How do you turn sour grapes into a rare and expensive vintage? Ask your favorite airline; for over a decade they’ve been fermenting profits ever since the fuel surcharges were no longer needed to cover oil price spikes.
Remember the hornet’s nest we stirred up a few months back when we called for an end to the airlines’ phony “fuel surcharge”?
Karen Freeman thought that she’d returned her Chrysler 200 Sedan to the Richmond airport with a full tank. She thought wrong.
“An agent noted that the tank was full,” says Freeman, an architect from Atlanta. The gauge also registered that the tank was at capacity, she says.
But a few days later, when she reviewed her credit card bill, she discovered that Avis had charged her an extra $7.43 for 0.8 gallons of gas, or about $9.29 per gallon. She called the company to complain.
“A representative told me that according to a satellite, when I picked up my car, it had 16.9 gallons in it,” she says. “And when I returned it, it had 16.1 gallons. I checked the ticket from pickup and there’s no mention of the fuel quantity other than ‘G8’ — which means full.”
Question: I rented a car from Hertz in Miami a few months ago. Before returning it, I filled it up with gas. When I turned the car in, I double-checked the fuel gauge, made sure my receipt reflected that the car had been returned full, and, thinking I had myself covered, flew home.
… gas prices. By a long shot. At least according to our friends at Access America, who poll travelers every quarter about their travel-related anxieties.
Even airline service and security — two hotbutton topics on this blog — fail to come close to travelers’ gas problems.
Maybe the travel media (and I include myself in this group) needs to take a hard look at the way it covers the Recession of 2008. It is — and I want to be careful not to overstate this — obsessed with planes.
Travelers aren’t. They are concerned about cars. They worry about high fuel prices.
Travel news outlets aren’t doing their audience any favors by pretending their readers, viewers and listeners fly everywhere.
Too bad gas prices are falling.
While the rest of the world whined about the seemingly unstoppable rise in energy costs this summer, and the greedy oil companies that were probably to blame for them, we missed the other side of the story.
Soaring fuel costs can potentially save us real money on our next vacation — if not in the short term, then down the road. The effects were already being seen across the board: hotel rooms, car rentals and counterintuitively, even airline tickets. If nothing else, paying more at the pump would have encouraged travelers to do things that will make travel more sustainable in the future.
Don’t believe me? Just talk to your seatmate or fellow hotel guest.
If you do, you’ll hear that contrary to travel surveys that basically shrugged off the energy crisis, travelers either plan some dramatic and permanent changes to the way they get around, or they’ve already made them.
Chat with Kathleen Hargan, a child custody mediator from Oakland, Calif., and she’ll tell you the sad story of downsizing her car to a Prius. “I loved my Lexus almost as much as my firstborn,” she says. “Well, a far second, anyway. It was a dream car. But I had an epiphany when gas hit $3 a gallon.”
Some travelers have gone even further. “I’ve cut my gas consumption in half — or even better — by parking my old reliable GMC Suburban in favor of a BMW motorcycle,” says Jack Riepe, who works for a trade organization in Alexandria, Va. “In most cases, a pair of khakis and a dress shirt can be teamed up with a blazer in the saddle-bags for a business look. Business associates have gotten used to the boots.”
Others are trying to kick the fossil fuel habit altogether. “Gas prices pushed me to buy a bike,” says Lynette Phillips, a university research associate who lives in Shaker Heights, Ohio. “We live close enough to some stores that we can walk, so I do that more often.”
So how is this affecting travel? J Michael Murray, a retired professor from Sarasota, Fla., canceled his Mediterranean cruise this fall. “Flying to Istanbul and back from Rome was too big a hassle,” he says. “The cruise and related expense was just too much for what we would have gotten.” Remember, cruise lines have imposed fuel surcharges on their tickets, which jacked prices up without raising fares. Very clever. Or maybe not.
I’m hearing from a lot more people like Doreen Friel, a communications consultant from Tampa, Fla., who is frustrated by both higher energy prices and the hassle of travel. She just canceled her Delta Air Lines affinity credit card because, “Sky Miles are now worthless,” adding, “it’s just not worth leaving home anymore.”
If fuel prices head higher, travelers like Friel will benefit. Have I fallen off my rocker? No. Here are three ways high gas prices can you money.
1. Hotels: more incentives and falling rates?
During the last few weeks, just before fuel prices started edging downward, lodging analysts and hotel insiders told me rate growth had slowed. If conditions don’t change soon, they added, rates could start to fall. It seems every other hotel is issuing gas cards to encourage people to visit. No company is beneath this kind of incentive. I just saw Preferred Hotel Group — to which upscale boutique properties like the Mosaic Hotel Beverly Hills and San Francisco’s Huntington Hotel belong — offering gas cards.
Hotels were holding the line on further discounts, but if bookings continue to slow, they would have no choice but to cut room rates. Average daily rates slowed from an uptick of 7.1 percent in 2006 to about 5.9 percent last year, according to PricewaterhouseCoopers. A recessionary economy might have pushed that growth into reverse, which would have been a boon to bargain-hunters.
What that means for you: Wait as long as you can before making a hotel reservation. Prices are probably headed south.
2. Rental cars: bigger is … cheaper?
Soaring gas bills meant that rental companies were, in the words of one insider, getting “slammed” — and the beneficiaries are you, the traveling public. Don’t believe me? Try this: Go to the Web site belonging to a major car rental company, like Avis, Enterprise or Hertz, and pull up a random rate quote. Then head over to Hotwire.com and find out how much less the same car would cost. Then go to Priceline.com and bid a few dollars a day below that. Oh wait, you’ve done this before? No, you haven’t.
Here’s the thing about rental cars that few people know. The larger cars can actually be cheaper than the matchbox cars. Why? Because travelers want to save gas, which drives up the demand and prices of vehicles with better fuel economies. Oddly, smaller cars and hybrids could cost more than SUVs and minivans.
What this means to you: Bigger is better. If you have a large family or if you’re driving a short distance, bid aggressively for a larger car on Priceline. (I just snagged a full-size car at Los Angeles airport on Priceline for what Hotwire wanted to charge for its smallest vehicle. Go figure.)
3. Airline tickets: still pretty darned cheap.
Yes, this summer’s airfares are up about 20 percent from last year. But they’re still a bargain. The average domestic airfare for the first quarter of 2008 was $332 — the same price as it was a decade ago, according to the Bureau of Transportation Statistics. And there are signs that consumers are resisting further increases, according to my friends over at Farecast. That’s bad news for airlines like US Airways, who envision a future where they charge outrageous sums of money to fly between big cities, presumably leaving the rest of us to ride the bus. If passengers refuse to pay higher prices, something’s gotta give.
It doesn’t take an aviation analyst to figure out what might happen if fuel prices again start heading north. Customers eventually will refuse to pay exorbitant ticket prices, and the weakest airlines will fail. But I don’t envision a future in which two or three remaining carriers are able to set their own monopolistic prices. Instead, I see a future where the poorly-managed air carriers liquidate and new airlines emerge to meet demand from air travelers. These upstart carriers will be more efficient, customer-friendly and unencumbered by the poisonous corporate cultures that have defined many of today’s dysfunctional airlines.
What it means to you: In the short term, you may pay more for an airline ticket. But don’t let the airlines name their own price. Know when to say when. Force the incompetent airlines out of business by refusing to do business with them. The sooner you do that, the sooner you’ll pay a more reasonable fare.
Higher fuel prices have already forced travelers to make some long-overdue changes — whether it’s cutting back on trips or being more mindful of our limited energy resources. Cheaper prices at the pump threaten to put a dent in the progress.
I’m not the only one who feels that way.
“I am enjoying the high price of oil,” says James Edward Wright, a retiree from Duluth, Minn. “For too long, citizens told our political leaders to make sure we have low gas prices, even if we have to drill holes in some third-world country that hates us. We need $4 to $5 a gallon gas to make it painful enough for us to demand a fix.”
Couldn’t have said it better myself.
Energy prices may be falling, but airline fuel surcharges are holding steady — if not rising.
The fees on tickets to Europe this autumn were already pretty high, ranging from $342 to $474 per ticket, according to sample fares from Bestfares.com. That figure doesn’t include landing fees and taxes of about $258 (but that’s another story).
But jet fuel prices are headed down, dropping from $3.64 per gallon on July 29 to $3.39 per gallon on Aug. 4, according to the Energy Information Administration. This has triggered widespread speculation that fuel surcharges would fall, too.
The winter fares to Europe — also courtesy of Bestfares.com — show the exact same fuel surcharges. Meanwhile, the base fares have dropped by about $200, as they do during the off-season. So proportionately to the fares charged by the airlines, the fuel surcharges have actually risen.
Many airfare experts believe airlines will eventually lower their fuel surcharges, as energy prices continue to decline. But the fares currently being offered seem to contradict the conventional wisdom. They suggest airlines have unbundled energy costs from their base fares, and probably have no intention of folding their fuel costs back into the price of a ticket.
We already know that airlines plan to do this with non-fuel-related surcharges. If they can get away with it on fuel fees, too, it may not be long before base fares are pure profit.
Time to buy airline stock? Perhaps.
(Thanks to my friends at the San Antonio Express-News for the tip.)
I got a little curious after hearing about the airline industry’s self-serving push to regulate oil speculation. It made me wonder how much the airlines were paying for a gallon of fuel.
Here’s the somewhat surprising answer: on average, the airlines are shelling out up to $1 per gallon less than we do at the pump.
I’m no expert on the airline industry, and unlike some other travel columnists, I’m not going to pretend to be one. But I think these numbers speak for themselves.
According to the Bureau of Transportation Statistics, the US airlines spent an average of $3.05 a gallon in May, or roughly $3.5 billion. It’s the latest month for which statistics are available.
But compare that to $3.81 per gallon of gasoline paid by the average motorist in the United States the same month, according to the government’s Energy Information Administration. When you look the fuel costs of non-scheduled airlines — they paid $2.81 per gallon — it comes out to about a $1 per gallon difference.
I know, I know. Comparing unleaded gasoline to jet fuel is problematic. And so is comparing wholesale prices to retail prices. Point taken.
But I don’t care.
If airlines are paying a buck per gallon less than we are, they should just shut up about energy costs. If anyone has a right to complain, it’s us.
Bob Crandall is right. The latest airline crisis, which has unleashed an avalanche of new fees and surcharges on passengers, has nothing to do with high fuel prices. It’s about bad management.
But we don’t need American Airlines’ former chief executive to tell us that. We just need to wait a while.
When fuel prices come back down — as they are almost certain to — just pay close attention to all the new extras that have sprung up in the last few months.
Does anyone think airlines will back off when times are better?
Of course not. Airlines have been waiting for an excuse to charge us for anything that isn’t bolted down on the plane. They’ve been looking at Ryanair for years, envious of its ability to charge passengers for everything.
No, none of these fees are going to go away.
So are the airlines lying to us? Yes and no.
Sure, fuel costs more. No doubt, it’s far more difficult to make a buck in the airline business than it was just six months ago because of sky-high oil prices. But that’s not the whole story.
Airlines have always wanted to add these fees, and in that sense, the higher fuel costs are nothing more than a smokescreen. They are not giving us what we want, as United Airlines disingenuously claimed when it announced its new surcharges yesterday.
They are giving us what they want.
Here’s a warning for anyone who pays for their gas with a credit card: Read the terms of your sale very closely. More gas stations are tacking on a surcharge for anyone who pays with plastic.
It happened to me this weekend at a Shell station near Marco Island, Fla. I pulled up to the pump, swiped my card and then noticed that in addition to the exorbitant $4-a-gallon price, the gas station added a 6-cent surcharge for using a credit card.
Of course, the station had a different perspective. It termed the $4-per-gallon price a “cash discount.” (I took my business elsewhere.)
This is hardly new. But you tend to see the cash-price scam pulled by service stations in bad neighborhoods or remote locations — not in the suburbs of Southwest Florida. There’s a lively exchange on Yahoo! Answers on this topic (warning: the post contains some offensive language).
I can understand why a gas station would want to offset the merchant fees charged by credit card companies. But advertising one price and then charging another is deceptive and probably violates the station’s merchant agreement with the credit card company.
If you’re charged a different rate in a less than straightforward way, the best thing to do is complain immediately. You could get some of your money back.
I think the long-term solution isn’t lower fuel prices or even a uniform rate. It’s a better car.