Are fuel surcharge fees devaluing your miles?
A few months ago, a client hired me to find award tickets for his honeymoon. He had a significant Starwood balance, so I suggested transferring Starpoints to Miles & More, the frequent flyer program for Lufthansa, Swiss and a few smaller Star Alliance airlines. The Miles & More program routinely opens up more award space for its own members than for non-Miles & More partners such as United. But I had to warn him about the downside of this strategy: Fuel surcharge fees.
Mileage award tickets are not truly “free”. Travelers have come to expect to pay the taxes on award tickets. Broadly, this comes to $150-200 for a US to Europe roundtrip, and usually less than $100 for a US to Asia roundtrip. This is widely regarded as a fair arrangement; the miles cover the cost of the airfare, and the passenger pays the government-mandated taxes and fees.
But in recent years, airlines have become addicted to fee revenue. When oil prices spiked in 2008, airlines began instituting fuel surcharges. These charges were a way for the airline to collect additional revenue per ticket without actually raising the fare. While simply raising fares would have been an honest, transparent response to higher fuel costs, airlines chose the low road, hiding these fees under labels like “YQ charge”.
Inevitably, this practice spread from paid tickets to award bookings at some airlines, which brings us back to our honeymoon story. Let’s say our honeymooners were flying from Los Angeles to London in business class. For simplicity we’ll look just at the flight going to London. Here’s a screen shot of the total taxes and fees, at $476.20:
But mandatory taxes and fees departing the United States are only $24.20. That means that $452 of these fees are going to British Airways in the form of a fuel surcharge. See the breakdown here:
As you can clearly see, the airlines are using these fuel surcharges purely as a way to generate additional revenue at the traveler’s expense. They are not recouping any government-mandated costs, they are simply addicted to fees. The net result of these additional costs to the traveler is that frequent flyer miles are less valuable.
Thankfully, US-based airlines have not started imposing fuel surcharges on award tickets (with a few exceptions detailed below). The worst offenders are the British Airways Executive Club and Lufthansa Miles & More programs, where fuel surcharges add many hundreds of dollars to award ticket costs.
Stateside, United does not levy fuel surcharges on any award tickets, and American and Delta charge them only for booking on partners (such as British Airways) that mandate these charges on award tickets. So while you’d never pay a fuel surcharge using American AAdvantage miles to fly on AA flights, you would have to pay one if using AAdvantage miles to fly on British Airways.
This is devaluation of frequent flyer miles by stealth.
Be aware of these surcharges before you decide which frequent flyer program to use, as they add substantial costs to award travel. If you have a pile of British Airways miles and don’t want to pay the surcharges, I recommend using them for bookings on American Airlines, Cathay Pacific, or other Oneworld alliance partners. Fuel surcharges will be less (or non-existent) this way.
Unfortunately Miles & More levies the surcharges even on airlines that don’t charge them on award tickets, such as United. So while redeeming United miles for a United flight would not incur any surcharges, redeeming Lufthansa miles for a United flight would mean having to pay Lufthansa a fuel surcharge.
Most importantly, if any US-based airline were to implement fuel surcharges on award tickets, frequent flyers would have to draw a line in the sand and put a stop to it. Otherwise we’ll see increasing devaluation in the form of both higher award levels and fuel surcharges. After all, when is the last time you saw an airline fee go down?
Have you paid fuel surcharges on award tickets before? Do you think these fees are fair for airlines to charge?