Airline Surcharges Make Up for Loss in Business Travel Revenue

Fuel surcharges that are typically added on to international airfares are likely to climb along with average base-level fares to help offset the higher expense of rising jet fuel prices, said Hotwire's Chief Executive Clem Bason.

Bason was quoted in a Marketwire article as saying that passenger demand is increasing, but airlines are not adding any capacity.

As the price of jet fuel hit a record high in 2008, airlines in many cases scaled back the frequency of flights, but they also parked older jets that were less fuel efficient and more expensive to maintain.

British Airways raised its surcharge recently, and U.S. airlines are likely to do the same.

Such surcharges can add on an additional $300 to $400 to a ticket, and are generally added as the industry moves into the peak travel period.

Average airfare for international flights this summer is already up 23 percent from a year ago and is climbing further as planes fill up, according to Hotwire.com. Domestic airfare is up 15 percent.

United Airlines' parent company UAL Corp. said its April passenger-unit revenue increased an estimated 23 to 24 percent from a year ago. Non-ticket revenue, such as checked-on baggage fees and charging customers for changing their reservations, helped that increase. Non-ticket revenue accounted for 2.6 percentage points of April's unit-revenue growth.

Though corporate travel offices have increased their travel budgets, they are nowhere near 2008 peaks, and may not be for some time. To offset the loss of business customers, airlines have been focusing on non-ticket revenue, or ancillary revenue, which includes all the little charges that drive most customers crazy, but are credited by airlines for keeping airfare competitive.

Most business travelers are exempt from extra fees such as checked-on luggage and premium economy-class seating, where as leisure travelers could easily pay an extra $100 on top of their airfare for each round trip.

During the fourth quarter, ancillary fees rose 18.3 percent from a year ago to $7.8 billion, and constituted 6.5 percent of the total revenue for 32 reporting carriers, according to the U.S. Bureau of Transportation Statistics.