charged to check additional bags of luggage on a flight. There are too many rules & charges at the airport, I guess thats what we have to deal with after 9-11.
http://whatwouldyoudo-if.blogspot.com/
Southwest’s fares are always higher than anyone else’s. On Friday I flew to Louisville on 1-day notice on United for $250 return from Logan. SW wanted over $800 from Manchester. It’s as far to one as the other, so I don’t care which one I use.
Maybe I’m doing it wrong, but without fail SW is more expensive than anyone else. Maybe you should check the competition before assuming that SW will be lower.
Back to the topic, yes, the fuel surcharge should go, but it’ll just get buried elsewhere in the dozen or so other b.s. fees and taxes.