Air France Cargo and KLM Cargo on Tuesday unveiled a fuel surcharge mechanism based on flight miles to better reflect today's realities of punishing high jet fuel prices as well as provide shippers with a more transparent method of collecting the fee from customers.
The revised mechanism also represents a complete change of the present model for air cargo surcharges. Effective Sept. 1, the fuel surcharges will be incorporated into the shipping rates, making them commissionable. Under the old system, forwarders complained that the carriers would adjust the fuel surcharges but let the rates stagnate or slide. The portion of the fuel surcharge going to the forwarder was reduced under the old system.
The United States dollar will serve as the basis for the new mechanism and be converted to the Euro and other currencies for invoicing. Existing exchange rates will be used to determine the new fuel surcharge levels should prices increase or decrease.
"The validity of the current fuel surcharge mechanism is at its end as the important underlying factors (the United States dollar and the price of oil) have gone to structural new levels," said Michael Wisbrun executive vice president for Air France-KLM Cargo. "For transparency reasons and in answer to the requests of our customers, Air France Cargo-KLM Cargo is taking this step." The new model will be based upon short haul, medium haul and long hall flights, and fuel surcharge increases and decreases will now be implemented in steps of ten cents instead of 5 cents.
"In order to increase stability and prevent changes due to short-term peaks, a monthly moving average will be used for the jet fuel price," said a statement released to reporters in Paris announcing the plan.
"It's good to see that at least one carrier is facing the reality of fuel surcharges based on actual distance flown, as opposed to not considering the length of the mission itself," said Brandon Fried, executive director of the Airforwarders Association.
Another issue to consider, said Fried, is that carriers are charging for volume weight, not actual weight, which allows them to charge customers a higher rate. A number of forwarders told Fried this is a big problem.
Another issue: In the past, fuel surcharges for the most part weren't commissionable. So this move by Air France and KLM to alter the fuel surcharge mechanism is precedent setting, Fried said.
The revised method represents the first modification since Air France Cargo and KLM Cargo introduced the fuel surcharge mechanism in 2000. |
