Copyright 2000 eMediaMillWorks, Inc.
(f/k/a Federal
Document Clearing House, Inc.)
Federal Document Clearing House
Congressional Testimony
October 11, 2000, Wednesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 9187 words
COMMITTEE:
HOUSE TRANSPORTATION AND INFRASTRUCTURE
SUBCOMMITTEE: AVIATION
HEADLINE: TESTIMONY INCREASE IN AVIATION FUEL COSTS
TESTIMONY-BY: KEVIN P. MITCHELL , CHAIRMAN
AFFILIATION: BUSINESS TRAVEL COALITION
BODY:
October 11, 2000 Written Testimony of Kevin
P. Mitchell Chairman, Business Travel Coalition Regarding Airline Fuel
Surcharges Before the U.S. House of Representatives Transportation and
Infrastructure Committee Subcommittee on Aviation Mr. Chairman and Members of
the Committee, my name is Kevin Mitchell. I am Chairman of the Business Travel
Coalition (BTC), which represents the business travel interests of major
corporate buyers of commercial air transportation services as well as the 21,000
independent business travelers who are members of the Commercial Travelers
Association. Thank you for inviting me this morning. In preparation for this
morning's testimony, BTC secured the input of many seasoned Corporate Travel and
Purchasing Managers. I would request that BTC survey results be included in the
record. Suppliers in industries that face upward spikes in the cost of
feedstocks, such as jet fuel, have alternative courses of action available to
them. One is to partially offset a cost increase by reducing expenses in other
areas, and to absorb the balance of the increase as a cost of doing business.
Futures contracts can play an important role. One Travel Manager who responded
to BTC's survey stated, "I work for a newspaper company that must undertake
hedging to protect raw newspaper prices. Raw newspaper is the company's third
largest expense and prices are rising this year. I have yet to see the newspaper
raise the cost of subscriptions or add a surcharge to cover the rising costs."
Another alternative is to sit down with your customers and work out a fair and
rational plan for sharing in the cost burden. Here is how one Purchasing Manager
at a large pharmaceutical company described how buyers and suppliers address
upward spikes in cost in other commodity areas: "We are open in concept to the
use of surcharges during periods of extraordinary market crisis as long as they
are administered fairly and even handedly. We have price escalation and de-
escalation clauses in many commodity areas where prices of feedstocks fluctuate
often. When this issue arises within our supply base we discuss the nature and
extent of the impact on the supplier and agree on benchmark costs for the
feedstock involved. We agree on a mechanism by which the surcharge will go up as
the feedstock price increases and how we will reduce it when the feedstock drops
back to the benchmark level, or below. We would not look favorably at an
open-ended imposition of a surcharge." Mr. Chairman, what this Purchasing
Manager describes is supplier- buyer partnering premised upon win-win outcomes.
A third course of action is to impose your will upon your very best customers in
lockstep with your competitors wherein, for example in this case, a surcharge is
a) loosely linked to actual fuel cost increases, b) is disproportionately
applied to business airfares and c) causes a burden on your best customers. Some
major airlines have imperiously imposed their will in this fashion twice this
year. One Travel Manager states: "I find it offensive that the airlines can
simply raise rates or impose surcharges whenever they feel the need. When other
suppliers take this tact, we have the option of re-directing our business.
However, with the airlines, once one of them does this - the others follow like
lemmings - leaving us with no alternatives." Indeed, with the January, 2000
surcharge, one major airline purchased sufficient forward fuel contracts as to
render the then current fuel price increases virtually immaterial to its
earnings. Yet, it too imposed the surcharge to remain "competitive." Another
corporate travel executive made this observation, "You can't put enough quotes
around the word 'competitive.' Since when do you raise your prices to become
more competitive when supposedly your forward-thinking strategy somewhat
insulated you from an uncontrollable cost increase that the rest of your
competition was experiencing? Wouldn't you want to take advantage of your
insightful budget planning and hold your prices while your
not-so-forward-thinking competitors were forced to raise theirs? As far as I'm
concerned, this is more soft evidence of collusion among the carriers." Mr.
Chairman, like so many problems that have come before this Committee recently,
such as record level business airfares and eroding passenger service levels, a
major systemic cause underlying airlines' mistreatment of their best customers
through these surcharges is a lack of sufficient competitive choices and
alternatives in what has become an excessively concentrated industry. One BTC
participant approached his primary airline supplier in February after this
year's first fuel surcharge was imposed to put into place contractual language
that would address future upward and downward spikes in fuel costs in a win-win
manner. The airline did not say no, it said Hell No! This is the type of market
power some airlines exercise. Another BTC participant, whose company spends $140
million dollars annually on air transportation services, expressed that they
spend in excess of $40 million dollars with each of twelve different suppliers
across a variety of commodity groups. They stated they had excellent
relationships with every supplier except for their primary airline supplier.
Members of the Committee, if corporations with large purchasing volumes and
centralized travel management expertise are treated poorly by airlines, what
does this suggest about how the other nine million smaller U.S. businesses are
being treated? With respect to this current fuel surcharge, BTC is advocating
three priorities: 1.BTC is spearheading an industry-wide initiative to encourage
all Travel and Purchasing Managers to immediately enter into discussions with
their airline suppliers for the purpose of agreeing on a contract addendum that
addresses large swings in fuel prices. BTC participants have developed a
boilerplate addendum that protects all parties. It was distributed today to
1,300 corporate buyers of air services to help jumpstart an urgently needed
industry dialogue. A copy of this addendum is included in my written submission.
2.DOT studies have demonstrated that it is the presence of low- fare carriers
that makes the difference in disciplining major airlines' policies. For example,
where major carriers compete head-to-head with Southwest Airlines, they do not
impose a fuel surcharge. To achieve a functioning competition in air transport,
a constant influx of new entrants is required, especially now that it is known
that some major airlines desire to consolidate the industry even further. The
DOT Competition Guidelines represent the least intrusive means government can
adopt to assure investors in startup airlines that the government will not allow
unfair or exclusionary practices. I urge this Committee to join State Attorneys
General, who are members of the Airline Competition Working Group, in their long
held belief that these DOT Guidelines need to be issued. 3.The Justice
Department should move to block the proposed United Airlines-US Airways
merger. It is a bad idea at a bad time. BTC has launched
www.AirMerger.com to broaden public policy debate and ensure that federal
government policy makers weigh the strategic concerns of airline customers in
their final determination about this merger. BTC will conduct
air competition symposia around the country this fall and plans a major
Washington, DC Summit and Customer Referendum on the merger in
February similar to its September, 2000 Internet Air Competition Summit. Thank
you for your interest in the views of the customer of the air transportation
system with respect to this important air competition issue. Introduction
Following are responses from twenty-six Corporate Travel and Purchasing Managers
to the Business Travel Coalition's (BTC) inquiry regarding recent airline fuel
surcharges. BTC's request for information was in support of its preparation of
written and verbal testimony for presentation to the U.S. House Transportation
and Infrastructure Committee, Subcommittee on Aviation, on October 11, 2000. For
reference purposes, BTC's request can be found at the back of this document.
Other BTC documents related to an earlier fuel surcharge in 2000 are appended as
well. This entire document will be submitted For The Record along with BTC
testimony. Corporate Travel and Purchasing Managers' Responses (1) I support it
the fuel surcharge . I work for a chemical company that is very dependent on the
price of oil. The current prices for a barrel of oil have forced us to raise
prices to our customers. The airlines are seeing the same cost pressures as we
are. Increasing the price of a ticket or adding a fuel surcharge is really the
same thing. There is no assurance we will lower our selling prices once the
price of oil goes down. Why should the airlines be looked at any differently?
They have substantially higher costs. At least calling it a surcharge puts a
little more pressure on them to back of the surcharge once the price of oil does
drop. Let's not forget they are in business just like most of us are. We have to
pass on higher raw material costs to our customers or we eventually go out of
business. (2) I work for a newspaper company that must undertake hedging to
protect raw newspaper prices. Raw newspaper is the company's 3rd largest expense
and prices are rising this year. I have yet to see the newspapers raise the cost
of subscriptions or add a surcharge to cover the rising costs. Or even raise
subscriptions/add a surcharge for home delivery because of the rise in fuel
costs has increased the expense of delivering to the home. (3) The 4 or so
airline competitive price increases this year, coupled with the two fuel
surcharges, has been met with skepticism within our organization. As of today,
roughly $100 of increased cost per domestic ticket, or 20%, has been added.
Sophisticated fuel hedging I believe is being used by the carriers, hence the
need to support fleet costs, difficult labor issues, operational needs, and
margin opportunities are coming out of the overall increase effect. I am opposed
to system wide fuel surcharges that never go away. Preferably the ability to sit
down with a carrier to work out a surcharge mechanism that isolates the true
cost and floats pricing based upon a pre-determined table. Now, would we rather
have the government step in and impose the ability to create these dialogues and
institute mechanisms, or go one on one with the carrier, there are differing
opinions. Profit and financial stability for carriers by "true cost means",
versus by "any means" is what I can support. Fuel surcharges imposed without
public scrutiny I cannot. Use the adage "follow the cash", and clarity will
come! (4) Unfortunately oil prices are very unstable at this moment. Although
the airlines are not "special" in this sense. All businesses have to purchase
some type of commodity that is continually variable in it's pricing. It is very
frustrating to constantly watch the airline industry slap on additional fees
every time they see a fluctuation in expenses. Fuel is not the only item on
their list of expenses. It would be refreshing to see this industry embrace
change like the rest of us in corporate America. Fuel expense increases, well
lets see how we can be more efficient in another area to make up for it. Airline
industry, stop copping out and taking the easy way. The $20.00 isn't the only
increase in cost, how many fare increases did we have last year? Six plus? (5)
You might add this to your list of concerns. The airlines (I tested UA and DL)
do not apply the fuel surcharges equally. The airlines are making corporate
America subsidize leisure travel by applying the $20 segment surcharge only to
the highest fares, but not to the supersaver fares. (6) "Fuel surcharge" is just
a thinly veiled excuse for a fare increase. More so, because the most recent
increase is only added to the highest fare categories, it is clearly directed at
the most inelastic group of customers, the business traveler. Plain and simple,
we are the target. Good luck with the fight Kevin - I strongly oppose the
surcharge. If an airline is going to have a fare increase - call it what it is.
(7) One common complaint I hear from travel managers is the fact that airlines
exclude fuel charges from the net fares and other discounts they negotiate.
Certainly prior to the fuel surcharges, airline prices had some portion
allocated to cover fuel expenses. We have not seen these prices adjusted
downward....just fuel surcharges added. (8) In the pure world of Purchasing,
every proposal of surcharges creates its own negotiation. We are open in
concept, to the use of surcharges during periods of extraordinary market crisis
as long as they are administered fairly and even handedly -- strong supplier
relationships require that. We have price escalation/de- escalation in many
commodity areas where prices of feedstocks fluctuate often. When this issue
arises within our supply base we discuss the nature and extent of the impact on
the supplier and agree on benchmark costs for the feedstock involved. We agree
on a mechanism by which the surcharge will go up as the feedstock price
increases and how we will reduce it when the feedstock drops back to the
benchmark level or below. We would not look favorably at an open-ended
imposition of a surcharge. Hedging can be a useful strategy, but hedging comes
at a cost - we are not always supportive of adding the cost of hedging to our
relationship and cost structure. There are times when it is in the mutual best
interest of both parties, there are times when it is a non-value added
"insurance" cost we might not want to pay for. Hedging makes sense when you can
predict the price and direction of a commodities price. If one could predict the
price of oil with any certainty why would you bother to run an airline? (9) Our
corporation definitely opposes the fuel surcharges. Thanks for speaking up for
us! (10) Would just like to add two points: When/if fuel prices decrease; the
airlines will not remove the surcharge. The reason the airlines can impose these
surcharges is because the market will pay the surcharges. Until demand
decreases, the airlines can charge whatever they want. Much like the housing
market in various parts of the country. (11) I strongly oppose the $10.00 per
segment fuel charge. The business traveler is the primary customer of the
airline industry during the five-day workweek. As a result, we already pay
premium seat prices. Businesses continue to be the victim of airline greed. New
aircraft, existing aircraft configuration changes to provide more comfortable
seating, and improved equipment maintenance to assure the safety of all
passengers and crew, are extremely important but costly items. However, the
business community cannot continue to provide the airlines with what I call
"luxury dollars", and still be profitable themselves. If we must be charged a
fee, it should be based on the actual miles flown per segment, not an overall
charge regardless of destination. Small businesses must operate within
previously planned fixed travel budgets. We must reach our customers to be
successful. However, we must travel within our means. Every time the airlines
impose another fee, our budgets must be increased too, making it extremely
difficult to maintain a cost-effective travel plan. The airlines are hurting the
source of their revenue. What ever happed to customer service? (12) I agree with
your assessment and do not agree with this surcharge. Airlines, like other
businesses should be accountable to manage their business in all aspects.
Needing to purchase fuel is not a new piece of their business, it is and has
been an integral component to their success and survival - they need to figure
out ways of dealing with it better. Airlines have always bought futures to hedge
against radical increases (not widely publicized), however once there is a fuel
increase (usually highly publicized) they pass along these "additional costs" -
real or perceived to the customer. The fact that they all do it in unison (due
to the almost monopolistic nature of the industry) eliminates the need for
competitive pricing for service. I agree with the airlines when they state that
they are not a commodity business, as their "inventory" has a unique expiration
once a plane leaves the ground (they can't have a sale on old inventory to
re-coup rev.) However, as a service provider, they should be forced to price
their product based on value - not on the ability to strong-arm the consumer.
We, as a corporation are always looking at ways to cut our costs and be more
efficient - making us more competitive and allowing us to provide more value. As
someone who is charged with reducing (or at least maintaining) travel costs, I
find it offensive that the airlines can simply raise rates, impose surcharges,
etc. whenever they feel the need. When other suppliers take this tact, we have
the option of re-directing our business. However, with the airlines, once one
does this - the others follow like lemmings - leaving us no alternatives. We are
always looking to manage our costs more efficiently through technology,
behavioral changes, increased productivity, etc. (and this is just for travel)
why can't the airlines do the same. Airlines have miss-managed their labor
force, their pricing strategies, their inventory management - all in the name of
"remaining competitive" and all to the adverse effect of the consumer. It's time
they were taken to task for it. Flying non- profitable routes or times to a
destination simply to match your competitors is not "competitive", it's foolish.
Although Continental is also applying a fuel surcharge, they are at least taking
control of their own destiny. They are abandoning hair-brained "competitive"
ideas ("Continental Light"), pulling down non-profitable flights, incenting
their work force based on customer satisfaction and delivering service. Gordon
Bethune is to be commended for "managing" his business. Now, if we could only
get him to drop the fuel surcharge... I'm sure that this is much more than you
wanted to hear, but it gave me an opportunity to vent. As someone who has been
on the airline side (13 yrs.) the agency side (3 yrs.) and the corporate side
(3.5 yrs. and counting) I'm still amazed at the arrogance of the airlines. They
do these things because they can! (13) I concur with the points already made
below. (14) Fuel Surcharges are also used to "get an increase" on guaranteed
fares that some customers have negotiated in their airline agreements. (15) Your
comments are right on. Unfortunately, almost unanimously the entire industry
falls in line and we, the consumers all lose. (16) Kevin, point #6 below says it
all. It maybe worthwhile to try to get an update from LH (or from Weber's office
directly as to their current situation on fuel and whether their hedging
strategy has continued to be successful. You can put us down as opposed to the
fuel surcharges... (17) As a consumer, I Absolutely oppose surcharges.
Surcharges are used to hide price increases and are prevalent in our gas,
electric, and phone bills. They are confusing and misleading. As you are aware,
surcharges are not added into price quotes and are included once the reservation
agent or on-line system "finishes" the reservation. As a corporate travel
manager, I oppose surcharges as the airlines use them to bypass our corporate
agreements. It also confuses our travelers and complicates the ticketing
process. My argument is not whether or not the airlines are justified in
compensating for escalating fuel costs. My argument is how the airlines are
accounting for it. If the airlines grant a pay raise to their employees, will
they then apply a labor surcharge? Fuel costs should be accounted for as
operating costs and factored into base airfares. (18) Kevin...thanks for the
opportunity to add thoughts and concerns to your House Committee testimony next
week. Certainly your points 1 through 13 are right on target. Only a couple of
things to add to a few items... Point #5...really irritates me. You can't put
enough quotes around the word "competitive". Since when do you raise your prices
to become more competitive when supposedly your forward- thinking somewhat
insulated you from an uncontrollable cost increase that the rest of your
competition was experiencing? Wouldn't you want to take advantage of your
insightful budget planning and hold your prices while your
not-so-forward-thinking competitors were forced to raise theirs? As far as I'm
concerned, more soft evidence of collusion among the carriers that you allude to
in your Point #12. Point #7...excellent point. The fact that the surcharge is
buried in the price of the ticket rather than a separate line item makes it just
another thinly disguised price hike. I heartily recommend that should there be
similar surcharges in the future, that they be broken out separately (not unlike
PFCs and taxes), so that when the need for the surcharge (in this case,
temporarily higher fuel costs) has expired, the surcharge is in turn eliminated,
rather than simply baked-in and therefore lost in the price of the ticket, and
ultimately allowed to become a component of a permanent price hike. Points #8,
#9, & #10...there are no references to any unexpected cost increases in any
of our airline contracts. I state this simply to affirm and underscore your
point that none of this is addressed in contractual agreements, and with the
kind of dollars impacted in T&E budgets for large corporations with large
air spend, something like mid-term surcharges should be. Point #13...you bring
up old memories of when the first commission cap was announced now over 5 years
ago. I remember having many meetings with our agency at that time, both
overviews with other customers, and one-on-one meetings to negotiate a win- win
solution. The same arrogance and insensitivity exercised by the airlines back
then was in evidence with the fuel surcharge, and this time, directly with their
corporate customers, not the agencies. That's all from me, Kevin. Thanks again
for the opportunity and best of luck on the Hill next week. Please feel free to
contact me if you need further information. (19) I believe that you have covered
the issues very clearly and very well. Regardless of whether it's reduced
commissions, poor on-time performance resulting in us being forced to other
carriers and missing negotiated hurdles, fuel surcharges.......it all comes down
to higher travel costs for us. Negotiating discounts now becomes more and more
vague.........XX% off of a very vulnerable unknown. We support the issues that
BTC is planning to bring before Congress. (20) I oppose the imposed fuel
surcharges and feel the 13 points are right on target. (21) "One major airline
purchased sufficient forward fuel contracts as to render current fuel price
increases virtually immaterial to its earnings. Yet, it too is imposing the
surcharge to remain "competitive." This greedy grab for windfall profits should
be the affront to aviation officials in government as it is to the customers of
the air transportation system." Isn't this another form of price fixing? The
airline is going to match the fuel surcharge so that other airlines will
cooperate when they raise a fare, or include another surcharge. (22) Fuel
surcharges are a cop out. They allow for an unannounced price increase at any
time. Isn't that what yield management does on a continuous basis? (23) Kevin -
your points cover the key issues. If the surcharges are unavoidable, I do
believe they should be required to rescind them immediately upon a return to
normal fuel pricing. (24) I would like to once again say thank you for acting as
"watchdog" for our interests. The information presented by BTC is, as always
clear, concise and right on target. I was struck with just one additional
thought that came to my mind as I read through the talking points below: The
fact that the airlines can pass additional costs of doing business to customers
as you say "in lockstep" bespeaks of price fixing; a practice from which the
federal government is supposed to protect us. (25) Kevin, as with all taxes it
is always easier to raise taxes them than to lower them when they are not
needed. If the fuel charge can go up when needed, it should go down when not
needed. (26) We all get stuck with paying higher gas prices. So do the airlines
- if the airlines can prove they are suffering due to increased fuel cost - like
any smart business person they would recoup that cost in their price of their
product. HOWEVER, if the airlines have negotiated a set price for fuel then they
are NOT suffering - so there is no need for a surcharge. "Importantly, fuel is
no longer the indiscriminate killer of airline earnings it once was. Airlines
now have sophisticated analytical tools. They can choose to hedge against the
risk of high fuel prices by purchasing forward fuel contracts just as many
corporations do with some core commodities." If they are smart - that is what
they are doing. If they are not smart then they should either raise their price
and lose business to a competitor or lose money. "Airlines make a business
decision they should be accountable for when they decide whether or not to hedge
against dramatic upward spikes in fuel costs." Absolutely. The costs of bad
business decisions are usually passed on to the consumer. "One major airline
purchased sufficient forward fuel contracts as to render current fuel price
increases virtually immaterial to its earnings. Yet, it too is imposing the
surcharge to remain "competitive." This greedy grab for windfall profits should
be the affront to aviation officials in government as it is to the customers of
the air transportation system." This is wrong. See point #2. When, and if, an
airline is affected by higher fuel prices then they should pass part of the cost
along to passengers - but they should also remove the charge if/when fuel prices
are reduced. This may need some kind of governmental guidance. It will be
interesting to see how United finances the huge pay increases for their pilots.
"Airlines have the opportunity to negotiate an adjustment in prices with
customers when fuel prices rise significantly." As above, the fuel surcharge is
not in the actual fare component but is a surcharge - so is the fare really
going up? The bottom line figure that is charges goes up but it isn't the fare
going up - it is a fuel surcharge. Do the airline figures reflect this
'adjustment' when they announce a fare increase or when analysts look back at
the year? I feel that airlines (and all vendors) should be able to pass on some
of the increased cost of doing business - but they also need to review the
situation on an ongoing basis to remove the increase if/when the cost of doing
business go back down. If a vendor partners with a corporation (and airlines
always stress that we are partners in business), then we need to share in the
good times as well as the bad times. The key word here is SHARE. Not all the
additional cost should be placed upon the end user - the vendor also needs to
adjust their profit expectation during the difficult time. "Consider that for
BTC participants, the annualized impact of this surcharge ranges from $400
thousand dollars to $3 million dollars per company." So? Rising fuel costs
effects all of us - both personally and professionally. It now costs me $40 to
fill my tank rather than $30. "In a near inflationless era when most suppliers
are loath to pass costs on to customers, airlines can apparently do so at will-
-and in lockstep." They do it - because they can. We pay because there is little
we can do. Yes, we can be aggressive in negotiations - we can go to net,
net-net, net-net-net fares, set fares, on-line fares, etc. etc. etc. We can
avail ourselves of teleconferencing - but all this aside, people still travel,
the planes and hotels are full. Speaking of hotels...won't their prices go up -
reflecting the increase in fuel costs too? Some limo companies have added a
surcharge (which will be eliminated when the fuel prices go down) - no one
mentions this. "In what other industry can a supplier increase a buyer's prices
by $3 million dollars without even a single phone call, a meeting, a
negotiation! If corporations with large purchasing volumes are being handled
this way, how are the other nine million smaller U.S. businesses being treated?"
Prices on all consumer goods and services go up all the time without warning.
Why do we expect the airlines to be different? Unfortunately, airlines employees
are often the last to know about what is going on in their own company. Fare
increases hit the GDS systems even before airlines sales offices are aware of
it. Also - most travel managers do not see the increase immediately, but only
after they start seeing reports that reflect higher ticket prices. Airline
Agreement Addenda Fuel Adjustments INTRODUCTION The following draft Fuel
Adjustment Addenda are designed as working documents. There are alternative
approaches to designing fuel adjustment programs that should be explored. The
draft addenda included here are intended as general starting points for industry
debate, and for individual corporations to enter into exploratory discussions
with airline suppliers. Each negotiation should be unique and take into account
additional factors such as a corporation's traffic patterns, strength of the
travel management program, current pricing levels and whether an airline has
purchased futures contracts for jet fuel. OPTION 1 Based on the Department of
Energy's (DOE) Weekly U.S. National Jet Fuel Index, and in the event that the
Index exceeds $ per gallon, corporation shall share in the cost burden with an
airline supplier. (For example)--If the price of jet fuel increases from a
baseline cost of $.50 per gallon into the $.76 to $1.00 per gallon range, the
adjustment shall represent percent of the increase. If fuel cost increases from
$1.01 to $1.25 per gallon, the adjustment shall represent percent of the
increase. The percent of increase in fuel costs corporation has agreed to pay
through an adjustment shall translate into $ per 100,000 miles flown. Airline
fuel adjustments shall be billed directly to corporation for the agreement term,
with supporting documentation included. In the event that the jet fuel Index
drops below $ per gallon, the adjustment shall be lowered to percent of the
increase over the baseline. When the jet fuel Index drops below the baseline of
$ per gallon, adjustments shall be eliminated. OPTION 2 Airfare levels
established in the agreement between an airline and corporation shall be subject
to fuel price adjustments based upon the Department of Energy (DOE) Weekly U.S.
National Jet Fuel Index, and an airline's fuel burden as a percentage of its
total cost figure. An airline's fuel as a percent of total cost shall remain
locked for the life of the agreement and does not change from quarter to
quarter. A fuel adjustment shall be made quarterly based on the ending
three-month DOE jet fuel price average. The adjustment shall be made to all
fares ninety (90) days and older, and shall reflect the percentage change in jet
fuel price between the ending quarter and the preceding quarter. The fares and
benchmark price of fuel become recalibrated with each new agreement and become
the basis for the next agreement. The percentage of adjustment shall be
determined according to the following methodology:
LOAD-DATE: October 13, 2000, Friday