04 July 2008

R-r-r-regulation? A Solution perhaps?

The antidote to civilization is back....

The airlines want us to accept that the solution to their problems is regulation. The calls for this come from as different a quarter as the former acerbic CEO of AMR - Robert Crandall (he must have given up smoking because he has been pretty cranky of late), and the US airlines.

Well just like drugs... JUST SAY NO.

However, I have a proposal which just about everyone might buy into.

The airlines all say their woes are caused by high fuel prices. So lets seperate this out and then have a fee that shows the fuel surcharge. This has been successfully implemented in International airfares across the board. So for the sake of transparency lets impose a requirement for the airlines to use the SAME NUMBER for fuel. We could use a formula which in total approximates the real fuel costs. This would be driven by the following factors:

1. Class of service offered F/C/Y
2. Flight time - based on mileage, zones or actual flight time
3. Number of stops made - connections are more fuel inefficient
4. Airport - some airports are more efficient than others
5. Type of aircraft - probably impractical but simply give each airline a factor based on their fuel efficiency of their fleet.
6. Fuel incrementer - as the price of fuel rises or falls the incrementer is reset every month or every quarter as necessary. Peg the number at the price per barrel of $2.00 per avgas and then raise of lower the index.
7. Green effect - this would be a percentage based on certain green effects (eg use of bio fuel).

The Fuel surcharge would then be levied onto each ticket and clearly showed so the airlines can have the charge universally implemented. So it doesn't matter WHO charges the fee - it will be broken out. More efficient airlines would be able to lower their regular airline prices if they are better at handling say Fuel Hedging.

The benefits are self evident. No more will the airlines have to impose silly fees (unless they want to). All airlines will be treated equally on a point to point basis. Consumers would see which flights are more fuel efficient so their choices will be better and thus the airlines will be financially encouraged to operate more efficiently. Each airline can go back to competing on a common basis. The airlines will go back to raising or lowering their prices without the cost of fuel being an opaque item.

Rick Seaney and his crew at Farecompare have created a table of Fuel surcharges from the USA Transatlantic. This is interesting as it shows that certain airlines are charging more for fuel surcharges than others. This makes my case stronger because the airlines may or may not be more efficient. We need to know which airlines are fuel efficient.

Have a look and see if you can tell which airlines are better at this.


Clearly this would be a masterful approach to stop the whining by the airlines and the consumer can be better informed to make his decisions.

Of course the chances of this happening are zero because the GDSs wont like the coding they would have to do and the airlines wont like the transparency. They would be much happier to gripe about it than actually DO SOMETHING.

Oh yes and if you think this is bad - look at the taxes which are not being universally charged either!



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