Fuel surcharges continue to add up

By Staff -- Logistics Management, 11/1/2000

Citing the ever-increasing cost of diesel fuel, several air carriers and a railroad are following the lead of motor carriers by raising their fuel surcharges. Airfreight carriers Airborne Express, Northwest Airlines Cargo, and American Airlines Cargo have all recently increased their fuel surcharges. Rail carrier CSX Transportation has added a surcharge.

The surcharges are being fueled by the high price of crude oil, which at press time was more than $37 a barrel. In mid-October, the U.S. Energy Information Administration (EIA) reported that the spot price for kerosene-type jet fuel had climbed to a high of $1.17 per gallon in Los Angeles; in November 1999-less than one year ago-jet fuel cost 72 cents a gallon there, according to the agency's figures. (Note: The EIA does not report a national average for jet fuel prices, only prices for New York City, Los Angeles, the U.S. Gulf Coast, Rotterdam, and Singapore.) The EIA also reported that prices for on-highway diesel reached $1.92 a gallon in California in mid-October. The lowest price reported at that time was $1.61 per gallon in the lower Atlantic states. The national average for on-highway diesel was $1.67 a gallon.

With prices continuing to soar, it's no surprise that carriers are imposing surcharges. Airborne last month added 1 percent to its existing fuel surcharge, bringing the total to 4 percent. That surcharge applies to all domestic, Canadian, and international express shipments.

Northwest, meanwhile, increased its fuel surcharge for trans-Atlantic shipments this month from 10 cents per kilogram to 15 cents. Last month, Northwest increased its fuel surcharge to 15 cents per kilo for all international shipments originating in North America.

American Airlines Cargo has increased its fuel surcharge by 5 cents per kilo. That surcharge will apply from U.S. origin points to all international destinations, where permitted.

FedEx was ahead of the pack when it added 1 percent to its fuel surcharge in April, bringing it to 4 percent. UPS instituted a temporary 1.25-percent fuel surcharge in August.

CSX Transportation, the rail subsidiary of CSX Corp., recently imposed a 4-percent fuel surcharge covering local and interline freight moves. It will apply to all traffic moving under tariffs, private price quotes, and certain contracts that incorporate those general tariffs, according to the company. CSXT President John W. Snow said at a recent industry meeting that fuel-price spikes would cost the railroad an additional $30 million this year, raising CSXT's fuel bill by $265 million over the $320 million it paid for diesel in 1999.

CSX Intermodal, another CSX Corp. subsidiary, implemented a 4-percent fuel surcharge in March for intermodal shipments.