The real sticker-price of air travel

As the fishes swim, the distance between Point Piper and Kirribilli House is very short indeed. But for the next Liberal Prime Minister, Malcolm Turnbull, that passage will be long and very, very gruelling.

The party’s legitimacy was gutted on November 24, and while there is no single step that he can now take to wipe the slate clean overnight, there is one thing that he can do to improve his party’s chances come the next election.

To translate the public’s (great) affection for Malcolm into votes at the ballot box - be it in 2010 (against Prime Minister Kevin Rudd), or much earlier, against the perishable Liberal Leader (Mr Brendon Nelson) - the Shadow Treasurer must ape Kevin07’s pre-election strategy. He must set the agenda for his opposite number, Treasurer Wayne M. Swan, much like (then) opposition Leader Kevin M. Rudd set the agenda for (then) Prime Minister John W. Howard.

A good way to jump start malcolm2010.com is to focus on consumer rights. The travel industry, for instance, is well overdue for reform given the shenanigans perpetrated by airlines and travel agents under the Big Top called taxes and surcharges.

Taxes and surcharges to the travel industry are what freak shows are to circuses. Who knows what you’ll find once you agree to pay the price of admission? And just like a freak show, you have no control over any aspect of the taxes and surcharges. You can’t minimise them, avoid them or even question the legitimacy of being levied certain charges let alone the quantum of those charges. Simply put: if you don’t take the travel agent’s invoice as gospel, you don’t fly.

Let's look at two major components of taxes and surcharges: fuel surcharges and agent’s ticketing fee.

On January 8, when nobody was looking, the Spirit of Collusion (formerly known as the Sprit of Australia) boosted international fuel surcharges by a whopping 17 per cent. This will see the public fork over (to Qantas) an extra $130 million this year. Good work if you can get it, isn’t it?

Mr Gordon Renouf, Director of Policy and Campaigns at Choice, claims that such pricing practices confuse the flying public and that the airline should raise ticket prices when its costs rise, rather than impose murky “surcharges”. He’s not wrong. Are you listening Mr Turnbull?

Mr Peter Costello, the previous Federal Treasurer, for some reason, never promoted greater transparency in airline fare advertising. The current Shadow Treasurer has a golden opportunity to enhance his credibility by steering the Federal Government towards consumer protection legislation that will compel full price advertising of services in all retail operations, including travel related services, motor vehicle sales, mail orders and so on.

What’s the issue? Airline advertising practices in the Australian travel industry do not currently provide accurate and complete fare information for consumers to base their travel purchasing decisions.

Why is it an issue? There is a growing sense of "sticker shock" in the airline travel industry. Consumers are generally not aware of the level of surcharges imposed above the advertised price of airline travel services. These are aggregated once payment is about to be made. The undisclosed amounts of taxes and surcharges include airport charges; passenger movement fees; airport improvement levies, fuel surcharges, government charges, insurance and air security premiums. And, as I discovered this week, Flight Centre also throws in a $28 “ticketing fee” under the guise of “taxes”. That’s right. They add a fee for themselves in the “tax” column and in so doing deceive customers. How sweet is that? They can “match” other agents’ ticket prices by excluding part of their commission from the sticker price, only to fleece the hapless customer at a later stage.

And it gets worse.

Take my case. Just after Christmas 2007, Flight Centre quoted me $1,950 plus tax for each of two mini around the world airfares with Lufthansa (and partner airlines). The quote said taxes are $1,215. Who knows if Flight Centre’s total of $1,215 is legitimate? Maybe the real total is really less than $1,215 but how do I know? There is no requirement in Australia for Flight Centre to break up and list these charges. I found it a bit rich that taxes and surcharges amounted to 62 per cent of the airfare.

In my case, I was so cranky with Flight Centre’s dismissive replies to my queries, that I approached Lufthansa. The efficient and thorough Germans advised me in writing, that the taxes and surcharges total $1,150, or $130 less (on the two tickets I bought) than what Flight Centre fleeced me. When I emailed Flight Centre a scan of the letter from Lufthansa’s General Manager, Australia, Flight Centre replied that Lufthansa is plainly wrong. And the implication was that Flight Centre would be keeping the $130.

Airline passengers are increasingly demanding that price information they receive in advertisements reflect the total price of the air services they are purchasing.

Assiduous consumer groups have begun to advocate for greater transparency in airline marketing practices. The lack of transparency is a constant source of consumer frustration, so it’s eye popping to witness truth in advertising raise its head in the marketplace.

On Saturday, January 19, Singapore Airlines rolled out advertisements in The Sydney Morning Herald's "Good Weekend" magazine that showed ticket prices inclusive of taxes and surcharges. Quite correctly the Singapore Girl advises that travel agents’ fees (if any) are additional. Singapore Airlines should be commended for advertising true fares and for its rejection of bait advertising employed by other, lesser carriers.

The Shadow Treasurer must force the Rudd Government to take action against misleading and deceptive advertising practices. All-in-one pricing must be the industry standard. That is the only route that passengers have to discover whether the charges under taxes and surcharges are legitimate in scope (for example, can Flight Centre pad the total for taxes with its own fees?) and whether they are legitimate in quantum (for example, in my case, what part of the taxes and surcharges was I overcharged by Flight Centre?).

There are three options that Mr Turnbull can promote.

Option 1

Airline travel advertising must clearly indicate the full price the consumer must pay, including all fees and supplementary charges. It is irrelevant if the fees are charged by the airline, by airports, by governments or as in the case of Flight Centre, by the travel agency. The price the consumer sees in an advertisement must be the all up price consumers will pay when buying their travel.

For instance, fly Sydney to Hong Kong for $1,573. No more to pay! (In this case, the price includes $270 fuel surcharge; $65 Macquarie Airport Charges; $50 Australian Government taxes; $29 HKG Airport charges, $31 PRC Government taxes and $28 Flight Centre “ticketing fee”. Note: there will be no break up of the taxes and charges given. But only an all-up price will be advertised).

Option 2

An all-in-price advertising requirement providing the advertised price plus clear and prominent disclosure of all supplementary charges the consumer will pay, and their value. In this option, the consumer will be required to add the advertised price with the supplemental charges to ascertain the full and final price.

For instance, fly Sydney to Hong Kong for $1,100+ (Where the airfare excludes $270 fuel surcharge; $65 Macquarie Airport Charges; $50 Australian Government taxes; $29 HKG Airport charges, $31 PRC Government taxes and $28 Flight Centre “ticketing fee”).

Option 3

An all-in-pricing requirement provides for one entire all-in-price, but advertisers are permitted to separately list the supplementary charges and their value.

For instance, fly Sydney to Hong Kong for $1,573. (Where the price includes $270 fuel surcharge; $65 Macquarie Airport Charges; $50 Australian Government taxes; $29 HKG Airport charges, $31 PRC Government tax and $28 Flight Centre “ticketing fee”).

Passengers have every right to know exactly how much they will have to pay when they consider the purchase of a ticket. They also have a right to know if the extra charges are legitimately levied: for example is the Hong Kong tax as charged by the agent indeed correct? And shouldn’t Flight Centre’s “ticketing fee” be added to the ticket’s sticker-price rather than be added to the total for taxes? And if it is added to the taxes shouldn’t it be, at the very least, disclosed to the customer in advance? My quotes from Flight Centre make no mention whatsoever of this $28 “ticketing fee”. And in my case I was issued with a paperless e-ticket!.

Truth in advertising shouldn’t be something the public has to fight for. Every single impost that will be demanded of the passenger must be detailed clearly and accurately.

Too often, a great value airfare splashed in a glossy advertisement turns out to be either the same price or even higher than a competitor's price once undisclosed taxes and fees are added. Ticket prices, no matter the destination or the type of seat offered, should be clear, straightforward and all-inclusive.

Just like the next Liberal Prime Minister, Malcolm Turnbull.