A year ago four members of the British Airways Executive Club program filed a lawsuit against the carrier, claiming that the fuel surcharges charged for award travel are not, in fact, tied to the cost of fuel and therefore should not be permissible. The case has been working its way through the process which is the Eastern District of New York’s Federal District Court and late last week the judge issued a ruling denying BA’s motion to dismiss. The case will continue to move forward.
At the crux of the case is the claim that the fuel surcharges are not permissible by the T&Cs of either the Executive Club program or the Contract of Carriage. From the original case filing:
5. On information and belief, with one exception, all of the taxes, charges, and fees assessed by BA comply with the terms of the Contract: they are levied on British Airways by a “person or relevant authority or body,” and BA then passes those on to its Members traveling on Reward Tickets.
6. The exception, however, is a very large one: British Airway’s purported “fuel surcharges.” These “fuel surcharges” sometimes exceed $500 per Reward Ticket. This is in stark contrast to the nominal amount of the charges allowed by the contract; as explained above, for example, the September 11 Security Fee is only $2.50 per departure.
7. There are at least two significant problems with the “fuel surcharges” that BA adds to all Reward Tickets. First, such charges are not levied on BA by any “person or relevant authority or body,” but rather are charges that BA itself creates and imposes on its Members. In other words, they are not authorized by the Contract. Second, the “fuel surcharge” is not a charge based on the cost of fuel. While BA asserts on its website that this charge “reflect[s] the fluctuating price of worldwide oil,” that assertion is false.
Although the claimants do not specifically call out the DoT protections against unfair business practices the Court uses that as part of its analysis of what is or is not appropriate for a fuel surcharge:
According to recent DOT guidance, “[w]hen a cost component is described as a fuel surcharge … that amount must actually reflect a reasonable estimate of the per-passenger fuel costs incurred by the carrier above some baseline calculated based on such factors as the length of the trip, varying costs of fuel, and number of flight segments involved.” DOT, Additional Guidance on Airfare/Air Tour Price Advertisements 2 (Feb. 21, 2012). In the context of the redemption of frequent flyer points, fuel surcharges “must be fairly disclosed and an accurate reflection of actual costs.” Id. at 3.
Some airlines have sidestepped this issue by simply renaming the fee to something else and continuing to charge it anyways. British Airways has not done that and so the Court suggests that this method for determining whether the surcharge is reasonable or not can be used. And that brings us to the end of the ruling:
The plain meaning of the term “fuel surcharge” is a supplemental charge that is reasonably related to or based upon the cost or price of fuel. This understanding comports with conventional usage. Most-if not all–commercial airplane passengers are aware that the price of jet fuel rises and falls. Against this backdrop, the typical consumer would consider a fuel surcharge to be an added charge imposed by an airline in order to defray rising fuel costs. British Airway appears to concede this point: it devotes significant briefing to demonstrating that “the relationship between the fuel surcharge and the fluctuating price of refined jet fuel is real,” Def. Mem. at 20; see also id. at 3-7, and its English law expert describes the fuel surcharge as “a discrete charge linked to the price of fuel.” Def. English Law ｏｰｩｮｩｯｮｾ＠ 5.10.1.
The question then becomes whether the plaintiffs have pled factual content that allows the Court to draw the plausible inference that the fuel surcharges imposed by British Airways were not, in fact, reasonably related to or based upon the price or cost of fuel. The plaintiffs support their claim with descriptions of the sizeable fuel surcharges that they paid when redeeming Avios for flights on British Airways. Compl. ifil 13-30. They allege that the fuel surcharge that Dover paid for a first-class ticket to Heathrow exceeded the cost of an economy-class ticket on the same flight. Id. if 19. They also point to an omission in the annual report published by British Airways that suggests that the airline does not view the fuel surcharges as a hedging strategy against fluctuating fuel costs, and hence that the fuel surcharges do not actually reflect the cost of fuel. Id. ifil 46-49. And perhaps most importantly, the plaintiffs describe a statistical analysis that indicates that the fuel surcharges imposed by British Airways from 2007 to 2012 “bore little relationship to-and were not based upon-changes in the price of fuel.” Id. if 55. British Airways attacks the assumptions that undergird plaintiffs’ analysis. It also proffers its own analysis showing that the fuel surcharge is correlated with the price of oil. At this stage, however, this Court is not called upon to judge the merits of the competing analyses. Assuming that plaintiffs’ factual allegations are true and drawing reasonable inferences in their favor, as the Court must, they have stated a plausible claim for breach of the Terms and Conditions.
In other words, there is enough reason to believe that if the claimants are correct about the fuel surcharge rates not being tied to the actual cost of fuel – something which BA disputes and which the court has not yet ruled on – then there is a reasonable claim that the imposition of those surcharges is a violation of the law which requires such fees to be tied to the cost of fuel. Ultimately the case seems to be one where BA could avoid much of the trouble by calling the surcharge something else. Delta calls their version of the charge a Foreign Origination Surcharge for travel which commences outside the USA, for example. Even that might not be sufficient, however.
It is unlikely that we’ll see a resolution to the case anytime soon, but it is one worth paying a bit of attention to. The impact of fuel surcharges on award travel is hard to understate and a ruling against BA in this case would have significant repercussions throughout the industry.
The case is Dover et al v. British Airways Plc (UK), U.S. District Court, Eastern District of New York, No. 12-05567. The original claim can be seen here. The most recent denial filing can be seen here.
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