18 July 2009

UAL CC Fees To Cost Consumers $2 billion?

The now big political spat over credit card fees that UAL want the agents to shoulder has everyone weighing in.

As Richard Eastman noted many weeks ago this has significant potential implications. However as I have noted - this is not something for everyone to get their noses bent out of shape on. We do have many other issues that are perhaps more important.

But let's play along with ASTA's Paul Rudin and use his $2 Billion number. If we accept the US represents about 1/3rd of total global traffic then this number would triple worldwide.

Thus we can say that now credit card fees comprise approx 3 times the cost impact to the airlines than GDS fees.

Etc Etc - Lots of big numbers to worry about.

Credit card fees are in the cross hairs of the airlines. Rightly so. As I noted in a recent post - with the near banks withdrawing from the credit card market we are seeing a pretty significant and steep increase in the imposition and collection of fees by the bank based credit card companies. Just like the airlines - CC companies have learned the unbundling trick. Although I am not sure who trained who in this bad set of practices.

There can be no doubt that the cost of using a credit card has risen and is rising for both Merchants and Consumers. In Europe and Asia/Pacific, having credit card fees covered by the consumer rather than a merchant is much more common behavior. Here are some examples from the UK:
Ryanair charges £5 per flight whether flights are booked online, via a call centre or at an airport. EasyJet levies a £2.95 booking fee, Flybe's charge is £2 per one-way journey, but rather confusingly lists a minimum fee of £3.50. Aer Lingus charges a £4 handling fee and British Airways charges a hefty £4.50 per ticket.

Ryanair recently lost a significant court fight that may have long time reverberations. The Superior Court of Justice in Berlin cited a European Union directive, which states that the charge is "inadmissible" unless Ryanair offers a charge-free method of payment too. They ruled that while FR offers free charges via Visa Electron the low penetration and usage of these cards made it largely irrelevant. This ruling could then reverberate around Europe.

Frankly we have to consider that if the US airline industry was to lose $3+billion this year, passing off more than 50% of that to the consumer is too large a number to avoid. So you can be sure United must be weighing its options - it may now be too late for people to back down.

What do you think?


1 comment:

simple123 said...

I DO NOT NEED A VISA ELECTRON CARD or other currently advertised accounts and credit cards to avoid Ryanair’s extra credit card charges/fees, IF I had the facility to pay for the product I buy by cash or another option without paying extra fees on the credit card. Changing accounts, waiting for approval, passing on all my personal information again, costs money, time and is just tricking / forcing me into another deal.
But Ryanair and now more other companies (maybe even the banks owned by the governments who bailed out these banks) do not offer the cash or other facilities to pay without extra charges anymore. It is not negative for the consumer to have no cash payment option, but it’s not fair, only to be able to buy the product with added extra charges!!!
This is not just about transparency, we as a consumer should have the right to pay for the product we are buying without the extra charges if no other facility offered.
Lets introduce an online payment facility to our employers, where they can only pay us via credit card, and find a deal with a credit card company and make extra money on our income!
This is why Ryanair has been taken to court by the German VZBV, where the judge ruled, that the praxis of adding these charges is illegal. The consumer should have the right of buying a product without paying extra charges. Read more on the website of the Federation of German Consumer Organization including public court order: