Bloomberg News

Airline ‘Teaser Fares’ Vanish as U.S. Spurs Tax Transparency

February 06, 2012

(Updates with Spirit’s response in 10th paragraph)

Jan. 26 (Bloomberg) -- Published fares on carriers such as Delta Air Lines Inc. and American Airlines will appear to jump by hundreds of dollars today for some flights as a new U.S. rule forces disclosure of mandatory taxes and fees in quoted prices.

While total ticket costs won’t change, airlines and travel agencies now must show an all-in number that combines the base fare with all required taxes and fees, according to the U.S. Transportation Department. Airline charges for optional services such as checked bags or in-flight Wi-Fi aren’t covered.

Gone are the “teaser fares” promoting trans-Atlantic flights for as little as $150, which can surprise fliers when they discover the total with all charges is closer to $800, said Charlie Leocha, a founder of passenger-rights group Consumer Travel Alliance in Springfield, Virginia.

“This is about truth in advertising, and it won’t be as deceptive anymore,” Leocha said. “They will have to show you the prices you can actually buy a ticket for. There’s no such thing as a ticket to Europe for $150 total.”

Airlines such as Delta, American and United Continental Holdings Inc., the world’s biggest carrier, have been adjusting advertising and data coding to prepare for the rule, as has Expedia Inc., the largest online travel agency, spokesmen said.

Spirit Airlines Inc., which has a $9 fare club that promotes heavily discounted tickets, made the changes this week while also accusing U.S. authorities of using the rule to disguise the scope of fees and taxes.

‘Hidden Agenda’

“If the government can hide taxes in your airfares, then they can carry out their hidden agenda and quietly increase their taxes,” Miramar, Florida-based Spirit says on www.keepmyfareslow.org. The website includes links to members of Congress.

U.S. Senator Barbara Boxer, a Democrat from California, sent a letter today to Spirit Chief Executive Officer Ben Baldanza expressing concern about what she called the airline’s “deliberate attempt to deceive the flying public” about the new fare rule.

“What the rule says is that you have to tell your customers the full cost of a ticket,” Boxer wrote, adding that the previous practice of showing only the base fare confused consumers.

Spirit is “disappointed” in her letter and would like to sit down with Boxer for a longer discussion about the issue, Misty Pinson, a spokeswoman for the airline, said in an e-mail message.

“We would normally expect senators to encourage First Amendment protection,” Pinson said. “We have always shown taxes before someone purchased. They now want them hidden. It is wrong and we will fight for consumers.”

International Tickets

The most-visible changes for passengers may be on international tickets, where taxes and fees passed on by airlines account for several hundred dollars of the price and can be double or triple the base fare amount.

For example, Delta’s website yesterday listed a round-trip coach ticket in May from its hometown hub in Atlanta to London Heathrow with a $338.40 base fare, while taxes and fees added another $599.20, bringing the total to $937.60.

“We had to make tiny programming and automation changes behind the scenes” to include taxes and fees with the base fare amount, said Morgan Durrant, a Delta spokesman. A link on the Delta.com home page will explain the fees.

AMR Corp.’s American was promoting a “travel deals” flight from Nashville, Tennessee, to Tegucigalpa, Honduras, for $286 one way on its website. With the return leg and taxes and fees, the total cost was $641.40.

Adding Data

All of AMR’s fare and itinerary searches will include taxes and fees as the customer selects flights to build a trip, Tim Smith, a spokesman for the Fort Worth, Texas-based carrier, said in an e-mail. Chicago-based United was in compliance with the rule earlier this week, said Mike Trevino, a spokesman.

The DOT has been considering a policy change on fare advertising since at least 2006, and said in the final rule issued in April that this change was to address a “bait and switch tactic by travel sellers.”

On domestic itineraries, taxes and fees are often less than 10 percent of the total ticket so the new disclosure rules may be less noticeable to those passengers, said Leocha of the Consumer Travel Alliance.

Southwest Airlines Co. joined Spirit and another low-fare carrier, Allegiant Travel Co., in asking a U.S. Court of Appeals in Washington last year to overturn the regulation, said Chris Mainz, a spokesman for Dallas-based Southwest. He said a ruling may still take “several months.”

“We think most people know that you see a price and know you’re going to pay government taxes and fees on top of that,” Mainz said. “The rule really addresses a problem that doesn’t exist. There’s no justification for treating airlines any different than any other product you’d buy in America.”

--With assistance from Mary Schlangenstein in Dallas. Editors: James Langford, John Lear

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net.


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