As I was sitting here trying to come up with a good topic for today’s article, I took a call from a client who wanted to know why the airfare that I quoted yesterday had gone up $50.00 and why the advertised price on the airline website showed a lower price until it was booked, when the price jumped up considerably.
I explained to my client that airfares are not guaranteed until the ticket has been issued. He said that he knew that but he couldn’t believe that the airlines would raise the fare that much and that quickly. I then pointed out that domestically the airlines change fares about a million times a month according to a number of industry reports. Sometimes they go up and sometimes they go down but they change constantly. What was harder to explain was the fact that the base price of the airfare had remained unchanged overnight, what changed was the fuel surcharge. The fuel surcharge is a means for the airlines to cover the higher cost of fuel without having to raise the fare. Why would they want to do that? It’s really a case of marketing and nothing more. The airlines have learned that if you can advertise a low fare, you get increased business, even if the actual cost include taxes, surcharges, etc. is significantly higher. People plan on going and once they get into the process of booking, they don’t like to back out, even if it is more expensive than they had originally thought that it would be. There are those out there who accuse the airlines of bait and switch, I’m not one of them because they aren’t offering one thing to get you in the door and then switching to a more expensive item, no, I think what they are doing is deceptive but it doesn’t really fit the traditional definition of bait and switch.
Let me give you an example of what I mean. Right now, Icelandic Air is offering a roundtrip fare from New York City to London and back for $68.00. That is the advertised price. There generally is an asterik that directs your attention to the fine print. Some restrictions apply, the price doesn’t include taxes, fuel surcharges, etc. and so forth. This disclaimer allows the airlines to advertise one price but that price doesn’t include a lot of what you might expect to be included in the price of an airline ticket. In the case of Icelandic Air, the base fare is $68.00, there is currently a fuel surcharge of $111.00 in each direction or $222.00 roundtrip, so just for the seat and the fuel, you are looking at $290.00. Then comes the taxes that are levied on your airline ticket. There is the $5.50 Customs User Fee, the Immigration and Naturalization Service Fee of $7.00, the US tax of $32.20, the Animal and Plant Health Inspection Fee of $5.00, the USA Passenger Civil Aviation Security fee of $2.50, then there is the British tax of $73.42, the Air Duty fee $34.59 and last but by no means least, the Passenger Facility Charge of $4.50. That’s $156.55 in government imposed taxes and fees. That brings your grand total to $468.55 for the airline ticket that is advertised at $68.00 roundtrip.
And to be fair, we can’t single out the airlines for this, the car rental companies do the same sort of thing. The daily rate for your car rental might be $45.00 a day, plus taxes and surcharges. A couple of weekends ago when I rented a car and they were running down the list of fees, which included a fee for recovering the cost of doing business at the airport and an “energy surcharge”. When I asked about that one I was told that it had to do with covering the cost of filling the vehicles up. I pointed out that I return the car full or they charge me some outrageous amount per gallon to fill it up or if I’m going to be doing a lot of driving I take the prepaid fuel option. Either way, I’ve already covered the cost of filling up the car. I don’t think it is right to ask me to pay to cover the cost of me filling up the car. When I asked the representative of the car company, he told me that it actually goes to cover cost of things like lights and such. When I pointed out that was part of the cost of business, he told me that the car rental companies are afraid to raise their rental rates for fear of driving off customers and so they have followed the airlines lead in tacking on fees that hide in the fine print. And here again, let’s not forget the 12% to 20% in taxes that State and local governments impose on car rentals. It isn’t unusual for taxes and fees to make up 35% of the final bill on a car rental.
Lest you think that this trend is confined to just airlines and car rentals, hotels are just as guilty for adding charges, like resort fees for amenties that you may or may not use or a fee for “free local” calls, even though you are using your cell phone or a number of other creative revenue sources that hotels believe that they can bill their customers for without it negatively impacting their bookings. The problem with most of these fees is that the hotel doesn’t allow you to opt out of them, which would seem to make them part of the room rate. And then you get the taxes and fees charged by State and local governments that are used to build sports arenas or are used to fund other local projects that the local voters don’t want to pay for. This is called taxing those that can’t vote you out of office. There is a downside, if these get to be too painful, conventions and tourists will stay away.
While I understand and truly appreciate the need to turn a profit. I think these companies are underestimate the ill will that these practices generate among consumers. If you visit any number of consumer travel related websites and read the comments or follow travel discussions online, you see a lot of comments alluding to the fact that customers feel like they are being taken advantage of by many businesses in the travel industry. While the consumer may be powerless when all the airlines or all of the car companies, etc., adopt the same practices, it doesn’t mean that they like it and it certainly isn’t viewed as good customer service.
I would suggest that it makes sense to unbundle certain costs however when one unbundles fuel from the cost of a flight, I have to ask, exactly what is the customer paying for with the base fare? Shouldn’t that be included in the airfare? Likewise, if it is unbundled, doesn’t that imply that the fee or item is optional and the consumer should be able to opt out of it. For example, the fee for each checked bag allows passengers who travel light to choose not to check a bag, whereas those who need to take more along on their trip, can pay for it. With some of these fees, the consumer is not given that option, in which case, I believe that cost should be included with the base rate charged for the service.
As far as government imposed taxes and fees, I understand the motive of taxing those that don’t have a say however one needs to be careful not to kill the goose that lays the golden egg. If the taxes and fees get to be too burdensome, people will decide to go elsewhere. Anyone remember New York City when their room taxes and fees were hitting 20% and conventions and tourists started going elsewhere. And when you have taxes and fees on an airline ticket that are double the base fare, that seems excessive. While there aren’t many options to flying transatlantic, it may discourage people from traveling and that is bad for all of us.
So next time you think that the price you are paying is too much, take a look at the breakdown of what you are being charged.