TAXES, FEES AND CHARGES: Follow up report to - Air Transport ...

TAXES, FEES AND CHARGES: Follow up report to 2005
AUC report on pricing on airline websites
Background
In 2005 the AUC published a report into the taxes, fees and charges (TFCs) quoted by
various airlines on their websites when passengers booked flights. TFCs included
items such as Air Passenger Duty, local airport taxes, passenger service charges and
fuel, security, insurance and even wheelchair surcharges. For the report, we compared
the TFCs charged by different airlines serving identical routes.
We found that TFCs were often quoted separately to the base fare and in the late
stages of the booking process. They were typically added after passengers had already
chosen their flights and were just about to confirm the booking. This separation out of
TFCs reduced the base fare, making it appear more competitive with other airlines’
fares. Some of the TFCs such as government airport taxes are indeed levied by a third
party, but others could be considered costs of doing the business. For example, many
carriers itemise fuel costs separately as “fuel surcharges” whereas they are in fact a
cost of doing business - like cabin crew uniforms or in-flight catering.
The AUC was concerned that passengers might not be aware that different airlines
charged different levels of TFCs, even on identical routes, because they assumed that
TFCs were imposed by a third party and were therefore standard across all airlines
operating on a route. They might therefore not look at other airlines’ websites for
comparable fares, but continue with the booking when there might be a cheaper total
fare available with another carrier.
To see if our concerns were valid, we commissioned some market research into airline
website pricing. This showed that only 43% of those passengers who had booked air
tickets online were aware that airlines often charged different levels of taxes, fees and
charges (TFCs) on a particular route. And only around half of those surveyed
understood what TFCs comprised.
Update
In April this year, we decided to see if there were still differences in the TFCs quoted
by airlines operating on a route. We found that many airlines, including British
Airways, Virgin, Bmi, and Air Southwest now included TFCs in the fare throughout
the booking process. However, we also found that many other airlines, particularly
budget carriers, still separated out TFCs from the main fare. There are still differences
in the totals of taxes, fees and charges (TFCs) charged by these airlines operating on
identical routes. The table below shows some examples;

Route
Stansted to Alicante
Belfast to Ibiza
Birmingham to Aberdeen
Newcastle to Krakow
Glasgow to Birmingham
Airline
TFCs
(return flight)
Easyjet £22
Ryanair £38.93
Easyjet £20
Jet2 £29.20
Flybe £51.30
Bmibaby £37.90
Jet2 £28
Easyjet £21.50
Bmibaby £38.95
Flybe £50.30
Conclusion
There remains a risk that passengers are not aware that airlines charge different TFCs
on a route and therefore might not look at other airlines’ websites to compare fares. In
addition, passengers now have a further problem in that they must compare prices
between those airlines that include TFCs in their prices and those that don’t.
The solution is for all airlines to quote fares inclusive of TFCs on their websites. This
would mean that passengers would be aware of what they would be paying in total up
front and be able to compare airline fares on a like for like basis and therefore would
not be potentially misled into booking with one particular carrier over another.
Moreover, if all airlines were to do this then there would be no competitive advantage
for one airline over another and they would have no incentive to separate out TFCs
from the base fare.
Air Transport Users Council (AUC)
4 May 2007