Airline pricing can put our heads in a spin at the best of times. We’re not talking about ancillary fees, either: those add-on charges such as pillows or blankets that don’t make up the ticket cost.
We’re referring to the frustrating feeling when we see a great headline airfare and rush off to book up tickets, only to be stung with a rack of compulsory taxes, fees and surcharges as we’re handing over a credit card.
While EU regulations require European carriers to show a breakdown of the airfare for customers, not many of us understand all the components that make up an airfare.
Even in the US, where regulations require airlines to include surcharges in the advertised fare, it means nothing if you don’t understand the basic fare structure.
But if you can think like an airline executive and understand how airlines are tailoring their fares, you can compare prices between airlines more easily and make more informed decisions.
Understanding the basic fare structure
No matter which airline you choose to fly with, the fare breakdown will have a similar structure, but the fees will always vary.
We take a look at a random fare on British Airways from London to Los Angeles in March, travelling in economy class.
On ba.com, for travel dates from March 24-31, the headline or base fare is advertised as £147.00 on a round-trip basis. Deceptively cheap!
If you can think like an airline executive and understand how airlines are tailoring their fares, you can compare prices between airlines more easily and make more informed decisions.
The cost of this base fare goes straight to the airline. When the taxes, fees and surcharges are added on separately, the final return ticket cost leaps to £446.70.
So what has happened to make the fare jump by almost £300?
Take a closer look at BA’s published breakdown of the taxes, fees and surcharges for the route, below:
|Government, authority and airport charges||Per adult|
|Air Passenger Duty – United Kingdom||GBP 60.00|
|Passenger Service Charge – United Kingdom||GBP 23.00|
|Customs User Fee – USA||GBP 3.40|
|Transportation Tax(Departure) – USA||GBP 10.20|
|Transportation Tax(Arrival) – USA||GBP 10.20|
|Animal & Plant Health User Fee (Aphis) – USA||GBP 3.10|
|Immigration User Fee – USA||GBP 4.40|
|Passenger Civil Aviation Security Service Fee – USA||GBP 1.60|
|Passenger Facility Charge||GBP 2.80|
|Total government, authority and airport charges*||GBP 118.70|
|British Airways fees and surcharges||Per adult|
|Fuel Surcharge**||GBP 171.00|
|Insurance and Security Surcharge**||GBP 10.00|
|Total British Airways fees and surcharges||GBP 181.00|
|Total taxes, fees and surcharges per person||GBP 299.70|
Are you still feeling confused?
We thought so.
The biggest single fees to look out for are the “fuel surcharge” and the Air Passenger Duty (APD), as we explain below:
The fuel surcharge
Airlines say the “fuel surcharge” is an attempt to make their fees and charges clearer to customers, as we can see how much the carrier is allocating for fuel. However, the fuel surcharge is also a clever tactic to give us the impression that this tax is unavoidable.
An airline’s fuel surcharge is not a government-imposed tax, but has always been an optional fee – imposed and collected by airlines to help recover fuel costs and stem losses.
While we know airlines have been forced to hike fares in response to the jump in oil prices, you may be surprised to learn that BA has added a £171 “fuel surcharge” to this ticket.
This high surcharge is not uncommon among airlines and is always in a state of flux, reflecting the shift in oil prices.
If you’re travelling in business or first class on this route, the airline ups the fuel surcharge to £245 (return) on this route.
If you’re doing the maths, the airline’s £147 base fare and £181 fuel surcharge combined brings the true cost of the economy airfare to £328, which goes directly to the airline.
In an ideal world, we would know what portion of the surcharge is being guzzled up in fuel costs. In theory, if oil prices are dipping, the fuel surcharge should fall to reflect the lower price. But this hasn’t always happened, as we have seen when 21 major airlines – including British Airways, Virgin Atlantic, Lufthansa and Air France-KLM – were fined after a massive price-fixing scheme to inflate passenger [and cargo] fuel surcharges between 2000 and 2006. We hope the airlines concerned have learnt their lesson.
Air Passenger Duty (APD)
You may also be surprised to learn that because this flight originates from the UK, a £60 Air Passenger Duty (APD) tax has been added to the economy fare, which is then passed onto HM Revenue and Customs. If you’re sitting in premium economy, business or first class, the tax doubles to £120 on this particular route.
This controversial UK aviation tax- which has been consistently hiked- only applies to flights originating or arriving at a UK airport.
It is worth noting that if you are flying through Europe and need to make a connection at a UK airport, the APD tax does not apply. However, if you choose to stop over in the UK, the tax kicks in and is bundled into your fare.
It is worth brushing up on some basic APD facts if you often make flights to/through the UK, as this is the highest aviation tax in Europe and can add a substantial amount to an airfare.
At the time of writing, the APD tax – introduced by the UK government as a supposed “green tax” – is split into four price bands, increasing based on the flight distance from London.
It ranges from a £12 levy for flights to Europe, £60 to the US or Hawaii, £75 to the Caribbean and £85 for a return flight to countries including Singapore or Australia.
Don’t forget that governments around the world also impose their own aviation taxes – but they’re not likely to be as high as the UK’s APD tax.
Other taxes, fees and surcharges
BA has allocated the remaining £68.70 of the £446.70 fare to pay off other “little extras” in the way of taxes, fees and surcharges. This includes an insurance and security charge, which many airlines have been levying since 9/11, to cover the increasing insurance costs, as well as customs and immigration fees and a £23 “passenger service charge” for you to use London Heathrow’s facilities. All airports collect such a fee.
If you’re paying this much, isn’t it about time you made the most of your airport experience?