Speaking on TTG’s Unpacked podcast this week, Blue Bay Travel Group Chief Executive Alistair Rowland highlighted how the fuel surcharging conundrum for suppliers occurs “where consumer rights and the Package Travel Regulations don't really meet up”.

The podcast participants, which also featured Jennifer Lynch, general manager of Worcestershire agency ArrangeMy Escape, were discussing what might happen as airlines and operators face increasing fuel costs, despite the likes of Jet2, Tui and easyJet all ruling out surcharges this summer.

While airlines generally cannot add fuel surcharges after a flight-only booking, under UK regulations, package holiday firms can legally add surcharges of up to 8% of the total price after booking due to rising fuel costs, provided this is in the contract and not within 20 days of departure.

Rowland said he thought long-haul carriers might start implementing surcharges for winter departures in the next four to eight weeks.

He detailed a “new issue” in that if a fuel “supplement”, or surcharge, is added and the client isn’t prepared to pay it, but the travel organiser isn’t willing to cancel the booking (they are not obliged to under the Package Travel Regulations), there may be a “stand-off”.

It likely wouldn't be worthwhile for the organiser to pursue litigation with the client, so Atol holders may incur losses, particularly those who put together flights and accommodation but are committed to the costs of them.

“There’s no better survivor in the industry than [Jet2 chief executive] Steve Heapy," said Rowland. "So for him to go first and say, ‘no fuel supplements this summer’, forcing EasyJet and Tui to follow, everybody should use that in their marketing. He wouldn't do that if he thought he was going to cancel half his flight programme.

“But I think the bigger problem we will face – it's a bit technical – is that the long-haul airline suppliers are not saying it [making that pledge], and they're not saying it because the airlines are likely to add fuel supplements.

“And for the first time we're going to face the new Package Travel Regulations situation where you can charge a consumer up to 8% of the package price as a fuel supplement without offering the consumer a cancellation option. So this is where consumer rights and the package travel regulations don't really meet up. And this is an unknown scenario.

“We have a number of airlines who are doing it, threatening it, looking at it, but it's likely that there's going to be fuel supplements and it's likely that we are going to come up against a situation where we, as the organiser, are on the hook either for the accommodation or the flight, and the consumer doesn't pay the balance – and that's going to be really difficult, because the fuel supplement might not have been established at the point of the balance payment, and so that's going to be a really fascinating scenario which the industry hasn't had before.

“It's always been the case that the Package Travel Regulations, as complicated as they are, have always been kind of fair to the consumer and the organiser. But this is a whole new situation where you're saying, ‘okay, £60 per person each way and we're forcing it on you because we can, but mainly because we can't get a cancellation position from our supply chain where a consumer isn't prepared to do it’. That's going to create a whole new league.”

Adding a note of optimism, Rowland said that in the main he believes there is “enough fuel”. “I suspect the short-haul airlines know that, which is why they have underwritten the consumer messaging for the current summer,” he added.

Flight consolidation 

The podcast guests also discussed the government's latest package of measures for travel, announced at the weekend, which is under consultation. 

The government will allow airlines to pre-emptively consolidate flights this summer to ease pressure on jet fuel supplies and avoid last-minute cancellations.

“We do see this happen already,” said Lynch. “It happens every year… just maybe not the capacity that we're going to see this summer potentially. So we're used to dealing with it. 

“And actually, it's not a bad thing from a sustainability point of view, is it either? If you're sending out three aircraft and three aircraft are not full, why are we not saving that fuel anyway?

“The summer season is generally Med for us anyway, so I'm hoping that the big three won't do this. Hopefully there'll be enough passengers that they can sufficiently run their routes. 

“But if not, we'll deal with it as it comes and just hopefully we don't lose the booking, because what you don't want is the knock on effect of this happening and then the client saying, ‘well, I'm not going to book with them again because our flights got cancelled’, so I'm hoping it's not going to disrupt us too much.”

She added: “It has already actually – we've had one with Lufthansa where they've condensed flights and the client cancelled.”