US Govt Votes to End Full-Fare Rule For Airline Tickets (e.g. Will now be Price + Tax)

neil on 31/07/2014 - 12:38
Last edited 31/07/2014 - 12:39

Sometime in the mid 2000s, advertising rules in Australia were changed for airlines to include taxes in their advertised prices. Before those changes, quite often you would see $1 airfare sales but when you actually went to look them up, there was say $50 extra in tax. I think we can all agree that we'd like to see all required fees/taxes/charges included in our airfares when advertised.

As far as I know, the US has had all inclusive pricing. In a step backwards, a new piece of legislation, "Transparent Airfares Act of 2014" has just been passed by congress. This would separate taxes from the base fare.

Jaunted article

Much of the media coverage has been quite critical of the decision, pointing out that 1) the name of the bill is misleading because the Act would actually reduce the transparency of ticket prices and 2) Pennsylvania Congressman Bill Shuster, who introduced the Act, owes much of his campaign contributions to United Airlines, Atlas Air, Airlines for America, and Delta.

and from NPR

The House voted Monday to allow airlines to advertise lower prices for their routes.

The Transparent Airfares Act, which was approved with minimal debate, would overturn a that requires airlines to post the full price of tickets, including taxes and fees.

"Before the full-fare rule went into effect, it wasn't uncommon to find an attractive ticket price — say, $299 for a transatlantic flight — but once taxes, fuel surcharges and other fees were added, the total fare came to $899," travel writer Christopher Elliott in The Washington Post. "That price was revealed only at the end of the booking process, frustrating passengers."

Watch this space especially if you are planning on making US bookings or booking via US airline sites. Given our current government has shown that it will pick what is best for big business over what is best for the consumer, it may be an issue to be to keep an eye on.

Travel

Comments

  • scotty on 31/07/2014 - 13:22
    +2

    That's bad. What's the justification for this? Just so that the airlines can advertise one price and then charge another?

    At the same time "price-not-including-tax" is probably inline with other things in the US where you need to add sales tax and/or tips on top of the price. It would be worse if Aussie companies and online retailers are allowed to advertise price without GST and other tax.

    • neil on 31/07/2014 - 13:44
      +5

      What's the justification for this?

      That's the question everyone is asking.

      From Chris Elliot

      Since then, I’ve received no complaints from air travelers about their inability to view the taxes and fees on their airline tickets. A representative for the Transportation Department, which collects complaints about airfares, also told me that it’s “unlikely” that anyone has asked it for more transparent prices. “Consumers have consistently confirmed to us that advertising of prices below the total cost of travel causes confusion,” DOT spokeswoman Caitlin Harvey told me.

      One can only assume that the airlines have pushed this change to legislators. From my US flight a couple of months ago:

      Fare Breakdown
      Airfare: 896.00 AUD
      Australia Passenger Movement Charge: 55.00
      Australia Safety and Security Charge: 4.22
      Australia Passenger Service Charge: 33.60
      U.S. Customs User Fee: 6.50
      U.S. Immigration User Fee: 8.20
      U.S. APHIS User Fee: 5.90
      U.S. Federal Transportation Tax: 41.00
      September 11th Security Fee: 12.00
      International Surcharge: 680.00
      U.S. Passenger Facility Charge: 5.30

      So Australia has 3 fees. I assume passenger movement is a fee to be paid to the airports and customs? Security for security. No idea what a passenger service fee is.

      Meanwhile the US has 7 fees. This is in addition to the fee you have to pay for an electronic visa. Do we really want to be shown base prices with all of these fees missing?

      • arameda on 01/08/2014 - 09:35
        +3

        Just FYI:

        The 3 Australian fees are actually higher than the combined US ones.

        The International Surcharge is a fuel surcharge from the airline, not the US govt.

    • sm007h on 31/07/2014 - 21:33
      +3

      You have to follow the money trail to find the motivation behind this. Look at the relationship between the senator sponsoring this bill and the airlines that stand to benefit from this, especially look at campaign contributions.

      This is the type of system that the Libs are trying to introduce to Australia.

  • strangeloops66 on 31/07/2014 - 13:44
    +6

    I just cannot believe that that the Act is named "Transparent Airfares Act 2014". Sounds like something from 1994.

  • strangeloops66 on 31/07/2014 - 13:56
    +3

    The Passenger Movement Charge is the old Departure Tax. It has nothing to do with in-flight bowel movements.

    In June 2013 the International Air Transport Association released an economic briefing showing the damage the PMC does to the Australian economy. Its analysis showed that by abolishing the A$55 charge, it would equate to a 3.5% drop in average ticket price on airfares to Australia, which would result in an increase of 2.5% in international passenger traffic to Australia (based on an elasticity of demand of 0.7).The additional benefit the additional visitors would contribute to the Australian economy is estimated at A$1.7 billion. This would result in net benefit to the Australian Treasury even accounting for revenue loss.

    • one man clan on 31/07/2014 - 16:01
      +3

      These reports are such garbage. I'm sure the International Air Transport Association has no vested interest in reducing taxes in its area of revenue.

  • Orion on 31/07/2014 - 19:03

    No one ever said americans were smart! ….

  • zambuck on 01/08/2014 - 08:16
    +2

    This is one of my pet peeves. Imagine walking into Maccas and being told a Big Mac is $2. You go to hand over your gold coin when they add: Plus business name registration fee, car park surcharge, cooking gas surcharge, payroll tax, franchisee fee and bowel movement charge.

    What percentage of people will happily reach into their pocket for the extra $5 in non-optional fees and not feel like they were just told a blatant lie? I don't really want a balance sheet to audit every time I buy something, I want to know the price. If I want to know later how much they spend on their input costs, perhaps I'll ask.

    • IdBuyThat4aDollar on 01/08/2014 - 13:40
      +1

      Thats actually how it was when I was in USA last year. I ordered a meal from maccas, and based on the price shown on the menu I had the exact change ready to get rid of my coins. Then I find out the advertised prices didn't include tax, so I just handed over a note. So annoying!

  • Ayanami on 01/08/2014 - 09:04
    +1

    From memory, I think the reasons the US clearly separate their tax from the purchase price in advertising is that, way back in historical times, people complained that they weren't aware how much they were paying to government in tax whenever they bought something. Blah blah blah. Would make more sense to have to advertise both figures next to each other rather than just the pre-tax price.

  • StewBalls on 01/08/2014 - 09:52
    +9

    US Congress…the best legislators big business money can buy! :/

    • retiredfeline on 01/08/2014 - 23:34
      +1

      Yes, that's what a USAn told me once: We have the best government money can buy. :)

  • sagrules on 01/08/2014 - 10:11
    +1

    When is this policy effective from?
    Really peeved at this because they already do the same thing when they advertise their hotel rates online and then add on resort fees (paid at hotel) when you go to check out, parking fees etc.

    • neil on 01/08/2014 - 10:16

      From the Jaunted article

      The bill now moves on to the Senate and, if passed, to President Obama to sign or veto.

  • YTW on 01/08/2014 - 10:17
    +5

    The base price is meaningless. Especially on an item where the taxes/surcharges are dependent on the fare selected - so you can't even estimate what the final price will be just by looking at the base fare.

    Wait and see which politicians get a cushy job sitting on the boards of airlines and you'll see who's behind this. America is run by companies, not people. It's such a shame we seem to be heading that way.

  • VFM on 01/08/2014 - 12:36

    Disclaimer: havent read the legislation.

    The title seems more like a law to provide a breakdown of the charges.
    * what does an "Airport Tax" really consists of?
    * what is "Security Fees"?

    I would guess that it is an attempt to increase transparency as to where the money is going.

    I wont call that a dumb move. In fact, too often too many components of a package get lumped together. I would call it "dumbing down". It makes it easier, not necessary smarter. (Ask the guys who build PCs, or those that "custom" build at Maccas).

    However, the airlines might decide to take "advantage" of a legal requirement to provide breakdowns, and (ab)use it to stop providing the "total price". Doubt if such an action will sustain any increase in sales. It would only serve to complicate pricing, confuse and frustrate and agonise consumers. Not smart at all.

    I might be totally wrong too :-)

  • [Deactivated] on 02/08/2014 - 07:36

    2 Words BIG BUSINESS. Have a look into farming subsidies over there. It only supports massive corporations and they don't help fruit and vegetable farmers which are the ones actually getting nutrients and vitamins into people. It's pretty sad but just appreciate the fact we lived in a fair country while we were young and we will soon be Americanised.

    Just look at our Education: http://www.smh.com.au/federal-politics/political-news/educat…

    Or our Health system: http://www.smh.com.au/national/fears-of-usstyle-health-syste…

  • scottb721 on 02/08/2014 - 15:27
    +2

    What's the opposite of progress?

    Congress

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