The fuel surcharge on flights has less to do with fuel prices than with airlines charging whatever they can.

Qantas reduced its controversial fuel surcharge on international flights last month but people flying interstate still face a substantial slug of $31 a sector.

Business travellers barely blink at the cost but budget-conscious consumers might be stunned to learn that the fuel surcharge, along with other taxes and charges, comprises 42 per cent of the cost of the carrier's cheapest Sydney-to-Melbourne domestic fare (at $125).

Fuel costs make up a major portion of airlines' cost structures (exceeding even wage bills at Virgin Blue) and, when that cost is rising dramatically, it can mean the difference between red and black ink on the balance sheet.

Hedging, or buying fuel now that you plan to use later, is one common way airlines try to keep costs under control. Another is to pass on part of the load by placing fuel surcharges on top of ticket prices. But what happens to the surcharge when those fuel costs are coming back down like now?

Fuel prices peaked in August at $US82 a barrel and are forecast to trade in the $US55 to $US65 a barrel range, says Tobin Gorey, a commodities economist with the Commonwealth Bank.

This decrease has flowed through to the petrol pump but the news has been slow to reach the airlines, says Norm Crothers, the deputy chief executive of the consumer organisation Choice.

"The issue is that it's all a bit non-transparent," he says. "We don't know what their costs are, how [the fuel surcharges] are being calculated or under what circumstances they will go up again."

Despite the unpopularity of the impost among fliers, neither Qantas nor Virgin Blue has plans to make any further adjustments.

One reason is that Virgin Blue already levies the lightest surcharge, says Amanda Bolger, the airline's public and media relations manager.

Virgin Blue charges $19 a sector (one-way) on domestic flights and $35 a sector (one-way) on international flights through Pacific Blue and Polynesian Blue, she says.

Meanwhile Geoff Dixon, the chief executive of Qantas, remains non-committal about further reductions.

"If prices continue to fall, we will extend the reductions to our domestic surcharges, which were not included in the most recent increase in August 2006, and look at further reductions to our international surcharges," he said in a statement.

He does not accept complaints that because fuel is part of the cost of doing business, it should be rolled into the overall ticket price.

"When Qantas was forced to address the issue of high fuel costs in May 2004, we chose to add a surcharge rather than increase the cost of fares so that we could reduce or remove the additional charge if fuel prices dropped," Dixon said.

"This is the first time since then that we have seen a decrease in the price of fuel over a sustained period and we will monitor the situation closely over the coming weeks."

Cassandra Meagher, an industrial analyst with CommSec, says the recent changes to the fuel surcharge are more about competitive pressures than the cost of oil.

"While fuel costs have been high, airlines have differing abilities to pass them on," she says.

"The key thing to consider is the [willingness] of passengers to accept a surcharge."

Meagher notes that Virgin Blue's lower surcharge is "strongly aligned with the leisure market, which is less able to afford it" and that airlines' need to recoup increased fuel costs must be balanced against their need to retain passengers.

Qantas, on the other hand, has a high proportion of business travellers and therefore the ability to pass on higher fuel costs.

She says the recent reduction in the international fuel surcharge came about as a result of competitive pressures from Qantas' main rival, Singapore Airlines.

Earlier last month Singapore Airlines cut its surcharge by 10 per cent, reducing it from $78 to $70 on flights from Australia to Singapore, and cutting the surcharge from Australia to Europe from $157 to $141 (compared with $170 on Qantas).

So, with the festive season looming, should you hold off on making holiday plans in the hope of further cuts to the surcharge?

According to Crothers, it's still best to purchase your ticket sooner rather than later. "It's generally always cheaper to book well in advance, as the possibility of the levy going down a bit more is outweighed by the benefits of advance booking."

Surcharge cut

Qantas' fuel surcharges at the time of writing are:

International from Australia (one way)
■ Great Britain and Europe: $170 (previously $185)
■ New Zealand: $60 (previously $65)
■ Mainland US, Canada, South America, South Africa and India: $133 (previously $145)
■ Asia-Pacific and Hawaii: $105 (previously $115)

Domestic (per sector, including GST)
■ Qantas: $31
■ QantasLink (jet services): $31
■ QantasLink (turboprop services): $29
■ Jetstar: $19