Do Fuel Surcharges Make a Significant Difference?

[lowecur]

I'll probably need some help with this. Let's take a look at the surcharges to date. I believe most of the Legacys' have a $10 surcharge for less than 1000 miles, and $20 for over 1000 miles R/T. Naturally a certain percentage of pax only fly one-way, but I believe those numbers are small. JetBlue just added between a $9 to $10 charge, and SouthWest added between $2 and $6. Just to make it simple we'll weight most of the charges less than 1000 miles and add a dollar or two depending on average stage length. I'll use some ball park estimates on pax for 12 months.

• Delta - estimate of 115M revenue pax in 2005 - X - $12. = $1.38B
• Southwest - estimate of 75M revenue pax in 2005 - X - $4. = $300M
• Jetblue - estimate of 15M revenue pax in 2005 - X - $9.= $ 135M

Now naturally these are guestimates for a full year, and the surcharges will only be in effect between 10 & 11 months in 2005. I think NWA said for every $1. per bbl increase, it raises annual fuel costs by $50M. It's really not a bad hedge, although more fuel surcharges are needed.

 

[wheelsup]

I was thinking about that today. At most you'd have a few hundred pax paying a surchage of what, $10-$20. The freight companies impose a surcharge but every package on board gets subjected to it, and you're talking about thousands of packages. No wonder freight is profitable .

~wheelsup

 

[General Lee]

I also read that for every 1% addition of the fare price, that negates $3 per barrel increase. So if you raise your fares by 5%, you negate $15 extra per barrel in your fuel costs. Of course your fare level can't go down too much....



Bye Bye--General Lee

 

[Jetjockey]

What gets me is passengers will book a fare on any carrier if it saves them $10. They blow that on 2 foo foo lattes at Starbucks before they get on the plane!

Pass on the costs to passengers where they freakin' belong! NO MORE EMPLOYEE SUBSIDIZED CHEAP AIRFARE..............OVER!!!!!!!!!!!