Sunseekers get burnt: Holiday price hikes

The price of oil will be a major factor in the cost of a foreign holiday this year. Yet there is little consistency in how airlines and tour operators include the price of fuel in their charges.

British Airways led the way in introducing a fuel surcharge in May 2004. It began with a £2.50 charge per flight. Most airlines followed and tour operators fell in line by adding supplements to holiday prices.

A year ago, the consumer magazine Holiday Which? reported that airlines were "plucking figures out of the air when it comes to fuel supplements". Oil prices continued to soar, rising above $60 (£34) a barrel in late summer last year before finally settling at around $50.

By then, BA was imposing a £30 surcharge each way on long-haul fares, adding £60 to the cost of a direct flight to New York or Orlando. In October, it switched to including the surcharges in all-inclusive prices, showing a breakdown of the additions when customers book.

Other airlines have yet to follow suit, although easyJet and Ryanair have refrained from adding fuel surcharges up to now. But their passengers are still paying for the increased cost of fuel; otherwise the airlines would be out of business.

According to Simon Evans of the Air Transport Users' Council: "Businesses have to get back an increase in costs from customers. Fares are not regulated, so airlines are not doing anything wrong. But what happens when the price of oil drops?"

Don't expect the extra charges to disappear unless there is a dramatic fall in oil prices, because none of the additions cover the full cost of fuel. The International Air Transport Association, which represents the airlines, says surcharges cover just 20 to 30 per cent of the increase in fuel prices.

BA estimates filling its aircrafts' tanks costs 400 per cent more today than it did in December 2001. Fuel hedging, which sees airlines buy supplies at a price fixed well ahead of delivery, brings a degree of stability. But it merely "levels out the pain", according to a BA spokeswoman. She said: "We put on a surcharge to show this is an additional charge that we can't bear on our own."

Most tour operators continue to add fuel supplements at the point of booking - typically £20-£25 per person on a short-haul holiday to Spain, £35 on a medium-haul break to Greece or Turkey, and £45-£55 on a long-haul holiday.

Tour operators differentiate between "supplements" and "surcharges" for legal reasons - their ability to levy a surcharge is restricted. They argue the charges are justified when the price of fuel is higher than expected at the time they calculated the prices and printed their brochures. Yet many of the brochures now available were published not long before Christmas, after the oil price had fallen from its high point.

Andy Cooper, director general of the Federation of Tour Operators, blames the failure to give an inclusive price on the volatility of fuel costs. He said: "The downside with brochures is that you can't change a price once it's printed. Tour operators make a guess about the likely cost of fuel. It has to be an estimate, so they say the core price of the product is X and then add a supplement. It is shown separately to show the difference is the fuel cost."

A spokeswoman for Thomas Cook said: "It's not possible to include a fixed amount for fuel in the price." But companies also fear appearing more expensive than a rival if they add the full cost of fuel to their advertised prices. A Thomson spokes-woman admitted: "We don't want to be seen as uncompetitive."

So, as long as the price of oil stays high - never mind that it may have stabilised - you should expect to pay a fuel supplement on your holiday.