Monday, August 21, 2006

The cost of free travel

I gave up on efforts to use my family as a test for booking a holiday offline and went back to booking with frequent flyer miles and calling direct to hotels. Was able to find four free tickets on Qantas to my destination in the South Pacific. However as many of you will know free is not free in frequent flyer tickets. You still have to pay the taxes and charges on a ticket. In the old days this was just the costs imposed by governments and airports to make a trip. However in the new world, airlines have been using this bucket of costs as a place to hide operational costs especially the "fuel surcharge". These costs made my free tickets cost AUD$1,150 or just under $300 per head. I even had to pay $200 plus dollars in charges for my three month old daughter who will spend the entire flight sitting on my lap. As I said to the agent - "this is the most expense free ticket I have ever bought".

Qantas has been extraordinarily aggressive in pushing operational costs into the services and taxes bucket. They recently announced an increase in the fuel surcharge to $185 for Europe $145 for the US and for Asia, Pacific and Honolulu $115 (all up from $98). There is no justifiable accounting reason why the operational cost of fuel is put outside of the cost of the ticket. Fuel in an input cost just like staff, catering, technology etc. If an input costs goes up then Qantas should raise the cost of its tickets to compensate. Why does it make a difference where they charge a customer for extra fuel costs? Three reasons - advertising, frequent flyers and agents. It allows Qantas to advertise lower ticket costs they are not true; it makes frequent flyers (like me) pay more free tickets; and it denies commission to travel agents as they do not make commission on the charges part of the ticket. For a return flight to Europe that can mean as much as $25-50 that an agent does not make on a flight.

Qantas has a right to pass on the increased cost of fuel but by hiding it in the fees and charges section and not the ticket costs it is ripping off agents and annoying frequent flyers.

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