Airlines began slapping surcharges on tickets last summer for fuel – and everything from pillows to checked bags – as the price of oil danced near $150 a barrel.

Now, crude is running half that amount and jet fuel prices are down about $2 a gallon. So, are the fees coming down? Don’t bet on it.

The airline industry continues to bleed red ink, and that makes any reductions unlikely, experts said.

“They’ve been losing a ton of money,” said Ilker Baybars, professor of operations management at the Tepper School of Business at Carnegie Mellon University.

Critics of the industry say it doesn’t add up. One of them, Sen. Bob Menendez, D-N.J., is demanding airlines roll back the surcharge for the holidays this year.

“You can’t continue to have high prices when fuel is half of what it was before,” Menendez said during a news conference this week at Newark Liberty International Airport. “The families who came here today are paying more than ever to fly.”

Airlines said they can’t comment on future pricing actions because fuel is a component of the fares they charge.

Continental Airlines last week reported a $236 million loss in the third quarter because of high fuel costs, a weak economy and weather disruptions at its Houston hub.

The Houston-based carrier spent $1.5 billion more for fuel this year, compared with the same period last year, according to company spokesman Dave Messing.

“Airlines are also experiencing a reduction in demand due to upheaval in the financial markets,” Messing said. “Heavy competition in the airline industry assures travelers of getting maximum value for their air travel dollar, regardless of fuel price fluctuations.”

The U.S. aviation industry most likely will lose billions of dollars this year, said David Castelveter, vice president of communications for the Air Transport Association of America, a trade group.

That’s due, in part, to the fact airlines will spend about $50 billion on fuel this year, 20 percent more than last year, he said.

“The price of fuel was significantly high for many months in 2008, and only now has begun to retreat,” Castelveter said. “The industry still faces great price volatility and is far from being out of the woods.”

Jet fuel hit a peak of $4.27 a gallon last July 11, before retreating to less than $2.36 a gallon this week, according to Brian Milne, editor of DTN Refined Fuels, a trade publication. He said it has followed the price of crude oil, which reached a peak of $145.08 a barrel last July 11, before dropping less than $75 this week.

Airlines have lowered the fuel surcharge on some international routes, notably to London where the surcharge dropped to an average of $340 round-trip, down from $426 round-trip, according to Rick Seaney, chief executive of

But domestic surcharges haven’t budged.

“Business travelers pay the most, as high as $170 round-trip,” Seaney said. “Leisure travelers pay from zero to between $20 and $40 round-trip.”

Fuel surcharges on a flight from Newark, N.J., to Houston, for example, range from $28 to as much as $186, according to

Domestic carriers have taken other steps to increase the flow of money coming into the cabin. They have cut their fleet capacity 7 percent to 10 percent to reduce the number of available seats as a way to hold up ticket prices, according to Baybars, the Carnegie Mellon professor.

Airlines also have added fees for everything from checked bags to food, beverages, pets and changing travel plans.

“They are determined to get prices up to levels that will make them sufficiently profitable,” said Michael Roach, a principal in aviation consulting firm Roach & Sbarra of San Francisco. “The fuel surcharge is a way of sneaking in a price increase just as charging for baggage and food is.”

A United Airlines spokeswoman said the carrier is “studying” whether to reduce the fuel surcharge on domestic flights. United already has cut the fee for some international routes.

“Our fuel surcharges are in line with what other airlines are charging,” said spokeswoman Robin Urbanski.

Northwest Airlines said it has no plans to cut the surcharge, according to spokeswoman Michelle Aguayo-Shannon.

“We still haven’t covered all of the lost ground,” on fuel, she said, adding that the surcharge can be up to $80 on some flights.

Southwest Airlines does not levy a fuel surcharge, according to spokeswoman Brandy King. “We have not added any extra fees,” she said.

American Airlines spokesman Ned Raynolds said the carrier’s fees and surcharges must exceed its cost of doing business to allow it to survive.

“We’re actually in much the same position as the families for whom Sen. Menendez is showing compassion for due to job losses, falling home values, and a financial market that is erasing their retirement savings,” he said. “At American Airlines, too, our financial problems continue.

During the third quarter, American earned a small profit only because it sold an asset, otherwise it would have had a $360 million loss, he said.

“So, on an operations basis, we’re still losing money,” he said. “We, therefore, don’t have any recent largess due to lower fuel prices to share with customers in the form of lower fares.”

Raynolds said jet fuel prices are more volatile than crude oil prices, with the spread between crude and jet fuel at historic highs.

“Even with decreases, jet fuel prices are just now about the same as a year ago and they are still 30 percent higher than this month in 2006, the last full year in which we were profitable,” he said.


(Joseph R. Perone is a staff writer for The Star-Ledger of Newark, N.J. He can be contacted at jperone(at)

AP-NY-10-21-08 1842EDT

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