Should jet fuel surcharges be regulated, and if so, how?

By adding fuel surcharges to base fares, airlines pass on the impact of higher jet fuel prices to consumers. Given the wide range of design options for fuel surcharge schemes, the reduced price transparency and the question of fair cost recovery, fuel surcharges have become a consumer protection issue. The paper reviews the regulatory approach to fuel surcharges in Brazil, the European Union, Japan and the United States. Further, it addresses the complexity of attempts to construct fuel surcharge schemes that rely on estimates of per-passenger fuel costs. The paper concludes that regulatory activities should aim to include fuel surcharges in all initial fare quotes and advertising. Enforcing fuel surcharge schemes that ensure a fair cost recovery would result in high regulatory costs and would also be in conflict with deregulation policies of removing restrictions on airline pricing. (C) 2014 Elsevier Ltd. All rights reserved.