The ACCC has taken action against Jetstar and Virgin because it says that booking fees they charge lack transparency when booking a flight on-line. They are hidden fees.
But has the ACCC set the bar too low? Should Australian airlines be required to fully disclose all ‘optional extra’ service charges in their flight price advertising?
Drip Pricing and the on-line booking process for air tickets
It was an impressive media release - ACCC takes action against Jetstar and Virgin for drip pricing practices (19 June 2014).
Drip Pricing is defined as the incremental disclosure of additional fees and charges during the online booking process. By taking the action, the ACCC is aiming to protect ‘consumers [who are] paying a higher price than the advertised price or spending more than they realise.’
The media release reveals that the ACCC’s action is limited to only one kind of drip pricing fee - the Booking and Service Fee of $8.50 charged by Jetstar and $7.70 charged by Virgin – per passenger per booking. The ACCC was aiming to force those fees to be ‘disclosed upfront and prominently with or within headline prices’ in the online booking process for a flight.
The airlines responded by saying that they were ‘Fees for Optional Services’ which could be displayed at the end, when payment is made.
The ACCC has succeeded. Jetstar and Virgin now prominently display the Booking and Service Fees payable on the screen containing the air fare information, which is an early screen following the flight selection in the online booking process, rather than at the end, on the screen where the air fare is paid.
What other extra service charges are displayed on the air fare information screen?
Full service airlines, and air fares which have more features, will include many extra service charges in the fare. Budget airlines, and basic or starter air fares, will charge extra services separately.
Booking and Service Fees are only one of many extra service charges that airlines add to the flight price during the online booking process.
Other fees include: excess, additional and checked baggage; seat selection, extra legroom and seat upgrades; food and beverages; merchant fees for credit card purchases; priority check-in; in-flight entertainment systems; and wireless internet connections.
Jetstar discloses that for certain fares, additional fees apply for checked baggage, which includes carry-on baggage that exceeds the 7 kg carry-on baggage limit. The amounts payable are not disclosed on that screen. Virgin refers to a baggage policy on its air fare information screen, but no amounts are disclosed.
The air fare information screen contains no reference to seat selection, extra legroom and seat upgrade fees. These appear on later screens in the online booking process.
How do international airline regulators approach transparency for extra service charges?
At the recent Annual Conference of the International Bar Association held in Tokyo, the Aviation Committee considered price transparency for airlines in a business session on How Can Airlines Generate Revenue? (20 October, 2014). Two presentations are of interest.
One was a presentation on the ICAO (International Civil Aviation Organisation) Core Principles on Consumer Protection that are currently under development. One principle which is being developed is that pre-travel, information including price transparency, must be given to the consumer.
The other was a presentation on the all-inclusive air service price advertising regulation in Canada (December 2012). It is a requirement for air price advertising that ‘each optional service offered for which a fee or charge is payable’ must be included in the ‘total price or range of prices’ when the price of an air service is advertised.
Conclusion – Are no more hidden fees possible?
Drawing upon the international approaches, the ACCC should request Australian airlines to display all of the extra service charges, not only the Booking and Service Fees, prominently and early in the on-line booking process and in their flight price advertising.
This would result in greater full price transparency for air travel consumers.