Do you find on-line booking fees, excess baggage fees, seat selection fees, food and beverage charges and entertainment charges by airlines to be annoying? Many passengers do, especially if they have selected the basic fare to save money and find these extra charges are ‘drip fed’ as they click through the booking screens to make an on-line booking; and to eat and drink and watch the in-flight entertainment when they board.
Budget airlines have a business model in which they charge separately for everything - it is called component pricing. The air traveller pays the basic air fare for a standard seat on the plane. The passenger pays extra service charges for anything extra.
Australian budget airlines are ‘world-class’ in charging for extras. Tigerair ranks 6th in the world with 23.6% of its income being ancillary revenue in 2013. Jetstar ranks 7th in the world with 20.6% of its income being ancillary revenue in 2013. For Jetstar, this was $US31.60 per passenger per flight.
If it wasn't for ancillary revenue, we wouldn't be making money in our business at the moment. It's that important. according to Bruce Buchanan, former Jetstar Group Chief Executive (2011).
The ACCC has taken an interest to compel airlines to disclose one of these extras - the on-line booking fees up front, when the air fare is quoted.
In June 2014, the ACCC took action against Jetstar and Virgin to bring forward the disclosure of their on-line booking fees of $8.50 for Jetstar and $7.70 for Virgin from the last screen in the on-line booking process where payment is requested to an early screen where details of the air fare are displayed, in the interests of greater ‘price transparency'.
The ACCC has succeeded and the on-line booking fees are now disclosed with the air fare.
But has the ACCC gone far enough? Should the ACCC force airlines to avoid misleading the travelling public by displaying the other extra fees early in the booking process and on their websites, rather than allowing the airlines to ‘drip price’ these?