Korean Air Short-Haul Fuel Surcharges Outpace Costs

Korean Air passenger aircraft (provided by Korean Air) An analysis has found that consumers traveling on short-haul Korean Air routes to Japan and China are paying fuel surcharges that are more than 30% higher than actual fuel consumption would warrant. The gap stems from changed operating conditions, including improved fuel efficiency and higher load factors, not being reflected in the carrier’s surcharge standards for nearly a decade. The Price Watch Center of the Korea National Council of Consumer Organizations announced the results of its analysis of the actual fuel surcharge charged per passenger on Korean Air international routes on Oct. 21. The study was based on operating performance and fuel consumption data for a total of 426 flights on four routes — Fukuoka, Qingdao, Shanghai, and Tokyo — operated from July 16 to Aug. 15 this year. Fuel surcharges are calculated by multiplying fuel consumption per passenger by the portion of fuel prices exceeding the benchmark oil price. While improved fuel efficiency through aircraft introduction and rising load factors lower per-passenger fuel consumption, Korean Air’s surcharge standard table has not been updated even once since 2016. When the council recalculated the charges using current operating data, it found that the appropriate fuel surcharge imposed on consumers amounted to only 57.5% to 87% of the actual amount charged. Based on the simple average across the four routes, the recalculated amount was about 30.1% lower than the actual surcharge. By route, the disparity was even clearer. On the Incheon-Fukuoka route, the actual surcharge was $32, but the recalculated estimated amount came to only $18.41. On the Incheon-Qingdao route, Korean Air also charges $32, but the estimated amount was $22.05. The Shanghai and Tokyo routes were also found to be lower than the actual surcharge by $14.8 and $5.74, respectively. The council also pointed to an added burden on consumers in the process of converting fuel surcharges set in U.S. dollars into Korean won. According to its analysis of won-denominated surcharge amounts announced from April to September this year, the exchange rate applied by the airline was set higher than the average exchange rate for the same period, creating a structure in which consumers pay more than the actual value. The Korea National Council of Consumer Organizations stressed that Korean Air should immediately improve its fuel surcharge calculation system to reflect actual fuel consumption and a reasonable allocation of costs between passenger and cargo transport.