The roll back of fuel surcharges on airfares continues apace as oil drops even faster and further than the Australian dollar.

Virgin Blue is the latest example. It has cut its surcharges by 20%, to $19 per domestic sector and $35 per international flight across the Tasman or within the nearer South Pacific and PNG.

But there is a discussion going on within the retail side of travel about whether, or even which airline will be first to drop variable surcharges altogether. This has nothing to do with altruism either. If they could any airline would keep charging as much as it can get away with for a flight. The speculation is that it is becoming administratively simpler for carriers to routinely adjust fares upwards when fuel goes higher rather than hang onto levies that annoy smart travellers when they know that fuel is tracking downwards and that the airlines are just as slow to respond as service stations.

The view I’ve heard is that the use of on-line price quotes either to research a deal or make a purchase has become such an established habit of consumers that they have become accustomed to seeing fares change literally before their eyes as the ‘yield managers’ in the airlines pull out the cheapies or put more of them on according to which mix of fares is going to get a particular flight away with the most total revenue for the airline.

The yield management games is all about average fares. An empty seat really ruins the calculation, so the trick is to keep an eye on what other airlines are doing on their sites, and try to ruin their day rather than yours.

By going for kudos in the headlines by dropping surcharges the airlines will no longer have to do anything if fuel falls even further. After all, there is no surcharge, so they keep the benefits as just another cost saving.

It is called ‘looking good and keeping more of your money.’

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