In 2016, we need to update the old saying that nothing is certain except death and taxes: We can now add fuel surcharges to that list.
Sure, we all know that one of the biggest expenses of moving packages – or people – from A to B is fuel. In fact, about 30 percent of airline expenses are for fuel, according to NPR. So it made sense when shippers and transporters – faced with soaring fuel prices a decade ago – started adding fuel surcharges to bills. Since then, however, gas prices have plummeted: At an average $1.80 a gallon they are lower than they’ve been since 2009, according to the Denver Post. But we are still paying fuel surcharges. What gives?
If you wonder that, you aren’t alone. The chairman of Travelers United, Charlie Leocha, sent a letter to the airlines asking them to lower airfares in response to the decrease in fuel costs, reported NPR.
“It seems to have absolutely no connection with reality,” Leocha told NPR, noting that airlines never explained when fees would be lowered. “It’s just a random fee the airlines vary as they want to.”
Airlines have their own logic, however.
Jean Medina, a spokesperson for the Airlines for America lobbying group, said each carrier decides what fees to tack on and those fees – even if they’re deemed “fuel charges” – can be used to cover any expenses.
“While airlines are reporting profits, it’s modest,” Medina told NPR. “While fuel has come down, other costs have been increasing — costs of labor, cost of aircraft rent, cost of buying new planes.”
While that may be true for some carriers, it’s not for American Airlines, the world’s largest. Indeed, it had a record-breaking third-quarter profit with net income that jumped 80 percent to $1.69 billion thanks to a huge drop in fuel spending, reported the Associated Press.
It’s not just airlines that impose surcharges. Many companies charge such extra fuel fees including taxicab companies ($1.25 per trip in Philadelphia, for example), UPS (a fluctuating rate depending on fuel prices) and FedEx (also fluctuating).
And, like airlines, many companies that impose fuel surcharges reap profits. UPS this week reported profits nearly tripled in the fourth quarter, exceeding analysts’ expectations, the Wall Street Journal reported.
FedEx is also reporting solid profits on the back of surging e-commerce. The company said its volume was up by 9 percent a day in the quarter that ended Nov. 30. Like UPS, FedEx is now charging not just for weight, but also for size — because many packages are light, but take up a large amount of cargo space. Some of that base increase is being offset by continued “fuel surcharges,” the company said. That suggests the fuel fees on shipping may shrink, but they won’t go away any time soon.
There are examples of some surcharges falling away, though this tends to happen slowly. NPR reported that taxis in Atlanta were charging a $2 fuel fee, but a city law forced them to lift it once the price of gas dropped below $2.90. Virgin Australian Airlines announced in January that it would drop the fuel surcharge on its flights to the United States, the report said. In December, the Nevada Taxicab Authority revoked a surcharge it had imposed in 2011, according to Philly.com.
In the meantime, here are some tips to help you minimize or avoid these lingering surcharges.
- Research airlines: Not all of them impose fuel surcharges. The Points Guy has a list of airlines and surcharges, but don’t forget things change quickly. Check the airlines’ websites, too. Tip: Remember that fuel surcharges on some awards tickets can cost you hundreds of dollars. Ask before you invest in an awards program.
- Ask before joining the taxi line: Some cities impose fuel surcharges on taxi drivers. Others don’t. And options like Uber and other public transportation abound. Plan ahead and ask before you decide on transportation.
- Consider shipping options: You might not be able to beat fuel surcharges on all shipping, but you can cut other costs. What many people don’t realize is that items shipped with slower delivery times (and at much lower costs!) often arrive only a day or two later than the more expensive methods, reports Simple Dollar. Also, in step with the trend towards “dimensional” shipping fees, use the smallest box or packaging feasible to protect and transport your package.
Do you have tips for saving on transportation and shipping costs? Share with us in comments below or on our Facebook page.
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