Airline Fuel Surcharges: Theory and Practice

摘要

Airlines utilize fuel hedging and fuel surcharges to mitigate jet fuel price risk. Hedging reduces exposure to volatile fuel prices. By adding fuel surcharges to basic airfares, airlines try to pass on the impact of higher fuel prices to their customers. There is a wealth of literature on why and how airlines hedge. Jet fuel surcharges have received much less attention in academic research despite their widespread use in the airline industry. This paper provides a closer look at the economic fundamentals of fuel surcharges and describes how airlines implement fuel surcharges with a focus on the practice of the major European network carrier Lufthansa. In this regard our paper complements an often-cited paper by Morrell and Swan (2006) on the theory and practice of fuel hedging in aviation.