/ 20 November 2009

Airlines’ double standard

Four years ago when the price of oil escalated, airlines introduced a fuel levy as a separate cost item on air tickets.

The reason, they said, was that fuel prices were increasing at such a rapid rate that by charging a separate fuel levy they could manage their ticket prices more effectively.

This fuel levy was disguised as a tax and when people came to book tickets they discovered that, in many cases, the price of the advertised ticket doubled when these so-called taxes were included.

When the Mail & Guardian exposed these practices earlier this year, the Competition Commission indicated it would be investigating uncompetitive behaviour.

It was felt airline pricing was deliberately opaque to the detriment of the consumer.

Moreover, there were concerns that the method of publishing prices was misleading because consumers were led to believe that these additional fees were a direct result of taxes and not fuel levies.

It was also felt that questions needed to be asked about whether the fees charged as a fuel levy were justified, given the dramatic drop in the oil price.

British Airways quotes the ticket price excluding fuel levies.

Taxes are confirmed only once you have selected your flight. This could be seen as company policy, except that when booking a flight out of London, the website quotes the fully inclusive price.

In fact, the same is true if you are flying out of the United States or Europe — it seems that only South African customers have to beware of that little asterisk warning of additional taxes.

BA, however, does advertise the fully inclusive price in above-the-line advertising. Virgin Atlantic also has this double standard.

The prices quoted on flights out of London are fully inclusive, whereas flights leaving South Africa are quoted excluding levies.

At least on Virgin the final price is in small print under the quoted price. Even its flights out of the US are more transparent, showing the breakdown in costs.

Although at the time of going to print BA International had not formally replied to our questions, they indicated that it is a systems problem.

This seems like a weak argument, especially as South African Airways has changed its website to show inclusive prices.

The only problem is that it still classifies the fuel levy as a tax, and this has implications for Voyager members.

Frequent flyers now pay for air miles
The most significant effect of the separation of fuel costs from the price of a ticket has been on the cost of air miles.

Before the introduction of a special fuel levy, customers cashing in air miles paid only airport and government taxes, which usually cost a few hundred rand.

Now customers using air miles will pay R3 000, for example, for a return flight to London. The fuel levy makes up about R2 000 of this.

The fuel levy was once incorporated into the price of the ticket. Fuel is only one of the operating costs of an airline.

But by introducing this levy and classifying it as a tax, airlines have got away with pushing a high percentage of their ticket costs on to the customers who had been promised a ‘free” flight.

Misleading air Travellers?