Understanding Airline Surcharges and Ticket Pricing
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Have you ever tried to use your American Express Membership Rewards points, RBC Avion points or AIR MILES to book a ticket to Europe, only to discover that you have to pay almost as much in taxes as the price of the ticket?
Let’s use the example of a flight between Montreal and Paris sold for around $725 in cash. With American Express’s fixed fare structure, a flight between North America and Europe costs 60,000 points. So why do we have to pay an extra $665 in fees and taxes?
Illogical at first glance, this is explained by the concept of carrier surcharges or fuel surcharges. Let’s take a closer look at what this means and how to avoid them when booking tickets with points.
Airline Surcharges Explained
Several years ago, airlines were faced with soaring fuel costs. Many decided to introduce a fuel surcharge line on their tickets. Since then, despite falling barrel prices, this surcharge has been renamed carrier surcharge. It enables airlines to protect themselves against the volatility of fuel prices and other factors influencing the commercial aviation market.
When you pay for your airfare in cash, this surcharge is somewhat invisible, since it’s included in the final price. However, when you use miles or points, this carrier surcharge is displayed as a surcharge to be paid, just like the various airport taxes.
This practice is under increasing criticism, and some countries, such as Brazil, have even banned surcharges for tickets paid for with miles. Other countries, such as Australia, New Zealand, Mexico and Thailand, also impose restrictions on surcharges.
ITA Matrix: The Software for Dissecting Tariffs
The cost of an airline ticket is made up of several elements added together: the base fare, taxes and fees. To understand this breakdown, the ITA Matrix site is very useful. Let’s take the example of a round-trip flight between Montreal and Paris on Air Transat at $694:
First of all, it’s important to understand that the fixed fare grids for loyalty program flights (such as American Express, RBC Avion, CIBC Aventura or AIR MILES) are set up in such a way that points are only used to cover the base fare. All other fees and taxes must be paid in addition to points.
Back to our $694 ticket to Paris. From the first few lines, we can see that the base fare is a meager 50 cents per segment. This means that your points will only cover that dollar… and the remaining $693 will have to come out of your pocket.
Let’s look at another example, this time for a flight from Montreal to Orlando:
On this $266 ticket, the base fare is a much more reasonable $90, and the rest is made up of various taxes and fees. In this case, there is no carrier surcharge.
To get the most out of your points with a fixed-fare schedule, it’s best to use them for short- or medium-haul flights within North America or to the Caribbean. For Europe, Asia and other destinations, you will very rarely get good value for your points due to high surcharges. So it’s best to turn to other programs that don’t charge these fees.
How to Avoid Carrier Surcharges on Award Tickets
Surcharges and fees for tickets between North America and Europe can reach an exorbitant 90% of the total ticket price, while the basic fare is just a few dollars.
Similarly, for long-haul flights to Asia, the Middle East, Africa and the Pacific, these charges can run into the hundreds of dollars. By contrast, surcharges are generally much lower for medium-haul flights in North America and the Caribbean.
Airlines and Frequent Flyer Programs That Do Not Charge Surcharges
To avoid surcharges, you need to choose the right program for your destination. Airlines that do not charge surcharges on award tickets include:
- Air Canada (Aeroplan)
- Alaska Airlines (Alaska Mileage Plan)
- American Airlines on their own flights (AAdvantage)
- Avianca (LifeMiles)
- British Airways on their own flights (British Airways Executive Club)
- Delta (SkyMiles)
- United Airlines (MileagePlus)
- Qatar Airways on their own flights (Qatar Airways Privilege Club)
- Singapore Airlines on their own flights (KrisFlyer)
For Canadians, the most accessible programs are Aeroplan, AAdvantage, British Airways Executive Club and Qatar Airways Privilege Club. The possibilities for transferring credit card points to these programs are explained in detail in this guide.
Aeroplan is an excellent program for avoiding surcharges. However, please note that a flat fee of $39 is applied to book a flight on a partner (Star Alliance or other).
With the LifeMiles program, there is no way to transfer miles from a credit card. However, LifeMiles often has good offers on the purchase of miles.
Airlines With the Highest Surcharges
Conversely, some airlines charge substantial surcharges on award tickets, including :
- Air France-KLM on partner flights (Flying Blue)
- British Airways on partner flights (British Airways Executive Club)
- Emirates (Skywards)
- Lufthansa (MilesMore)
- WestJet (WestJet Rewards)
To avoid surcharges with British Airways, you can search the websites of other airlines that use Avios as their currency:
- Qatar Airways
- Finnair
- Iberia and Aer Lingus
Availabilities are not the same and tickets can be harder to find, but it’s worth taking a look around before you book.
Airport Taxes Explained
Another aspect to consider when minimizing the cost of an award ticket is the amount of airport taxes charged. These cover security measures, infrastructure maintenance, and services such as passenger and baggage handling. They also cover certain governmental obligations, such as customs and immigration controls.
In general, the highest fees are charged by the departure airport, rather than the transit or arrival airports. On top of that, some countries apply a departure tax, often included in the total cost of the ticket.
Airports With the Highest Taxes
Some airports are notorious for charging higher-than-average taxes. If possible, avoid flying from these airports if you want to save money.
Europe :
- United Kingdom (London-Heathrow being the highest)
- Germany (Frankfurt being the highest)
- France (Paris-Charles de Gaulle being the highest)
- Stockholm (consider other Scandinavian airports, which are among the lowest in the world)
Americas :
- Mexico
- Jamaica
- Dominican Republic
- Bahamas
Asia :
- Delhi
Airports With the Lowest Taxes
Conversely, airport taxes are particularly low for the destinations listed below.
Europe :
- Dublin
- Istanbul
- Oslo, Copenhagen, Helsinki
- Amsterdam
- Spain
- Rome
Americas :
- Canada
- Brazil
Asia-Pacific :
- Philippines
- New Zealand
- Japan (no tax on domestic flights)
- China
How to Get to Europe Without Paying (Too Many) Surcharges
Understanding carrier surcharges is a good start, but ultimately, how do you get to Europe on points without spending a fortune on taxes and fees? Here are some strategies for your next vacation.
The Best Programs for Award Tickets
The best programs for flying to Europe from North America are Air Canada’s Aeroplan and Air France’s Flying Blue. These frequent flyer programs do not charge carrier surcharges on their own flights (or not at all in the case of Aeroplan, but charge a $39 fee to book with a partner).
British Airways Executive Club is also a good option, with non-stop flights to London from Toronto or Montreal for just $100 in taxes in economy class. Fees have been significantly reduced in recent years, since they used to run to over $500. However, taxes are still very high for Economy/Premium or Business Class seats.
Whichever program you use, you’ll save precious dollars by choosing airports with low taxes. In Europe, look to Dublin (DUB), Amsterdam (AMS), Rome (FCO), Barcelona (BCN), Madrid (MAD), Oslo (OSL), Copenhagen (CPH) or Helsinki (HEL). These are the airports with the lowest airport taxes on the continent.
Pay for Your Ticket in Cash and Use Flexible Points
Alternatively, another strategy to consider is to buy a flight at a good cash price, then use flexible points to reimburse the expense. Good programs to use for this strategy include :
Scene+ points can be exchanged for an acount credit at the rate of 100 points per $10 on travel expenses. In the case of a $750 plane ticket, you’ll need 75,000 Scene+ points to cover the full fare.
With CIBC Aventura, a similar exchange can be made, but the points must be used when the transaction is pending on the account and in Canadian dollars. For a $750 ticket, you’ll need 60,000 Aventura Points to redeem in full.
TD Rewards points are just as versatile, but you have to go through the Expedia portal for TD. A $750 flight is free with 150,000 TD Rewards points.
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Bottom Line
Navigating carrier surcharges can be complex. To sum up, it’s best to use the fixed fare grids of frequent flyer programs for flights within North America, Central America and to the Caribbean.
For an affordable points-based flight to Europe, consider Air Canada’s Aeroplan and Air France’s Flying Blue programs. Finally, for other international destinations from Canada, Aeroplan and Qatar Airways Privilege Club are best for their accessibility and for paying as few surcharges as possible.
Finally, choose airports such as Amsterdam, Rome or Barcelona rather than London, Paris or Frankfurt.
Still have questions? Feel free to ask them in our Facebook group.
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