Sydney to London, £20,000 return: that, apparently, was a genuine price returned on the Cathay Pacific website. For some, it may have confirmed their worst fears about the impact on aviation of the US-Israeli assault on Iran, and Tehran’s reprisals. In fact, as with BA’s occasional nonsensically expensive UK domestic fares, no one would ever pay that amount; the highest regular fare I have been able to find is around £9,000.
Between Asia, Australasia or Africa and the UK, a large slab of capacity has been taken out of the market.
Cathay Pacific says that fuel surcharges will rise in line with the added cost of filling those aircraft tanks. Many other carriers concur: “We have no choice but to put up your fare,” they chorus. “Have you seen how much we are paying for jet fuel?”
If you have a flight booking, or are thinking of making one, don’t panic. For a start, you are not going to be asked retrospectively to pay extra on your air fare. It is possible that some package holidaymakers may be surcharged, as the law allows. But for flight-only bookings the convention is that once you have paid, the airline will not come after you for any more cash – unless the government hikes aviation fees.
Many people fretting right now will say: “I need a summer holiday to look forward to, but I haven’t booked a flight yet. Could we be priced out?”
Relax. In the short term, fares have little to do with the actual cost of providing the service. They are decided according to the strength of demand and the number of seats available. If Donald Trump’s Iranian adventure ends soon, fares could actually fall for those going east from the UK. Emirates, Etihad and Qatar Airways will seek to rebuild their businesses by cutting fares. As the senior aviation figure Jonathan Hinkles told me: “The Gulf carriers will be able to recover that market through price alone.”
What, though, about your holiday flight to Europe this summer? The awful situation in the Gulf will impact prices, but perhaps not in the way you might imagine. Most well-run airlines won’t notice the oil price rise because they “hedge” the majority of their forecast energy requirements: they enter into financial deals to lock into a fixed price for a certain quantity of fuel. By the time they start to negotiate their 2027 supply, the price of oil may well have fluctuated back to normal levels.
There is though, one constituency of passengers who will be affected by any added fuel surcharge: frequent flyers redeeming points for travel.
Normal travellers will never bother to look at the fare breakdown on a flight ticket; why should they? How airlines choose to set out the elements of the price you pay is of little concern. Consumer pricing rules mean that carriers must wrap all unavoidable costs into the quoted fare.
But some airlines, including British Airways and Virgin Atlantic, choose to describe part of the overall fare as a “carrier-imposed charge”. The practice began exactly 20 years ago, when BA took the “very regrettable” step of increasing its fuel surcharge on new bookings. As the price of oil hit $70 a barrel (it’s now bubbling around $100), longhaul passengers were faced with paying an extra £70 on a return trip.
“We have little choice but to pass some of our extra costs on to our customers,” the airline’s commercial director said at the time. “We believe that it is better to be transparent with our customers by showing the level of fuel surcharge they are paying, rather than hid[ing] the costs by raising fares behind the scenes.
“This approach would enable us to reduce the surcharge should fuel prices fall over time.”
Yet when the price of oil subsequently halved, the extra charge remained. Since it was clearly no longer a fuel surcharge, it was rebranded as a “carrier-imposed charge”. Virgin Atlantic adopted the same practice.
For those of us buying tickets for cash: on most routes, competition decides the price level – so if an airline suddenly increases its “carrier-imposed charge” by £50, the fare to New York will not suddenly rise by the same.
But the “carrier-imposed charge” clobbers frequent flyers redeeming points for “free” flights. They are expected to pay not just government taxes, such as air passenger duty, and airport fees, but also these “carrier-imposed surcharges”. Currently, on British Airways, that amounts to an extra l£144 for a one-way flight from London to New York.
These surcharges diminish the difference between frequent-flyer reward flights and ordinary commercial fares, making loyalty schemes rather less appealing, and effectively devaluing the accrued miles. Yet all the evidence is that frequent flyers will continue to fly frequently, whatever the costs – and rewards.
Read more: Iran war costing travel industry £450m per day – but ‘quick’ recovery predicted
