Flying blind on air-fare fuel levy
Local travel agents to battle surcharge imposed to cover ‘high cost’ of oil — which is now at 12-year low
SOUTH Africa’s travel agent watchdog is taking on the airlines — not only locally, but on a global scale.
At the heart of the Association of South African Travel Agents’ beef with major airlines is the mandatory fuel levy added to bookings for many local and most international flights.
The oil price is at a 12-year low — trading at around $30 a barrel from record highs of over $120 — but the fuel surcharge has largely remained the same.
Asata wants the levy included in the base fare to provide an all-inclusive, transparent air ticket price.
It says the ticket price should be directly related to the cost of doing business, as well as supply and demand. It shouldn’t be linked to “recovering an elevated cost that is no longer elevated”.
The charge, which can add 40% to the price of a ticket, also prejudices frequent flyers, many of whom are able to use their accumulated miles or points to cover only the base fare.
Corporate discounts, too, are calculated on the base fare only.
Asata’s 34-page study of surcharges, completed last year, has been adopted by the World Travel Agents Associations Alliance to lobby airlines.
The Brussels-based alliance says the surcharge is no longer acceptable given “the many changes to consumer laws and inclusive pricing legislation that are sweeping the globe”.
Indeed. The issue is being addressed in the US, Europe and Australia; several airlines, including Qantas and Virgin Australia, have already absorbed the levy into their basic fare.
In the Philippines, fuel surcharges are no longer allowed, and just last month, the Hong Kong civil aviation department stopped airlines levying surcharges for any flights originating in Hong Kong, until further notice. SAA has had to drop the surcharge on this route.
The surcharge is just one of various fees tacked on to base fares, often described misleadingly as “taxes”.
Only one of these extra charges is actually an air-passenger tax, levied
FLEECED: The fuel surcharge, which can add 40% to a ticket price, prejudices frequent flyers by the South African Revenue Service, and only for flights leaving South Africa.
The other two regulated charges go to the Airports Company South Africa and the Civil Aviation Authority.
A third, unregulated charge goes to Aviation Co-ordination Services, a nonprofit entity created by the airlines. The final charge, the fuel levy set by individual airlines, is one of the largest charges on a ticket. (See box, above right.)
So what does the airline industry have to say about all this? Sadly, very little.
The Airlines Association of Southern Africa and the Board of Airline Representatives of South Africa, which speaks for international airlines flying to South Africa, declined a request by Asata to meet.
“Nobody wants to engage us in a conversation,” said Asata CEO Otto de Vries. My attempts were equally futile. Airlines association CEO Chris Zweigenthal said it would be “anticompetitive” for any body to tell airlines what surcharges should be included. Board of representatives CEO June Crawford declined to comment. The International Air Transport Association, representing the world’s airlines, also sidestepped the issue.
Meanwhile, SAA spokesman Tlali Tlali claimed jet fuel had not reduced in price the way crude oil had, something Asata disputes.
Said Tlali: “The pricing policy adopted by any airline is the heart of the entity’s survival.
“The idea is to strike a balance between what the business can charge and what customers are willing to and capable of paying.”
But can SAA substantiate that the levy reflects actual costs of fuel per passenger, I asked.
“We cannot disclose our internal pricing model to the public,” said Tlali.
British Airways, operated by Comair, said it had reduced its average domestic and regional fuel surcharge by between 20% and 30% in February last year.
Spokesman Shaun Pozyn said the surcharge allowed airlines to make fare changes across the thousands of fares displayed on global aggregation systems used by travel agents.
Stephen Forbes, spokesman for BA’s international flights, said a separate fuel surcharge no longer existed on flights to and from the UK and Europe.
Instead, “carrier-imposed charges” were introduced in October last year. These were not linked specifically to fuel prices.
So what exactly are they linked to?
“We do not comment on the detail of our fares,” he said.
FlySafair spokesman Kirby Gordon said the risk inherent in changes to the oil price was priced into its air fares.
“In the end, airlines, travel agents and all parties in-between are ultimately answerable to the end customer and that customer has the right to understand where the money they pay is going.”
Local aviation industry expert Linden Birns said Asata’s contention ignored several factors, including that fuel prices varied, with spot prices at many African airports sometimes more than 200% higher than the global average.
Currency devaluation and hedging — in which a fuel price is agreed for a set period — added further pressure, he said.
Asata’s next stop is the National Consumer Commission, which was not able to comment.
Section 48 of the Consumer Protection Act says no price may be unfair, unreasonable or unjust.
I asked the consumer goods and services ombudsman, Neville Melville, what else consumers could rely on when challenging such a surcharge.
“One of the guiding principles of the act is its preamble: to improve access to, and the quality of, information that is necessary so that consumers are able to make informed choices,” said Melville.
There was also section 3, which referred to the promotion of fair business practices, protecting consumers from unconscionable, unfair, unreasonable, unjust or otherwise improper trade practices and misleading, unfair or fraudulent conduct.
Looks like our consumer authority — and in fact every consumer authority worldwide — is going to have to seriously apply its mind.