"A deal to take your breath away, fine print to put it back"

Thursday, March 17, 2005

A deal to take your breath away, fine print to put it back
The airfare ad seems to present a great bargain, but the tiny disclaimer
listing fees and taxes tells the true story.
The Los Angeles (CA) Times

   
"LAX to JFK from $99!" "London from $215!"

Just kidding.

That $99 one-way fare recently advertised in newspapers by Delta's Song
carrier was really $109. British Airways' $215 fare was available only as
half of an LAX-London round trip totaling $543.

To find out how these fares grew, you need to forage among nearly unreadable
fine print at the bottom of airline ads. Lurking there are taxes and fees.
Even if you plow through it all, you probably won't be able to calculate the
true total.

This is common practice in the industry.

"Everybody does it," said John Lampl, spokesman for British Airways in New
York. "It looks like a lower fare, and it looks like a better deal. I
personally dislike it. I think it's deceptive."

United Airlines spokeswoman Robin Urbanski disagreed. The listings are not
deceptive, she said, because they conform to the law (more on that later).
Airlines generally do them the same way, she added, which allows consumers
to compare "apples to apples."

In an e-mail statement, low-cost carrier Song said, "We would be at a
distinct disadvantage if we did not present our fare information in a manner
that is equitable with our industry peers."

To read all that fine print, Lampl said, "sometimes I need a magnifying
glass."

No wonder. The type at the bottom of some airlines' newspaper ads is set at
5 points, less than two-thirds the size of the type you're reading now.

One recent United Airlines ad presented 29 tightly spaced lines, spread
without a break across 11 inches. That's about four times the width that
typography textbooks recommend for comfortable reading in this size type. I
had to squint and use a ruler to keep my place.

How do airlines get away with this? Or for that matter, the governments -
both U.S. and foreign - that levy most of these taxes and fees?

The answers have to do with tortuous regulations and our apparent decision,
as a nation, to make passengers, not the public as a whole, bear much of the
cost for airports, air traffic control and air security.

On the face of it, federal law seems to require airlines to state the total
fare, including taxes. Under a regulation in force for two decades, an
advertised fare is considered "unfair or deceptive . unless the price stated
is the entire price to be paid by the customer to the air carrier, or agent,
for such air transportation, tour or tour component."

But in practice, airlines are allowed to omit most taxes charged on domestic
air tickets - and virtually all taxes on international tickets - in
advertised fares, as long as they spell out the taxes in fine print.

That's because federal regulators distinguish between ad valorem taxes -
those based on a percentage of the fare amount - and all other taxes. They
figure customers would have a hard time calculating an ad valorem tax, said
Bill Mosley, spokesman for the U.S. Department of Transportation. So it must
be wrapped into the fare. The other taxes don't have to be.

On domestic tickets, there's just one ad valorem tax: the domestic passenger
ticket tax, which finances Federal Aviation Administration operations. It's
now set at 7.5% of the fare, a decrease from 10% since it was imposed in
1997.

The three other taxes keep getting bigger, and one, the security fee, is
headed for an increase this year, under a proposal by the Bush
administration:

The domestic flight segment fee, sometimes called the federal excise tax,
supports the FAA. It's charged on each "segment," or leg of the flight. So
you pay twice on a nonstop round trip and four times on a round trip with
one stopover each way. On Jan. 1, the fee, indexed to inflation, increased
to $3.20, up by 10 cents.

The passenger facility charge, sometimes called the local airport charge,
helps pay for improvements at airports. The amount varies by airport and is
generally owed each time you depart from the airport. The maximum,
originally $3 per airport in 1990, now is $4.50.

The security service fee supports the Transportation Security
Administration, set up after the Sept. 11, 2001, terrorist attacks. It's
$2.50 per segment, with a maximum of $5 one way or $10 round trip. The
proposed increase would boost it to $5.50 per segment, with a cap of $8 one
way.

Taken together, these three taxes can really add up, especially for rural
customers who don't have access to many nonstop flights. They are also
regressive; a vacationer on a $139 fare, for instance, pays the same three
taxes as a first-class passenger riding on a $1,000 fare.

The more you stop, the more you pay. A round trip between LAX and Lubbock,
Texas, with a stopover in Dallas-Fort Worth, racked up $60 in taxes on top
of a $291 base fare when I priced it recently on American Airlines' website.

But on a $286 LAX-JFK nonstop round trip on American, the taxes added only
$40.

International tickets are freighted with even more taxes and fees. The $543
British Airways LAX-London ticket quoted at the start of this story includes
$113 in taxes. Six are imposed by the U.S. and two by Britain. None is
assessed on a percentage basis, so none is quoted in the advertised fare.

Among the fees are an agriculture tax ($4.95), international transportation
tax ($14.10 each way), Heathrow Airport departure tax (about $23), departure
tax from Britain (about $38) and an immigration tax ($7).

Whew.

Back home, the proposal to increase the U.S. security fee has an uncertain
future. Airlines, labor unions and other groups are lobbying against it.

But whoever wins that struggle, one thing is nearly certain: The security
fee, like so many others, will continue to hide out in the fine print of
airline ads.

Don't expect that print to get any bigger either. Such type must be
"legible," Mosley said, but the DOT doesn't set a minimum size.


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