Thursday, November 29, 2001

NEW YORK (AP) Most major airlines plan to maintain a fuel surcharge of $20 on each one-way ticket even though the price of jet fuel has been cut in half during the past year.
The industry’s reluctance to drop the charge contrasts with the nation’s major hotel companies, which have eliminated the additional fees they put in place to combat skyrocketing energy prices.
“Regardless of what fuel prices do, our costs continue to rise and, especially in today’s market, we need every nickel we can get because we are still losing about $10 million a day,” John Hotard, a spokesman for American Airlines, the nation’s largest carrier, said Tuesday.
Analysts predict that industrywide losses are likely to be $10 billion for the year because of drastically lower demand attributable to the recession and the September 11 attacks.
While airlines have cut fares to try and spur demand, they have stubbornly held on to the fuel surcharges, which now make up roughly 15 percent of the average domestic ticket price.
By comparison, major hotel chains that tacked on energy surcharges earlier this year, ranging from $1.50 to $5 per night, have gradually eliminated them.
Marriott International Inc. and Hilton Hotels Corp. dropped all surcharges by the end of the summer, while Starwood Hotels and Resorts Worldwide Inc. eliminated the fee on Nov. 15.
“It was a temporary measure to recoup costs,” said Tom Marder, a spokesman for Marriott, based in Bestheda.
Most of the nation’s largest carriers including United, American, Northwest, Continental and Delta introduced a surcharge of $10 each way in February 2000 and then doubled the amount nine months later when crude oil was more than $30 a barrel. Oil prices are now below $19 a barrel on the New York Mercantile Exchange.
A gallon of jet fuel costs roughly 52 cents today, compared with $1.06 a year ago, although the price has fluctuated significantly throughout that period, said John Kilduff, a commodities analyst at Fimat USA Inc. in New York. The price of jet fuel headed sharply lower after September 11 as carriers reduced flight schedules by nearly 20 percent.
However, a research note written Tuesday by ABN Amro airline analyst Ray Neidl suggests the carriers might be wise to maintain the fuel surcharge.
“Analysts who follow the oil industry seem to believe that prices will not significantly decline further,” Mr. Neidl said, adding that the recent rally in airline stocks, which was brought about by low fuel prices, is probably over.
Each year, airlines use roughly 20 billion gallons of jet fuel and it accounts for roughly one-tenth of all expenditures, according to the Air Transport Association, an industry group based in Washington.
Industry watchers said airlines have a history of adding fuel surcharges whenever energy prices go up. However, when prices come down, the surcharge is typically subtracted in name only. An equal amount, analysts and industry officials said, is typically shifted to the base price of a ticket.
As Minneapolis-based airfare analyst Terry Trippler put it: “Fuel surcharges are eliminated but reincorporated.”
The only major carrier without a fuel surcharge is Dallas-based Southwest Airlines, and rival carriers said they do not include the surcharge in markets where they compete with Southwest.
“Suddenly the gas doesn’t cost as much where Southwest flies,” Mr. Trippler said. “How dumb do they think we are?”
For its part, Delta Air Lines has maintained a fuel surcharge of just $10 on each one-way ticket, the Atlanta-based company said.
Northwest Airlines of Eagan, Minn., said it has no plans to eliminate the surcharge because it hasn’t yet been fully compensated for extra money spent on jet fuel before prices plummeted.
The fuel surcharge is not necessarily apparent to travelers because it does not appear on airfare receipts, as do sales, airport and city surcharges.
While the fuel surcharges are often waived on tickets discounted through special promotions, Mr. Trippler said consumers should be aware that not all advertised fares include them.
“Read the fine print,” he said.

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