Gluttony

Discussion in 'British Airways | Executive Club' started by studio76, Feb 17, 2011.  |  Print Topic

  1. studio76
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    studio76 Silver Member

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    http://travel.usatoday.com/deals/in...-airline-fees-are-the-most-sinful-/43817348/1

    Fuel surcharges for frequent flier award seats, particularly from British Airways, gets the win for gluttony. Senior Editor Christine Sarkis notes that British Airways' fuel surcharges are "over the top," especially in regard to redeeming frequent flier miles. Sarkis paid more than $400 in fees and taxes for an award ticket, a hefty price for a "free" seat; and frequent flier expert Tim Winship recently offered advice to a reader expecting to pay more than $700 in British Airways award redemption fees. With your loyal business and participation in British Airways' frequent flier program, you've done your part. Why the extra fees? With the true definition of gluttony, it seems British Airways just wants more, more, more.
     
  2. Globaliser
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    Globaliser Silver Member

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    Someone who thinks that an award seat is "free" has no business being "Senior Editor" of a site called SmarterTravel.com.
     
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  3. They're a business. They have a duty to their shareholders to generate as much income as they can. What is confusing about this?
     
  4. Absolutely. If you (mistakenly) start with the premise that it's a free seat then handing over any money must be a hefty price? Does it matter weather it was $100 or $400? You thought it was free.
     
  5. alex0683de
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    alex0683de Silver Member

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    As much as I agree with this, I do think the fuel surcharges have gotten way out of hand.
     
  6. Primula
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    Primula Silver Member

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    Well, it's certainly already been paid for once, by how you earned those miles in the first place.

    I can completely understand why BA do it. I can see how it helps BA's bottom line. I can understand that I'd rather pay £400 for a J award seat than buy a ticket. But I'd also rather pay £50 for a J award ticket than buy a ticket and I do think the fuel surcharge is getting to a level where it is beyond a joke. Shuttle-Bored's analysis of fuel surcharge versus fuel price was very telling in showing how the fuel surcharge has moved beyond any relationship to actual fuel prices, with the only remaining relationship being if prices increase, BA get to increase the 'fuel' surcharge further.
     
  7. Globaliser
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    Globaliser Silver Member

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    No it hasn't.

    When you earned the miles, you earned only part of the "price" of the award ticket. You were not earning the taxes fees and charges element. That's why you have to pay those when you book the award ticket. That element has not "already been paid for once".

    And the airline makes that perfectly clear. It does not tell you that the ticket is going to be absolutely free. Anyone who thinks otherwise (like, apparently, Christine Sarkis) is just indulging in wishful thinking.

    The question of whether the taxes fees and charges is set at an appropriate level is another issue entirely. And it's not just fuel surcharges. I happen to think that the UK government's APD is worse than fuel surcharges, which at least bear a reasonable relationship - and therefore increase and decrease - with the expected cost of fuel. APD is just pure taxation, but levied on a dishonest basis.
    Can you point me to this, please?
     
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  8. Shuttle-Bored
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    Shuttle-Bored Silver Member

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    Originally published here, but reproduced for general critique....

    [​IMG]
     
  9. Globaliser
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    Globaliser Silver Member

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    Thank you. No wonder I missed this great piece of work.

    However, to aid presentation, I wonder whether the following adjustments might help if someone were to do this exercise again?
    1. Aircraft are not fuelled with Brent spot crude, but with aviation kerosene - so that is a more relevant price.
    2. The fuel surcharge should logically be tied to future fuel prices, not historic or current prices, because the revenue thereby taken ought logically to match the expected price of fuel at the time of travel (which is anything up to 12 months ahead). So BA's expectation of future fuel cost (reported quarterly) would be better than spot prices.
    3. The accuracy of BA’s reported expectations could be matched against out-turn, also reported quarterly.
    4. The lines showing each category of fuel surcharge could be adjusted for average stage length in that category, which would more clearly show whether some types of passenger are being picked on (although it is more difficult to allow for the “real estate occupied” factor that is used to calculate the premium cabin surcharges).
    In an ideal world, the chart wouldn’t show spot prices at all, but rather BA’s net price after the effects of hedging. After all, when looking at the propriety of what BA charges for fuel surcharge (if you assume for the sake of argument that it’s proper to have a fuel surcharge at all), it really doesn’t matter what anyone else is paying – the only important question is what is BA paying.
     
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  10. Shuttle-Bored
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    Shuttle-Bored Silver Member

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    It's definitely far from perfect, I'd agree.
     
  11. Globaliser
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    Globaliser Silver Member

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    But I'm glad you did it, because I wouldn't have a clue how to start! And my wish list would probably tip most people over the edge ...
     
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  12. Shuttle-Bored
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    Shuttle-Bored Silver Member

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    :D

    In part, it's availability of data which makes doing anything more meaningful rather difficult. Looking around (aka www.google.co.uk), there is a monthly data set for "U.S. Gulf Coast Kerosene-Type Jet Fuel Spot Price FOB (Dollars per Gallon)" - again, not an exact proxy, but I'm guessing probably a better data set to utilise?

    Of course, it doesn't address whether BA's purchasing/hedging operation is efficient and therefore achieving the best price for what it's buying - but at least would give a closer approximation of what airlines in general might pay.
     
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  13. studio76
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    studio76 Silver Member

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    Nothing at all, just found the article amusing - and know that many here would not otherwise read the McPaper.
     
  14. TuxTraveller
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    TuxTraveller Silver Member

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    Shuttle-Bored - great work on the graph - really interesting trend
    Globaliser - nice wish list :D
     
  15. Raffles
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    Raffles Silver Member

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    It is only a matter of time before someone tries to challenge this. However, it won't be on behalf of frequent fliers. It will probably be on behalf of corporates who pay the surcharge on top of their pre-agreed fares, or someone who has been refused a taxes refund.

    At least we're not yet in Lufthansa territory, where the taxes and surcharges on economy tickets are often MORE than the cost of buying such a ticket outright for cash!
     
  16. Blur
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    Blur Silver Member

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    BA and AC are in a race to see whose fuel surcharges can be the most outrageous.
     
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  17. AtomicGardener
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    AtomicGardener Silver Member

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    What seems to be a more conservative approach to maintaining shareholder equity- increasing cash flows by: 1.decreasing costs, 2.passing a majority of market volatility onto customers, or 3. decreasing costs and gouging customers at the same time while hiding in the safety net of off balance sheet products?

    That's where I'm confused. I guess this is just part of the "merger"-not like they could use economies of scale to create an efficient hedging mechanism. Regardless, not a good sign.
     
  18. ukgooner
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    ukgooner Silver Member

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    In the early days I kind of accepted it as it was supposed to reflect the volatile nature of fuel prices - and also was refunded if you had to cancel a ticket. Nowadays we surely know that fuel is unlikely to ever return to pre-surcharge levels - so the must be an argument to cap it through legislation? There is little logic to it being 50+ of the cost of a ticket

    For me the fact it's so much more obvious in an award ticket is secondary.
     
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  19. ukgooner
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    ukgooner Silver Member

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    Another thought - if the economics of mileage based FFS is based on fuel at a certain level, then it is fair for a cash supplement to be paid on top should fuel costs rise as they have done. Its not as though the airline is making greater profit from the flights used to earn the miles to accommodate free fuel as well.
     

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