3 ways travel companies are responding to fuel prices—and what it means for travellers

For this week’s top story, we’re looking at how the high price of fuel is affecting travel—and the cost of your ticket.

With fuel prices climbing, your next vacation is likely to get more expensive, too. Sadly, we can’t do much about that, but we can make sure you’re not caught off guard. 

Travel companies aren’t sucking up the costs. They’ve created surcharges, hedged fuel and reduced flights. Find out what it means for your wallet the next time you book a trip.

1. A new fee: fuel surcharges

Several airlines are adding fuel surcharges. These are rolled into the taxes/fees you see on top of the base fare and are intended to be temporary adjustments. If you already paid for your ticket, good for you. You shouldn’t see a fuel fee. (More on that below.) 

For some airlines, surcharges only apply to special bookings or specific destinations. For example, Porter is tacking on $40 each way to VIPorter flight redemptions. WestJet is adding a $60 surcharge on bookings made with a companion voucher. Air Canada Vacations is charging $50 on sun destinations. Air Transat has a $50 surcharge for international flights. And Flair has added $40 for domestic flights and $60 for select international routes. (Which ones? Great question. The airline says it varies from market to market and can depend on other factors.)

Check all your tickets, though. Cruise lines, bus tours and experience packages are also starting to add surcharges, especially in Asia where fuel shortages have already hit. 

StarDream Cruises out of Malaysia has added a daily surcharge of $16 to $35 per person on select routes, to be collected on board. DAZ Travel & Tours, a travel agency in the Philippines, announced they’d be rebilling booked customers for surcharges passed down from carriers and tour operators. And Pakistan-based Tours Avenue posted that they’d be adjusting package prices to cover rising transportation costs.

Wait, what if I already paid for my trip?

Unlike airfare, surcharges on tours and cruises can be added after you’ve booked and paid in full, as long as it’s disclosed in the terms and conditions. These surcharges can be applied to offset things like fuel costs and currency valuation.

For example, Royal Caribbean says in its T and Cs that it can add a fuel supplement of up to USD$12 per guest, per day, “at any time prior to sailing.” Group tour operators such as Intrepid Travel and G Adventures say they can impose surcharges when the cost increase is greater than 2%.

Shari Tucker, a Halifax-based travel agent who runs Love the Way You Travel, says she’s recently seen some international suppliers adding fuel surcharge disclaimers. 

“If fuel prices go up, your price will go up and unfortunately there’s nothing travellers can do about it,” she says. “I don’t think the fuel surcharges are going to double the cost of anybody’s tour, but suppliers can’t eat all that cost. Operating costs for everything—boats, cars—that uses oil and fuel has got to go up if the situation continues the way it is.”

2. Airlines are fuel hedging

Because fuel accounts for so much of airlines’ operating costs and its price fluctuates, some carriers hedge fuel. Essentially that means buying a set amount at a set price, to protect themselves from later increases.

Air Canada has hedged a small portion. Air Transat also has a short-term fuel hedging strategy. And many European and Asian carriers hedge fuel—some with time horizons of several months or even a couple of years.

However, not all airlines hedge fuel. Porter doesn’t. U.S.-based airlines don’t. And even for those that do, it’s still a limited quantity for a limited time. Hedging is meant to minimize volatility, but it can’t avoid price hikes entirely.

3. Airlines are limiting routes

High fuel costs, looming fuel shortages and war-disrupted routes are all making it difficult for airlines to maintain their regular schedules.

WestJet says it’s consolidating flights on low-demand routes. In the U.S., United is cutting about 5% of its flights over the next few months. Overseas, Air New Zealand is cutting 5% starting in May, and Scandinavia’s SAS has already started cancelling hundreds of flights.

And if people can’t fly or don’t want to, the travel agents, tour operators and local businesses that serve them will take a hit. 

Mariellen Ward, a Canadian journalist and tour operator of Breathedreamgo Bespoke and India for Beginners, says India’s tourism season was winding down when the war in Iran started. But she’s seen a reduction in summer and fall bookings. “That’s unusual,” she says. “For the fall, we have some tours underway and have had to reassure a few people that the war is not directly affecting this region.”

Fewer flights could mean higher prices in-destination

Hotel rates and other costs might increase, too, thanks to the squeeze in demand, says Richard Campbell, founder of Calgary-based global tour operator 10Adventures.

“When the war ends and airline prices come back to normal, we will see… additional tourism demand, but the travel season will have been compressed in many destinations,” he says. “This additional demand will be spread across a shorter season, which will in some cases lead to increased prices.”

So, what should travellers do?

Book soon

“The days of spending a week or two deciding to do a trip are not prudent now,” says Campbell. “If the prices work, book it.”

Watch for sales

Air Canada and Air Transat have both recently promoted sales. If you’re flexible on destinations or dates, you may still score a discounted flight.

Consider a refundable ticket

“One of the biggest things that I’m recommending for people right now is to make sure that they buy flexible or partially refundable flight,” says Tucker. If fuel shortages hit your destination, it can be good to know you can back out. Especially since most travel insurance excludes acts of war. “It’s worth paying an extra couple hundred bucks upfront,” adds Tucker.

Travel closer to home

Short flights are cheaper than long-haul ones, and faraway destinations like Asia and Australia are already facing fuel shortages. And any routes that typically fly via the Middle East are currently detouring, which could mean pricier fares.

Use points if you’ve got ’em

If you earn rewards through your credit card, now may be a good time to cash in, especially for a pricier refundable ticket. 

Yes, travel costs more—for now

It’s early days for feeling the effects of fuel price increases. Flight surcharges are only around $50 for Canadian airlines and aren’t yet being applied on all flights. Most tour operators and cruise lines in the west haven’t activated surcharges, even if they are legally allowed to. That said, it’s still a good idea to add a bit of a buffer to this year’s travel budget.