An advance copy of my previous Op Ed castigating the major American airlines, particularly Delta which is based in nearby Atlanta, for their continuing gouging of flyers by fuel surcharges while fuel costs are cut in half, was sent to their top management team for comment. Several weeks later, their executive staff did in fact reply, by emailing me that jet fuel prices were only a small part of their costs, and they needed to continue their excessive airline fares in order to meet those other costs -- even though world oil prices have indeed tumbled! The Delta staffer who wrote to me sounded so convincing that I nearly bought her story -- but it is far from "the truth, the whole truth, and nothing but the truth."
Consider, first, this background: World oil prices continue around fifty dollars a barrel, less than half of the average price -- over $100 -- in mid-2014. That precipitous drop caused a few air carriers, such as Japan Air Lines and Qatar Airways, to decide to lower their fuel surcharges, which are a major portion of air fares -- indeed, sometimes the major component of those fares, over and above base ticket costs, particularly on international flights. For example, CNN has reported that one typical major airline round-trip fare between New York and London is composed of a base ticket cost of $403 + a surcharge of $458, mainly for higher fuel costs which do not exist at present. Nevertheless, that fuel surcharge costs more than the flight itself costs!
Fast forwarding to the immediate present, Delta Airlines recently proudly announced $1.1 Billion in profit sharing, which is being paid out to its employees at the average rate of about a 16% increase in their compensation. This amounts to about "two months' pay" according to the Atlanta Business Chronicle. And, of course, the more a Delta employee gets paid, the more profit he or she gets to share! And, of course, a substantial (but undisclosed) portion of that Delta profit sharing comes from those unnecessary fuel surcharges that they continue to gouge out of Delta passengers, and particularly us frequent flyers. Profit sharing is, indeed, a worthy use of corporate funds -- but not when it comes at public expense via an unnecessary, unjustified, and unworthy continuation of no-longer-needed fuel surcharges!
Something is drastically wrong here, from any reasonable economic perspective: think: GREED! This is the same kind of greed which has caused Delta to worsen its frequent flyer program -- over the strenuous objections of individual flyers -- by making its so-called rewards now depend primarily on money spent on tickets rather than on miles flown, as in the past. As a long-term Delta frequent flyer, I recommended early last year, when these changes were first announced, the implementation of a sensible two-tier system in with both miles flown and money spent on tickets would count comparably towards frequent flyer rewards. Delta not only gave my proposal a total rejection -- they now even refuse to discuss the issue, probably knowing they are wrong as to the principle, honoring which would cost them some profit.
The arrogance of gouging flyers for fuel surcharges while fuel costs drop precipitously, and the arrogance of worsening long-standing frequent flyer rewards programs, are not only greedy behaviors at Delta alone -- these consumer-adverse practices have spread far-and-wide throughout the U.S. airline industry's major carriers. Speaking as an economist, it is abundantly clear that more and more low-cost air carriers like Ryan Air and Virgin Atlantic will emerge to undercut the fare gougers. That is not at all in the long-term interest of Delta, United, American, and the others. It might well be said that fare is foul and foul is fare at these major carriers. A full Congressional investigation would be a good start towards removing those unjustified fuel surcharges. Such an investigation is urgently needed -- in the public interest, as well as in common decency!
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