About fuel surcharges and how to avoid them on award tickets

A couple of years back, I wrote about the various fare components on your airline ticket, and what each of them means. And in the middle of 2014, Jet Airways did away with YQ surcharges on award tickets, by increasing the miles required for awards on 9W metal. Yet, questions and comments continue on concepts such as award tickets, airline fees, fare components, etc. Given that these surcharges have a funny way of contributing astronomically to the overall ticket cost, I thought I'd give them a closer look.

What are YQ surcharges?

In simple terms, YQ (sometimes also YR) surcharges are fuel surcharges, which are paid in addition to the base fare (as also other taxes, fees, etc) of an airline ticket. These are/were meant to compensate the airline for the effects of highly temperamental fuel oil prices. Back in the day, fees and surcharges weren't very obvious. However today, things are a bit different. Consumer activism across markets, as also changes to regulation and practice, have resulted in many airlines disclosing various fare components separately. So, some airlines show the base price separate from YQ, whereas others will show combine the base fare with YQ (and possibly some other components). However, all YQ (and YR) surcharges go to the airline. The other components of fare are generally pass-through costs, such as airport usage charges, taxes, fees, etc, charged to the airline by those service providers, which are in turn passed on to the customer.

Fuel surcharges don't always (if ever) move in line with market prices of fuel. Don't ask why...there are many reasons, depending on who you ask! Also, don't assume that countries with an oil-dependent economy (think Middle East) will not charge fuel surcharges. Quite the contrary!

There are also other reasons to include fuel surcharges separately, rather than simply add it to the base price:

• airlines can offer discounts on the base price without diluting their revenue from YQs;
• many jurisdictions offer lower or no tax policies on aviation fuel, but higher taxes on the base fare; so keeping YQ out of the base fare is a tax saving mechanism;
• agency commissions can be lowered by pegging them as a % of base fares; or
• base fares can be advertised, for competitive advantages (though this is no longer relevant in many markets any more).

Spotting YQ surcharges

You can easily spot a YQ surcharge, for the simple reason that it is called exactly that! And it is usually lumped with all the other taxes and fees.

So if you redeemed miles for an award ticket for the above routing, you'd pay taxes and surcharges of nearly Rs 60k, of which a whopping Rs 40k represents YQ and YR fuel surcharges. Just imagine, two thirds of just the fees and surcharges comes just from YQ and YR!!! (In this particular case, most of the other costs such as the UK and India passenger services, fees and charges are unavoidable irrespective of the airline you fly, so you've got to be agnostic to those.)

Not exactly optimal.

But what if I can't see a YQ surcharge

Some airlines may include YQ as part of the base fare, you may not know how much the YQ surcharge is. But if that's the case, it is the best ever news you can get!

There's a reason your stash of airline miles is worth anything at all, which is that you don't need to pay the base fare for the travel, if you're redeeming air miles. However, you will have to pay the other charges, taxes, etc, and that can often come to a substantial amount, especially if YQ or YR fuel surcharges are to be paid separately. So if the base fare includes YQ, you're in luck! Let me explain with an example.

Jet Airways includes YQ along with the base fare 

The above is an example of the same itinerary, priced as both a revenue ticket and an award ticket. As you can see, the fees and other charges add up to about Rs 1,780 in each case (the Rs 13 difference being on account of cess, which is a derivative of the amount of service tax, called JN). The entire YQ surcharge is added to the base fare in the revenue ticket, and therefore your miles are used against this total. That results in you having to pay minimal fees and charges on an award ticket.

On the other hand, you have airlines - like Air India in the case below - that charge YQ separately.

Air India charges YQ separate from base fare

In such cases, typically you'll have to pay all taxes and fees, including YQ, unless the airline specifically covers any of those as well for the purpose of award tickets.

Naturally, the objective of every airline will be to minimise their outflow, and increase revenue (yes, they sometimes make money even on award tickets!), and hence there's a tendency to exclude all fees and charges (including YQ surcharge) from an award ticket. Which means you pay those separately, which is poor value for your miles, if you ask me.

Avoiding YQ surcharges on award tickets

Vinay, my co-author on this blog, would say that I've done enough for a Ph.D on exactly this question - how to avoid YQ surcharges on award tickets. While I won't go so far to admit to what he might be claiming, the rule for avoiding YQ is quite simple - book award tickets on airlines and routes that don't have a YQ surcharge.

But that's easier said than done. Different airlines have different rules on fees and surcharges, and you can find all sorts of combinations. These can only get more complicated if you're using miles from one airline's frequent flyer program, for award tickets on a partner airline. The complexity arises because there are airlines that:

• don't levy any fuel surcharges at all
• levy a fuel surcharge all the time
• levy a fuel surcharge only in respect of some of their partner airlines
• levy a fuel surcharge only on some routes
• levy a fuel surcharge only on partner award tickets
• levy a fuel surcharge only on specific classes of travel such as business or first (however, this can be quite rare).

Therefore, it is important to pick an airline that minimizes (or doesn't charge any) fuel surcharge, when redeeming your miles. And the easiest way to do this is using Matrix ITA, which you can use to figure out if a particular airline levies fuel surcharges separately.

While you cannot book tickets directly on Matrix ITA, you can use it to figure out the associated costs of an award ticket, and try and minimise those.

Conclusion

One of the reasons I love the Jet Airways Jet Privilege program is the ability to redeem miles for award tickets, without a fuel surcharge. However, the same cannot be said of some of its partner airlines. Nonetheless, Jet Airways allows me the flexibility to choose the partner airline in most situations. I would even go to the extent of suggesting that one of the principal factors in choosing a frequent flyer program to credit your miles to, would be whether that airline and many of its partners levy fuel surcharges or not.

Readers: What strategy do you apply to minimise fuel surcharges? Or are you indifferent to it?