Understanding airline booking fees: a baffling ordeal
A year ago, when crude oil was headed for £100 a barrel, fuel surcharges were understandable. Now that the price of oil has fallen dramatically, the fees should go away, right? Nope. Especially thanks to airlines.
The relation between airlines and crude oil
Airlines have long wanted to use a la carte pricing, and high crude oil prices were just the push they needed to start charging all kinds of random fees. In some cases, the fees add up to more than the part that is officially designated as “airfare.”
Airline booking fees have long since gone beyond logic into the realm of grim humor. The tacking on of fees for every imaginable service is a worldwide phenomenon, too.
Ryanair alone has a litany of fees from a "Payment Handling Fee" to a "Priority Boarding Fee", and these fees differ based on currency and on whether they were booked online, over the phone, or at the airport (online is still usually cheapest).
Credit/debit card fees
If you do all this on your Visa Electron card, the airline will kindly waive your debit card fee, but that is as far as the free stuff goes. Paying fees with any other card will cost you at least £3.50. A Carte Bleue will also allow you to skip the fee for paying for fees on EasyJet.
Fair or unfair?
Whether the new pricing model is unfair or not depends on whether you’re an airline or a passenger. The Office of Fair Trade says that airlines have to include taxes and other compulsory charges in their headline prices. The OFT says that if those costs were genuinely optional, they could display them apart from the airfare prices.
For domestic flights, British Airways and Virgin cut their fuel surcharges by £35 each way at the end of 2008, and BMI announces with great flourish on its website that it has removed fuel surcharges altogether.
Why these fees?
The reason for many of those fees has to do with the amount retailers are charged by processors of credit card payments. Secure Hosting, an online provider of payment services says that setting up a merchant account costs from £75 to £250 to set up, and then service charges of 1.6% to 2.8% are assessed on credit card transactions. With debit cards, the cost is 20 to 50 pence per purchase.
Furthermore, there are no set standards for costs of processing credit cards. A spokesperson for APACS, the UK payments association tells my finances uk, “There are no laws governing how much a retailer can charge for the use of a credit or debit card.”
While retailers try to absorb those costs in the price of merchandise, they don’t have to, and in some cases, like with the airlines, they don’t. They simply pass them on to the customers.
Airline booking fees are a confusing matrix of charges that mostly came about from large increases in crude oil prices in 2008. That opened the way for airlines to shift to a la carte pricing, which allowed them to boast about very low fares without mentioning all the other fees that would be added on. Throw in fees that cover the airlines costs for processing credit card payments and you have a fee schedule so confusing that it’s far easier for most people to go ahead and pay the myriad fees rather than complain.