We've all seen those airline ads. "London $224," they scream in eye-catching type. Far below, in small - make that microscopic - print comes the catch: The fare is one-way only and must be booked as part of a round trip. Oh, by the way, taxes, fees and surcharges aren't included.
In fact, when you actually book the fare online, it balloons to $826. That's still a bargain, but not quite what the ad promised.
Such bait-and-switch tactics make it difficult for travellers to estimate a flight's real cost. Adding to the confusion is a rapidly growing list of hidden fees for elements once assumed to be part of the flight experience. These days, in-flight meals, pillows, blankets and advance seat selection can all carry their own price tag.
Last week, for example, Air Canada announced a new $25 fee to check a second bag for low-fare seats within North America. The six largest U.S. airlines have done the same. And WestJet says it may be next. Many passengers are wondering when they'll start seeing pay toilets on planes.
Part of the blame lies with Ryanair. Ireland's no-frill carrier keeps costs so low that chief executive Michael O'Leary says his goal is to offer all flights for free. Revenues would be earned from ancillary services.
This month, for instance, flights from London to Ireland were briefly selling for no charge except the £10 cost of the taxes and fees. But travellers wanting extras paid more: £42 to check two bags, £6 to be one of the first on board and £9.49 to take out insurance.
North America's large scheduled airlines could never adopt a free-flight model because of their high costs for unionized labour. But when passenger loads plummeted after the Sept. 11, 2001, terrorist attacks, so-called legacy carriers such as Air Canada and United moved their pricing structure closer to that of low-cost rivals such as Southwest Airlines and WestJet. Suddenly, carriers cut meals and other frills.
Leading the pack is Air Canada. In 2003, it launched brands that each have their own amenities and restrictions. In 2006, the company also introduced an à la carte pricing structure that lets passengers pick a basic fare online, then choose the options crucial to their needs. Pick your seat in advance, add $20. Buy a snack, add $6. Take only hand luggage, subtract $3. Forgo Aeroplan points, subtract $3.
So how do airlines get away with running ads that skip over hidden mandatory fees? How much do hidden fees add to the basic fare? And what new hidden fees could be lurking around the corner?
Canada's federal government is bucking a worldwide trend by letting airlines advertise partial prices. Legislation requiring full-price disclosure has been in effect in the United States and some European countries for years and will be extended to all of the European Union by this fall.
Last year, Britain's Office of Fair Trading forced 11 carriers to revise their ads and websites to include all fixed and non-optional costs in prices. And Europe's Consumer Protection Commissioner recently gave airline and travel websites four months to stop misleading consumers on pricing.
In Canada, both Ontario and Quebec have laws requiring tour operators and travel agencies to include all taxes and mandatory add-ons in their advertising. B.C. is considering similar legislation.
Airlines using Canadian airports, however, fall under federal jurisdiction. A provision requiring truth in airline advertising was part of a bill passed in Parliament last year. But that section was removed by the Senate, which called for more government-airline talks. Nothing has happened since.
Jean Collette, chairman of the Association of Canadian Travel Agents, points to lobbying by Air Canada and WestJet for stalling the rules. Advertising a one-way fare on a mandatory round-trip ticket is like showing the price for one leg of a pair of jeans, he says. "You can't buy just the one leg."
However, Air Canada argues that it is in a competitive market and other airlines also advertise one-way base fares. "Therefore," airline spokesman Peter Fitzpatrick says, "we are forced to follow along because people often do not read beyond the headline advertising numbers for airfares."
Airlines may argue that such advertising is necessary to attract business, but that doesn't make it right, says Michael Janigan, executive director of the Ottawa-based Public Interest Advocacy Centre. "Almost any fraudulent or misleading practice is helpful to the merchant using it," he says.
Taxes and fees
Canadian airlines pay higher taxes and fees than their counterparts in the U.S. and more than most other industries in Canada, according to a study conducted by the C.D. Howe Institute last year. The International Air Transport Association, an association of the world's major airlines, has also singled out Canada's busiest airport, Toronto's Pearson, as having some of the highest user fees in the world.
Airlines want travellers to know they aren't responsible for those taxes and fees. So they don't include many of them in the advertised fare. Added to an Air Canada Toronto-London round-trip fare of $448, for example, are a Canadian airport improvement fee of $20, a Canadian security charge of $17, a U.K. passenger service charge of $35.43, GST of $1 and U.K. air passenger duty of $80.52. That's a total of $153.95 - or about one-third of the base fare. Additional charges on flights within North America can include an insurance surcharge plus up to $20 to cover the air navigation fees airlines pay to NAV Canada.
The most maddening add-on of all is the mandatory surcharge that protects airlines from rising fuel costs. Starting in 2004, Air Canada led other North American carriers in raising its base fares to incorporate fuel surcharges, instead of breaking them out separately. But for competitive reasons on international flights, the airline is forced to follow the industry practice of showing fuel surcharges as an add-on, Air Canada's Fitzpatrick says. On the Toronto-London round-trip fare of $448 referred to above, for example, the fuel surcharge is $224, the equivalent of the one-way fare.
Fuel surcharges and navigation fees should be incorporated into the basic fare, says Michael Pepper, president of the Travel Industry Council of Ontario, the industry's self-regulating association. "You can't run an airplane without fuel and navigation fees," he says. "They're taking it out of the fare and showing it below the line. That's misleading. That's totally misleading."
à la carte charges
Unlike taxes, fees and surcharges, which can't be avoided, à la carte add-ons are at the buyer's discretion. And that, Air Canada argues, is good for the traveller.
"Again, it is all about choice and transparency," Fitzpatrick says. "People can determine what they want and pay for it, or people can save money by not doing certain things or save on those things they would not be doing anyway, such as checking a bag."
The current rush by U.S. carriers to add charges for checked bags, preferred seats and other extras reflects the American industry's economic woes, says Karl Moore, a business professor at McGill University. The U.S. economy has slowed, fuel prices are high and a merger is looming between Delta and Northwest airlines.
"It's a tough time, he says. "What they're doing is trying to make revenue where they can. There is a herd mentality. If United charges for a pillow, the others will do it. But they don't want to be the first."
Free meals, still an expectation on international flights, may soon have to be purchased separately. Says Fitzpatrick, "We are still rolling out branded fares internationally and in time we may also expand à la carte pricing to this market."
Robert Mann, an analyst with R.W. Mann & Company, says fees for using a credit card could be the next shoe to drop in North America. This is already the practice with some European low-cost airlines and with carriers in Australia.
Also possible are fares where the final price would depend on the cost of fuel at the time of travel, Mann says. In this scenario, fliers could be assessed a surcharge or given a refund at the last minute. If that happens, he says, an industry would grow up around it, allowing consumers to lock into a price for an additional fee.
And the logical extension of charging for a second checked bag? Basing fares entirely on weight, Mann says. This idea will probably never fly. But theoretically, he says, airlines could weigh passengers and their luggage at check-in and let the scales determine the airfare.
Some airline somewhere is probably studying the concept at this very moment.
Avoiding hidden fees
BOOK EARLY Once full payment is made, you can't be hit with further fuel surcharges.
DO IT YOURSELF Save money by avoiding extra-cost services if you are comfortable doing so. Pack a lunch, take only hand luggage and accept whatever seat is left.
COMPARISON SHOP Multi-airline sites such as Expedia and Travelocity don't provide the à la carte choices you find on individual airline websites. But they offer a cost comparison across a spectrum of carriers.
READ THE FINE PRINT Many airline and reservations sites earn commissions on insurance, hotels and rental cars. If you don't want them, don't click them.