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.