We’ve all had the experience where a bill has been larger than we expected. Car rental, for instance, always seems to be subject to numerous extras which inflate the cost. So much so, that the final bill often bears little relation to what you thought you would pay at the outset.
Who would have thought that insurance, fuel and a drop-off fee were not included in that attractive lead-in rate? It’s enough to make any cynic suspect that the extras are more profitable than the actual vehicle hire.
Now the airlines are following suit. Passengers booking one of the cheaper tickets will find that when they click the ?purchase? button, the initial online price may double thanks to taxes, fees and other surcharges.
What’s more confusing is that no two airlines charge the same for the extras, even on identical routes. Take the experience of Andre Guindi, who wrote to Business Traveller about the following discrepancies:
‘I was hoping to fly from Gatwick to Nice at the end of December and so was comparing prices. The initial display on the website showed BA’s prices being less than those of Easyjet. But the final result [on the booking page] showed that Easyjet worked out cheaper because this airline charges £15 for airport tax whereas BA wants £39. How can an airline flying from the same airport to the same destination justify a £24 difference in airport tax? I would have thought that airport taxes are the same for everyone and shouldn’t vary from one company to another.?’
Nice is just one of many examples. Book KLM to Amsterdam from Heathrow and you’ll pay £29 for the flights but £50 for the taxes, airport passenger service fees, insurance and oil surcharge. BA and Bmi both charge £44 to Amsterdam from Heathrow, while if you take Easyjet from Gatwick, Luton or Stansted, you pay £10.
Another example is London-Warsaw. Fly with Lufthansa and the extras cost £68, as against the £37 of BA and £35 of LOT. All depart Heathrow and use Warsaw’s main terminal. Meanwhile, low-cost Wizzair, Skyeurope and Easyjet use cheaper London airports and Warsaw’s more austere Etiuda terminal, where the passenger fees are lower. Yet of these three, only Easyjet passes back the saving. It charges £14, whereas Skyeurope and Wizzair ask for £38 and £45 respectively.
Ryanair is reputed to pay lower airport fees than other carriers. At regional airports, it’s rumoured that the authorities allow Ryanair to land for free because they’re so keen to be connected to a major destination like London. So Ryanair’s extras are smaller than most ? but it hasn’t stopped Ryanair charging more than Easyjet where the two compete. For example, Ryanair wants £25 in taxes, insurance and wheelchair user fees (even if a passenger doesn’t require wheelchair assistance) on a Stansted-Rome Ciampino return, whereas Easyjet, flying from Gatwick to Ciampino, charges £13. Comparisons between Ryanair and conventional carriers are impossible as each use different airports.
These quirks happen because carriers have differing policies on what they will and will not charge for. All charge back the cost of taxes, varying from government-imposed aviation duty (in the UK) to old-fashioned airport taxes (most other countries). But others may view charges and fees as a marketing weapon and cash generator.
Fuel surcharges are another grey area. For instance, book a London-Paris flight with British Airways in the UK and the fuel surcharge is £4, whereas when the same flight is booked in the US or Australia you pay US$8 and US$4 respectively. For a longer sector, like London-Singapore, the surcharges would be £10, US$17 and US$11. When asked why this should be so, Martin George, BA’s commercial director, replied: ‘We’re aware of these differences. It’s all down to what the market will bear.’
But it’s not easy to see exactly what taxes, charges and fees the airlines are charging. A few years ago, these sums were itemised (they were also much cheaper), but nowadays most carriers lump them together.
If that wasn’t enough confusion, major carriers now insist passengers pay booking fees, even for online bookings. Fees are commonplace in Scandinavia and mainland Europe and are soon expected to arrive in the UK. (Finnair and Maersk Air have already started charging these fees to UK customers).
This is ironic. For years, the airlines have led us to believe that it’s beneficial to book online. Using the airline’s website to make a reservation and accepting a paperless or e-ticket, we were told, is more efficient as staff can be deployed to other duties. The resulting savings are then passed back to the passenger. But now airlines have realised that booking fees are a new revenue stream.
Business Traveller reader Tiago Braz in Lisbon came up against this new policy when he booked online with TAP Air Portugal:
‘I don’t understand why the carrier is charging me an online fee of E11 to buy a ticket to Rome. I haven’t spoken to anyone. I’ve just bought the ticket and the booking went through the system. Next time TAP will be my last option.’
What Tiago Braz experienced is now affecting millions of travellers throughout Europe. These fees appear when airlines stop paying travel agency commission and the agents must then impose service fees to earn a living. The online fee charged by the airline is intended to ensure that the airline doesn’t undercut the travel agents and force them out of business ? though of course, it also means they get to keep the commission. In the UK, commission is as low as 1% and, says Richard Lovell, CEO for Europe, Africa and the Middle East for global agent Carlson Wagonlit, ‘it’s inevitable we will move to 0%, simply because it’s rumoured that the airlines, who are paying more, are getting nothing in return. All that’s holding it back [the introduction of 0% commission] is that ticketing agreements between IATA [the airline trade body] and the agents talk of remuneration. So it’s easier for the airlines to keep commission at 1%.’
And what’s the official reason for the online fees? Says a spokesperson for Finnair who charges a fee of E15 [in Finland]: ‘The online fee covers the cost of making the booking and maintaining the system.’
It’s not an argument that carries much weight. ‘All businesses have certain costs,’ says travel management consultant Andrew Solum. ‘Would you expect London Underground to raise its ticket price by 10 pence when it installs new ticket machines?’
Other carriers suggest that bringing in fees puts them on a level playing field with the agents. Says Thomas Wandahl, director of operations for Scandinavia’s SAS: ‘When we abolished commission fees for travel agents, we lowered our fares then introduced service fees. We did this to avoid any conflict with the travel agents.’
The airlines are wary of upsetting the travel agents because the latter provide them with most of their profitable premium fare passengers. Sarah Built, general manager in the UK for Swiss, adds: ‘Switzerland is moving to zero percent commission in January [2005] and the possibility of booking fees is currently under discussion.’
When asked why Swiss should see fit to bring in booking fees [in Switzerland], she continued, ‘Distributing our tickets costs money. Also, our travel agents are our partners: we work well together.’
So the idea is that the airline and the agent should charge the same price. But this argument has a flaw. ?Travel agents are offering an added and impartial service,’ says Andrew Solum. ‘So if you do pay more it’s to cover the value of their knowledge and expertise.’
In addition, large agents like Carlson Wagonlit refute what the airlines are saying. ‘In 99% of cases we charge firms a fee for the overall service we provide,? says Pauline Sneider, director of account management in Northern Europe for Carlson Wagonlit. ?Only one per cent of our business is based on individual transaction fees.’
For those who believe that airline booking fees are insignificant, bear in mind that they might rise – those initial £5 rates are quickly disappearing in favour of ever higher booking fees. Maersk Air now charges £10 in the UK, while in Austria the local carrier (Austrian Airlines) asks passengers to pay E20 for a flight to Germany or E8 for a flight to Italy. But Lufthansa charges what are possibly Europe’s highest online fees. In Germany it charges E30 for every short-haul booking and E53 for long-haul bookings.
It must also be emphasised that booking fees are even higher should you book by phone or require a paper ticket.
Passengers who cancel their trips will usually find that none of their fees will be refunded unless they have bought costly flexible tickets. Those carriers which are prepared to entertain a refund for the extras (like BA) charge a fee for the privilege, so you get little back. But booking fees are never refunded – that cash goes straight to the airline’s bottom line.
So what’s to be done? One solution would be to get the airlines to quote all-inclusive fares so that passengers immediately know where they stand. The UK’s Trading Standards Institute (TSI) is looking into the way airlines price their flights on the internet. Says TSI’s Bruce Treloar, lead officer for travel: ‘There’s a lack of transparency for consumers in the pricing of flights on the net.’ According to a TSI spokesperson, ‘consumers should be provided with all the facts they need to make a price comparison before they get to the checkout. Prices should be clear and all charges should be included in the quoted fare. We are currently in discussion with the airlines on this issue.’
So until a decision is reached, it’s a question of buyer beware.
