Last summer I wrote that a law firm was preparing a class action suit against British Airways over fuel surcharges. The case was filed and a federal judge has refused to dismiss it.
Fuel Surcharges Briefly Explained
Award passengers are frequently shocked to learn that their ‘free’ mileage ticket costs as much as $1000 in cash when redeeming points of certain frequent flyer programs.
Fuel surcharges are a fixed amount of money added to a fare. The amount will usually be the same across all fares for a given city pair. In other words, all “New York – London” fares that an airline publishes will add the same amount for fuel surcharge.
Fuel surcharges are an easy, efficient way for airlines to alter their airfares across a given market. They can change one number — the fuel surcharge — and raise or lower (almost) all prices in the market at once rather than modify each and every fare they file.
For paid tickets, fuel surcharges don’t really matter. They’re displayed as part of the ticket price. They don’t really increase the amount most consumers pay. (They may raise the price paid on some contract fares, where a base fare is negotiated but the surcharges may be on top, that doesn’t touch most consumers but it’s another reason airlines like fuel surcharges.)
But for award tickets they are a very big ticket with those airlines that impose them. They’er almost an ‘accident’ on award tickets. They weren’t introduced to gouge award passengers, they were an efficient means of altering airfares and include non-discounted fare hikes on contract customers. But the side effect some figured out was that they could extract revenue from customers who were ‘locked in’ with no alternatives for spending their miles.
Which Frequent Flyer Programs Impose Fuel Surcharges?
Most Asia Pacific and European airlines impose fuel surcharges while in general U.S. and South American programs do not.
The lawsuit mistakenly asserts that no US frequent flyer program adds fuel surcharges onto award tickets. That’s not accurate.
- American adds fuel surcharges onto awards for travel on British Airways and also (quite reduced fuel surcharges) on Iberia.
- Delta adds fuel surcharges onto awards for travel on some partners like China Southern and Air Tahiti Nui, and imposes an “international origination surcharge” for awards that begin in Europe and approximates a fuel surcharge (and in any case is a carrier-imposed fee rather than pass-through charge, much the same as a fuel surcharge).
The correct statement the suit could have made is that no US frequent flyer program imposes fuel surcharges for travel on its own flights when travel originates in the United States.
Are Fuel Surcharges Actionable in Court?
The lawsuit makes two broad claims:
- The British Airways Executive Club terms and conditions allow it to pass through fees imposed on it by other entities (not charges that the airline or frequent flyer program itself imposes).
- The British Airways website fraudulently claims that the fees are in order to compensate for the fluctuating cost of fuel.
British Airways responds that the Executive Club incorporates its contract of carriage which specifically allows fuel surcharges, and that the terms of the program allow the airline to impose its own charges. The relevant question here will be whether a permissable surcharge under the terms and conditions of the program can be something other than a pass-through of externally imposed costs.
BA also argues that the suit is precluded by the Supreme Court’s Wolens decision interpreting the Airline Deregulation Act (notwithstanding that the federal government doesn’t regulate frequent flyer programs and the Wolens case did allow a state law breach of contract suit to proceed).
The Lawsuit Will Proceed
The judge in the case in an initial hearing wondered whether anyone who is a member of a frequent flyer program could preside over the case (given potential conflict) though noted not being a member of British Airways Executive Club (which he mistakenly thought was a partner of Delta, whose Skymiles program the judge does belong to).
In any case, the judge was not persuaded that the Airline Deregulation Act precludes the suit or that fuel surcharges as-imposed by British Airways on its Executive Club members were so plainly permitted by the language of its terms and conditions as to plainly bar a claim of breach of contract. So the suit moves forward.
But Don’t Get Too Excited
Even if there’s some sort of settlement and modest payout to U.S.-based Executive Club members who booked awards and paid fuel surcharges, at most the case claims that the Executive Club terms and conditions could have been written differently (to include carrier-imposed fuel surcharges) and that the fees could have been described differently so as not to suggest that the cost of a fuel surcharge bears some relation to the cost of fuel for a given passenger’s transport.
So even if plaintiff’s win something out of the suit, there’s no reason to expect this suit to mean an end to fuel surcharges on award tickets.
(HT to Traveling Better for the status of the case. Loyalty Lobby shares court filings in the case.)
- You can join the 30,000+ people who see these deals and analysis every day — sign up to receive posts by email (just one e-mail per day) or subscribe to the RSS feed. It’s free. You can also follow me on Twitter for the latest deals. Don’t miss out!
I think that your assertion that the fuel surcharges “don’t matter” on revenue tickets is not 100% accurate, at least given what the filing on Thursday indicated. Yes, the fees can be charged if they are fully incorporated into the price displayed but <a href="http://blog.wandr.me/2013/11/lawsuit-award-fuel-surcharges-moves-forward/"there is also an assertion that the DoT could consider arbitrary fees masquerading as a fuel surcharge to be deceptive business practices if they are not tied to the variable costs of fuel. That would likely require a different case to address but the groundwork is there in some of the definitions and statements on file here and in other place.
I also believe you are wrong in the two broad claims of the case. There is really only one: The fuel surcharges are not actually tied to the price of fuel and therefore not permissible under the CoC nor the T&Cs of BAEC.
And should the claimants win it will be interesting to see how the rules are rewritten to allow for the continued assessment of such fees. It is highly unlikely that BA or others will walk away from them, though it will likely mean a decent comp for people who have been paying them over the past several years. That is certainly something worth looking forward to for all those customers.
If the plaintiffs win, I wonder if the penalty will be a few million dollars cash to the attorneys and some free-drink coupons for all Avios users?
“For paid tickets, fuel surcharges don’t really matter. They’re displayed as part of the ticket price. ”
Actually the problem is that they aren’t. You see an advertisement for $199 flights to wherever but by the time you get to the check-out page, they’ve become $600. it is classic bait-and-switch.
It is easily demonstrated that these supposed fuel costs have absolutely nothing to do with the actual cost of fuel. Flights from A to C via B have significantly lower charges than flights from A to B alone which is mathematically impossible.
@Wandering Aramean – the plaintiffs make both claims separately, and while the judge found the second claim to be more persuasive there was no ruling on the merits of the claims/
And certainly fuel surcharges ‘matter’ in the case that the DOT could intercede regarding the way that pricing of airfares are built, my point was in terms of how they matter for the way customers buy paid tickets.
It is nice to see that BA are having problems due to their lying. The “fuel surcharges” have nothing to do with fuel and calling them such is just plain deceptive. It’s a lie, and they should be ashamed of themselves for public, bold faced lying.
Aside from the legalities, on moral grounds BA deserve every ounce of trouble this practice causes them, including defending, and hopefully losing, this lawsuit.
This could lead to some potentially damaging discovery. I can only imagine that there are discoverable records which will confirm that BA has known for some time that the characterization of “fuel surcharges” is deceitful. I am not familiar with the customer protection law being sued under, but if it provides a fixed statutory penalty for each instance of a deceitful practice (e.g., each ticket sold), BA could be in a world of hurt, and the suit could serve notice to others.
@jfhscott such things won’t likely come out publicly, that sort of discovery will increase likelihood of a settlement
I’m more interested in rather if the airlines can consider the award tickets free.
I’ve said this before, it would be the equivalent of a hotel saying the hotel room is $10 a night, but fees such as housekeeping, electricity, soap etc., are fees and, therefore, while the room cost may be $100 in the end, if they give away a free night it is $0 for the free night + $90 in fees which is deceptive.
The truth of the matter is the cost of fuel is part of the cost of doing business. Airlines should be forced to fluctuate the price of miles to account for the cost of fuel, but the tickets should be free.
The problem is they take on the word ‘Fees’ which are meant to be more like airport fees, etc., and add anything they want to it.
Fees and Taxes should only be something that the airline is forced to pay to an outside entity, fuel, pilots, flight attendants, the cost of the plane are not fees which should be passed onto the customer.
Every time I’ve considered using miles on a flight and I see that there is a carrier imposed YQ I file a DOT complaint stating basically the above.
Gary,
Indeed, such bombshells would be more prone to driving settlement. Indeed, given the proprietary nature of such information, it would likely be produced only pursuant to a confidentiality/protective order.
The article mentions that BA produced a study which tended to prove that its YQ and fuel prices were correlated. Now THAT is what I would love to see over a glass of chianti. In any event, at this point in the proceedings, given competing studies, the judge appears to have been correct in favor of the party not moving for summary decision.
I’m too plumb busy, but I would like to know more about the relevant consumer protection statute – does it require that the consumer be actually deceived, or does it suffice to prove that a practice is deceptive, even if any given consumer was not fooled? Also, I would love to know if the statute permits injunctive relief permitting the court to order that the accused cease and desist the allegedly deceptive practice.
But I will not speculate given my lack of knowledge of so specific a statute.
So what to stop BA to raise the avios required if they get rid of YQ? Another law suit? They will collect the money one way or the other….
Credit to you Gary. Your post, over a year ago led me to becoming one of the named plaintiffs. The one plaintiff example high lighted in the article is mine. If you want to know more, get in touch.
@gleff
@seth
I wonder if UA’s MP miles devaluation is any way related to this?
By this I mean, they must have considered two options:
1) Greatly increase MP miles required for *A partner F and C redemptions (F more so than C)
2) Add YQ to *A F and C partner redemptions
They chose option 1.
Is devaluing via MP miles increases potentially safer legal ground than devaluing via adding YQ?
Yes, I know you are both bloggers and not attorneys! 🙂
Plaintiffs rarely wind because Plantiffs’ Attorney rarely lets the case go to trial since it is much better for them to agree to some modest settlement in return for defendant not opposing a large fee for the lawyers.
Win, win not wind. I have no knowledge of BA customers wind or lack thereof.
I do get excited about this just for the sake of sticking it to BA.
Sounds like the only winners here will be the lawyers. Again. And we’ll all end up paying the legal fees in higher fares!
@ben senise – not in the UK (or perhaps all of Europe) they can’t do that. EasyJet and Ryanair used to do that all the time, but now they’re very strict about advertised fares having to include taxes and fees. Not sure about in the US.
Dear Steve,
Amazing how very little folks know about class actions and how quickly they parrot anti-consumer stuff generated in reams by right wing fronts like the Manhattan Institute, Americans for Prosperity or the Cato Institute.
I was involved (as a class member) an age discrimination suit that took over ten years and millions of bucks in out of pocket cash paid by the many law firms in several states involved–with an excellent chance of never being recovered if the case was lost.
Close to a hundred million in cash was paid out to class members with some receiving two hundred thousand or more.
The lawyers did a magnificent job. And, they got a good fee, as approved by the judge and as they should have for the risk, time and expenses put in.
If you think a hundred mil is modest … then I want to be your friend!
Class actions ain’t prefect. But, without them we poor consumers are likely to be even more screwed over.
Please post link to class action lawsuit. I believe I have a right to a claim.
@Caraline there is no settlement to join in at this point