Fuel Surcharges Irrational

Fuel surcharges have become so irrational they are sapping the strength and vitality of air freight, says Julian Keeling, president and CEO of Consolidators International.

The airlines' fuel surcharges are not applied on either a rational or fair basis, says the air cargo executive. They do not reflect the true costs of jet fuel. The irrationality in pricing is causing many air customers to consider switching their business to trucks domestically and to container ship for their overseas shipments, he continues.

The core of the problem is the airlines' insistence on pricing their fuel surcharges in a one-size-fits-all-categories. This is manifestly unfair, he says.

Why should a shipper and its agent, the forwarder, pay the same rate for a flight from Los Angeles to Honolulu as a trip from Los Angeles to Sydney, Australia, which is double the distance? Fuel charges should reflect the length of the trip, and not be applied on a blanket basis, adds Keeling.

Keeling urged including the fuel surcharge in the actual rating structure vs. listing it as a separate item on the airway bill. He pointed to KLM-Air France's recent decision to incorporate at least part of the fuel surcharge into the carrier's rate structure as a positive development. But, he noted, the amount of the surcharge incorporated in the rating structure should be higher--at least 50%.

Ocean carriers apply a percentage of the fuel surchage to their rates, adjusting their rates on a bi-monthly basis as bunker fuel either rises or falls in price, says Keeling. He feels shippers and forwarders would welcome such a change by the airlines.

View more air cargo news from Outsourced Logistics.

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