Airlines increase surcharges, cut the perks

Cost-cutting measures impacting business travelers

By Dave Hannon -- Purchasing, 5/8/2008 1:03:00 PM

As airlines continue to face skyrocketing fuel costs, many are creating new surcharges or increase existing ones, while also cutting many of the perks or extras that business travelers are accustomed to.

This week both Delta Air Lines and American Airlines raised fuel surcharges, this time by $20 roundtrip, to recoup rapidly rising fuel costs. According to the Associated Press, fuel surcharges on some flights are now in the $130 range for a roundtrip ticket.

Rick Seaney, CEO of airfare research site FareCompare.com, told the AP that the increases mean that fees and taxes together now cost more than the actual base fare on several short-haul flights.

Germany’s biggest airline, Deutsche Lufthansa, has increased its fuel surcharge to $126 for longhaul flights and $32.50 for all flights in Europe. British Airways’ highest surcharge is in the $150/flight range.

 A gallon of jet fuel on the spot market in New York was selling for $3.57 this week, according to the Energy Information Administration. That is up about 78% from a year ago.

The increased costs being incurred by airlines are also forcing many to cut every conceivable perk or cost that is not related to safety. Delta Air Lines said this week it will be closing nine of its VIP lounges in the U.S. and U.K. to reduce costs. Delta this week also stopped providing paper ticket jackets to save money. Delta spokeswoman Susan Elliott told the St. Petersburg Times that Delta believes it is "one of the first, if not the first" major airline to eliminate ticket jackets. In fact, more airlines are considering moving to electronic check-in as a way to reduce paper costs and labor costs.

Airlines are also reducing the number of flights in an effort to control costs. Reuters reports that in April United's capacity on North American routes fell 6.5% from the year-ago period and Continental Airlines trimmed its domestic capacity by 2.9% in April.

JPMorgan's Jamie Baker told USA Today recently that by this time next year, there could be as many as 20% fewer seats available due to capacity reductions, which would be the equivalent of shutting down a carrier the size of American Airlines.

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