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Chicago, IL - August 6, 2019
Business Travel Trends and Forecasts Toronto
Westin Copley Place - September 10, 2019
has scrapped surcharges on flights within Europe and reduced them on long-haul
routes that don't cross the Atlantic Ocean. Instead, it has integrated the price
element into the total ticket price.
management consultants told BTN the change,
which took effect Nov. 3, should reduce costs for many corporate clients
because more of what they pay will be subject to their negotiated discounts. Surcharges
can account for well over half the ticket price yet are ineligible for
negotiated discounts. “No one understood why, if you had €1 million of air
spend, only €400,000 was negotiable,” said Jörg Martin, the Germany-based managing
director of CTC Corporate Travel Consulting and chairman of GBTA Europe's
carrier made another move that may confirm the “heads they win, tails we lose” way
some buyers’ view airline pricing strategies: Air France-KLM has pushed up some
fares by more than the amount it has reduced its surcharge. According to Olivier
Benoit, senior director and air practice area leader for BCD Travel consulting
arm Advito, it reduced its surcharge by €114 for business class from Paris to Hong
Kong but increased its published fare by €215. “As usual, the devil is in the
detail,” said Benoit. “For a client with a significant discount, the total
price will decrease. For a client with a limited discount, the price will
remain flat or could even increase.”
History Of Contention
has long been contentious.
Introduced explicitly as fuel surcharges more than a decade ago in response to
rising fuel costs, YQ and YR boxes on air tickets have ceased to bear any
relation to fuel costs. Indeed, Lufthansa Group gave up any such pretense in
2014, renaming the YQ box an “international surcharge” to cover costs it considered
uncontrollable, such as air traffic control. Others, such as British Airways,
renamed them “carrier-imposed surcharges.”
have received considerable criticism
since late 2014 for maintaining surcharge levels though fuel costs have fallen.
Other than in regulated markets like China and Japan, examples of change have
been rare. Qantas and Virgin Australia integrated surcharges into their base
fares on international routes in January, and British Airways quietly did so on
short-haul flights a couple months later, Benoit said.
object to both surcharges' lack of transparency and their immunity to
discounts. “We have been talking in depth with airlines since the beginning of
the year to make them understand our perspective,” said Martin. Air France-KLM wrote
to the travel trade last month that it had “decided to move towards a
transparent and simplified pricing policy, integrating (fully or partially) the
carrier surcharge (YR) in the net fare.”
Benoit said the
carrier has retained a surcharge on long-haul routes so that it has a mechanism
to respond to future fuel price increases. "In a perfect world, it would
be fully integrated on every route, but the fuel price is still volatile. A
surcharge could make sense but only if it is transparent.”
Though Air France-KLM
reduced the surcharge on other long-haul rates, Benoit said it did not do so on
transatlantic routes because surcharges there already are lower. For example, a
typical business class surcharge from Europe to Asia is €450 to €500; from
Europe to the United States, most airlines charge around €175. However, Martin said
the stasis on transatlantic routes also represented Air France-KLM's failure to
reach consensus with joint-venture partner Delta Air Lines. Delta did not
respond to a request for comment.
warned: “AF/KL may revise its discounts policy in ongoing requests for proposal
or by offering lower discounts to corporate clients from 2016. Although AF/KL
has to offer competitive pricing, this could be a challenge when negotiating
routes where it is in a monopoly or dominant position.”
and Martin believe more airlines will reduce or scrap surcharges over the next
year and welcomed the improved transparency. They have one complaint, though.
“Total ticket prices have not benefited from the drop in fuel prices,” said
Benoit. “Airlines are looking instead at what the market can bear, and they see
that their load factors are holding steady or even moving upwards.”
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