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FLYING LOW

17-06-2009

Channel Air Bridge

Stirrer blogger Richard Lutz had a rant yesterday about the hidden charges levied by budget airlines. Andy Goff defends the no-frills operators.

Airline departures are like fruit and veg; once they’ve gone off they have no value. So, like good grocers, airlines try to maximise the value of the goods before the shelf life is over.

An aircraft, like an Airbus A319, might have up to 124 seats available for sale. Each seat can have a different value depending on when a passenger books it. No-frills airlines will allocate maybe 5 seats on a flight to the rock bottom end of the price scale, maybe more on those flights departing on unpopular days and times. Try early on 1st January to most places.

Some months in advance of departure they will watch how bookings are going and start moving prices around. If it looks like an unusually poorly populated flight they might allocate more seats to lower fares. Popular looking flights will have the lower end fares removed - supply and demand in action.

Of course, if not enough seats are sold to make the flight viable it will probably have a ‘technical fault’ and be cancelled or consolidated with another flight. The actual cost of operating a flight will remain largely the same, depending on what happens to fuel costs and how clever the airline is in forward buying aviation fuel.

There was a time when airlines paid travel agents 10% commission on international flight and 7.5% commission on domestic flights. I think Ryanair, in the UK, was the first to stop paying any commission to travel agents following the precedent set by Peoples Express in the USA.

There was also a time when a travel agent earned that commission on the whole ticket price which included lots of costs the airline had to pay out. Such as landing fees, security charges, ground services like toilet emptying, on-stand charges (a nice warm walk down a tube or a chilly walk across the tarmac) and a host of other costs inherent with running an airline and an airport.

I think it was the Americans who realised that they could offer lower fares by stripping out some of the charges from the fares and showing them separately, and it meant they weren’t paying agents’ commission on them as taxes are collected net of any earnings.

Gradually the ‘advertised’ fares became lower and lower and the ‘taxes’ went higher and higher.

Agents’ commission went lower and lower and earnings went lower and lower. When a customer paid by debit or credit card for a ticket the agent would end up paying the card company commission on part of a cost on which they earned nothing and often collected on behalf of a government.

For example: Air fare £100 taxes £25 total £125. Commission earned £10. Customer pays by credit card @ 2.5% - Cost £3.13. Earning to the travel agent £6.87 for possibly an hour’s work. Wow!

Anyway, slowly governments, airlines and airport operators became enamoured with an easy way to raise dosh by not just charging indigenous taxpayers on their holiday and business trips. They also discovered they could tax foreigners as well. Super.

Many of the costs an airline faces they will have to pay regardless of whether or not they have passengers. So best to ensure ALL the seats have bums on them because they, the passenger, will pay the taxes.

Admittedly some of the taxes are passenger dependent. That is, only payable if a bum is on a seat, but many are aircraft costs payable even if the plane is empty. And, of course, a bum on a seat means a wallet in the pocket to be emptied by value-added sales of food, baggage handling, what-was-but-often-is-not duty free sales, pens, over priced cuddly bears and, if Michael O’Leary has his way, on-board micturition and defecation.

So when you see an advert for 1p fares and then see the taxes added on afterwards, think about how much per mile in total you are paying rather than feeling ripped off.

And spare a thought for lowly travel agents. I was once a travel agent and the commission paid by airlines for the joy of making a sale on their behalf was cut from being a percentage based on the ticket value to being a flat rate of £2.50. It could be well be less now. I wouldn’t know as I sold the travel agency. Phew!

To see Richard Lutz' Blog click here

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