21 December 2009

EC Investigates Taxes and Fees. Doesn't Like What It Sees - Likely To Legislate

One thing you can say about the European Commission (EC) when it doesn't like something - it acts pretty quickly. With the powers of judge jury and executioner, the EC has broader powers than those of the usual sovereign state authorities.

The Commission formed a committee to investigate airline fees and taxes. his Project Study group has just released their findings. The 25 page report is clear and concise.

"The investigations that were conducted in relation to this Common Activity involved an examination of 281 flights and contact with 34 airports and 24 airlines. These investigations and contacts form the basis for the conclusions reached in this report."

The conclusion of the report should give a clue as to how the EC will act in the future:

"The practical knowledge gained by the participants during the course of the Common Activity has fostered a new understanding of the airline industry within the respective consumer authorities. As such, the completion of this report represents a starting point for increased consumer protection cooperation across Europe, clearer guidelines for airlines on how to present air fares to consumers and, most importantly, more transparent transactions for consumers purchasing flights."

The study itself surprisingly had small amounts of representation. only 10 of the 29 EU nations were included. Under the direction of Norway's Consumer Ombudsman, the group did not include participation from the two major travel markets of UK or Germany.

The carriers investigated were:
*Aer Arann
*Aer Lingus
*Air Berlin
*Air France
Austrian Airlines
British Airways
Brussels Airlines
Czech Airlines
Estonian Air
Iceland Express
Malmö Aviation
Polish Airlines LOT
Travel Service/Smart Wings
Note those with the * chose not to cooperate.
34 Airports were also evaluated.

Ths study showed that of the Fees and Taxes charged (TFCs in the EC's speak) only 41% were directly levied by a government body or airport. Of the remainder more than half was attributed to Fuel Surcharges. Given that the study was done at the end of 2008 - it is likely that the percentage of TFCs has grown since then and the proportion of non Tax levied charges has also increased.

The Study group found that many of the airlines were not in compliance with EC rules. It specifically states that to be in compliance an airline has to ensure that its charges as represented on the website should be:

To be in accordance with Article 23, government taxes and airport charges must be:

clearly distinguished from other charges and
correspond with the actual amounts levied by airports and governments.

A follow up of the airlines in June and July this year showed that several airlines are still not in compliance. Also a noticeable exception - "Optional services – for example food/beverages, seat reservations, insurance or luggage – have not been scrutinized in this project."

The project study group made a number of direct recommendations. Here are the main two:

"The project group therefore recommends that all air fares should be comprised of the following elements: the basic air fare, airport charges and government taxes which are levied per passenger and the total price. All other unavoidable TFCs should be included in the basic air fare.
Further fees should only be added to the ticket price provided these are genuine optional fees and not mandatory costs all passengers are obliged to pay."

"The project group consequently recommends that passengers travelling in Europe should have a clear legal right to be refunded all airport fees and government charges which are not due. If the ticket for air transport is not used we believe that passengers should be entitled to repayment of all prepaid taxes and charges imposed on passengers by airports and governments and collected by airlines."

I believe that Article 23 regulation will be revised soon to address these issues. This will make the display of information simpler but will impose a set of conditions on airlines that will be hard for their systems to comply. The study while applauding the ability of the consumer to shop (presumably via the Search and OTA sites) did not address how they may also be required to display this information.

So chaps you have been warned. Offer airline products for sale and you will need to be pretty explicit.


PS If you want a copy of the study - please ping me.

No comments: