Daniel Gross at Slate titled a recent piece “The ‘Fuel Surcharge’ Scam -- The latest corporate trick to hide price hikes.” He focuses on the express delivery business, calling out DHL, UPS and FedEx for using the surcharges to compensate for artificially low “list prices.” Gross adds that the practice has even been adopted by local services such as waste haulers and lawn fertilizers.

There are across-the-board parallels to private aviation, and the issue is most controversial in fractional ownership programs where your five-year commitment can vary substantially. Reasonable customers could assume that base pricing of your plan would include the then-current cost of fuel, or at least a 3-6 month average. In fact, many plans’ base price is years out-of-date, guaranteeing that every flight will be surcharged. (In the Slate article, UPS and FedEx used diesel prices that were last seen in 2003 when calculating surcharges).

Separately, the surcharge often doesn’t reflect the company’s true cost of fuel. It may be some market rate or a blended calculation that doesn’t reflect the actual price and any quantity discounts your provider may enjoy. So what is initially positioned as an ease-the-hardship/share-the-pain becomes yet another opaque profit center. You’re paying for the cost of fuel about as much as you pay for the cost of a beer when you tap the hotel minibar.

Most complaints we hear are about the disingenuousness of the practice. Grumbling clients recognize that providers need to earn a profit, and none of the major fractional jet companies is generating significant profits. The resentment is focussed on the lack of transparency. As one client told us:

“I’m a big boy, I know they need to make a profit, and I hope they do. But these surcharges are insulting – just charge me the proper amount for monthly maintenance and keep fuel at a level where I don’t feel like a chump.”

Companies’ motivation is obvious. With inflated surcharges, they can keep the rack rate lower for buy-in, attracting cost-conscious buyers who don’t dig deeply before buying. These surcharges can add many hundreds or even thousands of dollars to the cost of each flight-hour.

Helium Report suggests that those considering fractional ownership retain a consultant or lawyer, or commit themselves to running the numbers on your cost of ownership. Ask pointed questions on your base price for fuel, how surcharges are calculated, and what the calculation would be in a few different wholesale price scenarios. When you receive your statements, carefully check the surcharge calculations and make sure they’re in line with the scenarios you documented earlier.

Our Decision Guide includes a list of due diligence questions that probe the composition and calculation of flight costs. It’s available free here.