Air Canada fuel surcharge changes on price volatility - Rising cost of fuel passed on to consumer
May 14, 2008
Fuel surcharges announced last week by Air Canada on North American flights are changing to reflect the volatile price of jet fuel, the company said today.
The surcharge on domestic flights, each way, would now cost $20, $30, or $45 - down from the $20, $40, or $60 announced last week - depending on the distance travelled, a company spokesperson said.
The changes drive home an idea floated today by Air Canada CEO Montie Brewer on how carriers can equitably pass on their rising fuel costs to passengers.
"We'd like to find a way to have the fuel price in real time straight to the customer," Brewer said today during a meeting with The Gazette's editorial board. "Ideally we'd get to the point where we'd have two elements in the price: one is a very transparent at-market cost of the commodity and the price for the ticket."
This month, Air Canada, along with more than a half dozen North American carriers introduced a new surcharge to offset the rising price of jet fuel.
Since May last year, the price of jet fuel has skyrocketed from about $2 to $3.40 U.S. a gallon, said Steve Lott, a spokesperson for IATA. It's left carriers to contend with one airline CEO has called a bigger hurdle for the industry than 9/11.
Brewer said he doesn't object to that description.
"The ... issue for us is the volatility of fuel. It can go up and down $3 in a day," he said. "For me that's $75 million worth of expense changing everyday."
Air Canada would have to decide whether to implement a real-time formula that could have airline passengers checking oil prices as they buy their tickets .
"We're going to talk to our customers and find out how they would like to see things," he said.
"All I'm saying is that with the volatility of fuel, I'm not sure the old pricing practices actually work as well for the customer.
"You know, time will tell."
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