BOOK A BRITISH AIRWAYS FLIGHT from Heathrow to New York JFK for the middle of November and roughly 10 per cent of a typical base business class fare – before all taxes, fees and other charges – will be attributed to some- thing called a ‘carrier imposed charge’. The airline’s explanation on its website says that the charge is “based on flight duration and covers all passengers...”. But there is now no mention that the
charge (which varies according to the length of the flight – for example, the charge from the UK to the US east coast is £319) might “reflect fluctuating oil prices”. This was the caveat given (and until rela- tively recently was still on BA’s website) when it was first introduced in the mid- 2000s, at time when the oil price (and hence jet fuel) had escalated alarmingly. BA, however, has now become rather reticent to talk about fuel surcharges and declined to provide Buying Business Travel with further details of what is included in its ‘carrier imposed charge’. BA’s arch rival, Virgin Atlantic, remains slightly less coy, justifying its own ‘carrier imposed’ surcharge (again, £319 on a trans- atlantic east-coast flight) simply as: “We may be able to fly in the sky, but there is no escaping the cost of fuel and other charges.” All very true. But fuel and other costs of flying, such as airlines paying airport owners to use their runways and ter- minals, are simply the costs of doing business that many travellers would perhaps expect to see included in the base fare. In any case, fuel surcharges seem a one-way deal: there has been no suggestion from the airlines of reducing them when prices fall, as has been hap- pening in recent months. But the airlines are now coming under
pressure to cut them. In October, Paul Wait, CEO of the Guild of Travel Man- agement Companies (GTMC), called for the elimination of Air Passenger Duty (APD), although he accepted that “a cut in fuel surcharges by airlines, however, is a viable alternative to making air travel a more affordable and a viable way to incentivise businesses to travel further and grow faster”.
TRANSPARENCY AND COMPLEXITY But there are other, less obvious reasons why the corporate market should be
BUYINGBUSINESSTRAVEL.COM
The ‘elephant in the room’ for corporate travellers is the potentially adverse impact on the way travel is managed
While US airlines have been the most
aggressive in charging for hold baggage and other products, European ‘full-service’ carriers are starting to catch up. While BA, for example, launched hand luggage-only fares for most UK and European flights last year, it now charges up to £65 for hold baggage if the passenger later changes their mind at the airport. On international flights, the fee for an extra checked bag rises to £140 when paid at the airport.
concerned about the transparency and complexity connected to the hidden costs of flying. “As fuel surcharges are charged by airlines in the taxes line rather than on the fare, the focus during negotia- tions is almost invariably on the fare price, with taxes seen as an assumed cost and, therefore, non-negotiable,” points out HRG director Paul Dear. Most airline ‘taxes’, moreover, are not as compulsory as they seem. APD is the only true tax on departing UK passengers (top-rate at present in premium cabins is £194 on long-haul journeys, dropping to £142 from next April), and no VAT is charged on flights. But this does not stop airlines adding such extra fees as a ‘pas- senger service charge’ to help cover the charges levied on them by commercially owned airport operators, such as Heath- row or Gatwick. Welcome to the wacky world of the 21st
century aviation industry, where recent years have seen nearly everything that used to be included in the price of a ticket now charged separately by airlines. Every- thing from transporting your luggage to securing better seats on the plane is now considered fair game for domestic and international carriers as they ‘unbundle’ the cost of flying. And it has proved a lucrative move for the airline world. According to a new report from US aviation consultancy Idea Works, the ancillary revenues earned by 59 airlines from around the world (using data from published accounts) surged to a record US$31.5 billion last year. Not surprisingly, this has transformed the economics of global airlines: a collec- tive net loss of US$26 billion in 2008 is set to turn into a profit of US$18 billion this year, according to estimates by IATA.
ANCILLARY REVENUES BA, in fact, earned a total of £325 million in ancillary revenues last year, according to Idea Works using the airline’s latest accounts. Although the bulk of this (£190 million) came from its BA Holidays opera- tion, the consultancy says that £45 million also resulted from paid-for hold baggage and £40 million from travellers paying to choose their seat allocation. A further £50 million came from travellers upgrad- ing their cabin choice. Virgin Atlantic was said to have earned
ancillary revenues last year of about £130 million, with 80 per cent of this pro- duced by its Flying Club frequent flyer programme. Only some £13 million is believed to have come from baggage fees.
WORRYING ISSUES While airlines are clearly benefiting from ancillary revenues, the ‘elephant in the room’ for corporate travellers is the potentially adverse impact on the way travel is managed. The worrying issues for travel buyers and their travel management companies (TMCs) centre around transparency, data collection and expense reconciliation. “The process of booking a flight has become more complex as the tools and solutions used by companies struggle to keep up to enable transparent fares to be presented,” points out Antony Elliott, vice- president for sales in the EMEA region at Chambers Travel, who believes this is a “big concern for the corporate buyer and their travellers, not only in cost but also in lost time”.
He adds that the lack of transparency
generated by “hidden costs such as check- in fees and charges for additional luggage” often confuse corporate travellers, who then “revert to solutions outside of the managed programme”.
BBT NOVEMBER/DECEMBER 2014 25
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100