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Should jet fuel surcharges be regulated, and if so, how?

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  • Klophaus, Richard

Abstract

By adding fuel surcharges to base fares, airlines pass on the impact of higher jet fuel prices to consumers. Given the wide range of design options for fuel surcharge schemes, the reduced price transparency and the question of fair cost recovery, fuel surcharges have become a consumer protection issue. The paper reviews the regulatory approach to fuel surcharges in Brazil, the European Union, Japan and the United States. Further, it addresses the complexity of attempts to construct fuel surcharge schemes that rely on estimates of per-passenger fuel costs. The paper concludes that regulatory activities should aim to include fuel surcharges in all initial fare quotes and advertising. Enforcing fuel surcharge schemes that ensure a fair cost recovery would result in high regulatory costs and would also be in conflict with deregulation policies of removing restrictions on airline pricing.

Suggested Citation

  • Klophaus, Richard, 2014. "Should jet fuel surcharges be regulated, and if so, how?," Research in Transportation Economics, Elsevier, vol. 45(C), pages 18-23.
    • Handle: RePEc:eee:retrec:v:45:y:2014:i:c:p:18-23
    DOI: 10.1016/j.retrec.2014.07.003
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    References listed on IDEAS

    as
    1. Michele Piccione & Ran Spiegler, 2012. "Price Competition Under Limited Comparability," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 97-135.
    2. Peter Morrell & William Swan, 2006. "Airline Jet Fuel Hedging: Theory and Practice," Transport Reviews, Taylor & Francis Journals, vol. 26(6), pages 713-730, March.
    3. de Meza, David & Reyniers, Diane, 2012. "Every shroud has a silver lining: The visible benefits of hidden surcharges," Economics Letters, Elsevier, vol. 116(2), pages 151-153.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Airline pricing; Regulation; Fuel costs; Transportation policy;
    All these keywords.

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • M38 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Government Policy and Regulation

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