Wednesday, December 29, 2010

My thoughts on ticket surcharges

Here is what I thought a while ago about air ticket surcharges. I even got published in the local newspaper, so it must be right, wouldn't you say so? And btw, I believe the editor did a fantastic job, right?

Gulf Executive Aviation has been bought since but the company's concept is still being applied today! 

Global airlines 'to spend $7bn extra on fuel'
By Mark Summers
Published: 22nd August 2007
MANAMA: The cost of aviation fuel now accounts for one third of the price of an air travel ticket compared to one ninth as recently as four years ago, a senior figure at a Bahrain- based charter airline writes in a new discussion paper.

Gulf Executive Aviation general manager Captain Alex de Vos says a combination of the difficulty in sourcing enough kerosene to keep pace with a global aviation boom and rising crude oil prices will see aircraft operators globally spend $7 billion more on fuel this year than they did last year.

In a paper addressing the practice of adding a jet fuel surcharge to air travel tariffs and whether this is a "necessity" or a "fairytale", Mr De Vos reiterates that "the fuel market price is the single most important operating cost an aircraft operator faces".

"Availability is the keyword here. If we take into consideration that over the last 25 years we have seen a yearly increase in jet fuel demand worldwide of about two million gallons a day, you can imagine the burden on refineries to keep up with the production. To keep talking airplanes, this number is roughly the equivalent of 35 additional Boeing 747s that take the sky on a daily basis. With such huge quantities it is no wonder that jet fuel market prices follow closely the market prices of crude oil," he said. This shadowing of crude prices during a rise in prices has had severe consequences for the aviation industry, Mr De Vos adds.

"Brent crude prices have approximately tripled over the last four years, meaning that aircraft operators also have to pay three times the fuel price they used to pay in 2003. This means that with current prevailing market prices, all aircraft operators worldwide are estimated to spend $7bn more on fuel this year than they did last year!"

Mr De Vos also gives an insight into the sheer quantities of fuel - at premium prices - required to propel an airliner. "More important to the passenger is what percentage of operational costs of an aircraft is taken up by fuel consumption? To give you an idea, a modern Boeing 747 jet has a fuel capacity of about 200,000 litres. On a typical flight, the four engines use approximately 12,500 litres per hour."

"To express this figure in hard currency, the aircraft has used about one-third of your ticket price just on fuel. Taking your airline ticket price into consideration, it may not sound like a lot, but remember - in 2003 the fuel share was only about one ninth," he says.
Mr De Vos said there is no immediate solution to rising fuel prices and their effect on the price of travel - but said suggestions being discussed included new propulsion systems and the hedging of fuel


  1. well said. I notice that you don't say how to solve the problem ;)

  2. One realistic way would be to streamline airway traffic, something that has really been done on a national level only so far.