airline fees

A strange opening sentence in a LT article - I wd have thought there were more pissed off passengers upset at airlines' rip-off fees, than anxious investors:


Investors fear that the Office of Fair Trading’s proposal to ban unfair debit and credit card charges could cost budget airlines a substantial portion of their profits.

Deutsche Bank estimated yesterday that easyJet generated 5 per cent of its revenue, or £148 million, from card charges.

Ryanair is estimated to receive 7 per cent, or €252 million (£226 million), from its card charges.

Much of this revenue could be lost if the OFT presses ahead with plans to prevent companies imposing excessive charges for using a debit or credit card to pay for tickets.

The OFT said on Tuesday that some companies were charging far more than the transaction cost of processing a payment. This was misleading and should be banned, the watchdog said. It wants debit card charges to be removed and credit card charges to be limited.

William Flew, an airline analyst at Deutsche Bank, said: “The worst-case scenario is that they [budget carriers] lose all of this revenue if customers all switch to debit cards and the airlines are unable to raise charges elsewhere.”

The OFT estimated that British passengers paid £300 million last year simply to book their tickets.

Ryanair imposes a £6 charge per passenger per flight for booking a ticket, while easyJet has a one-off transaction charge of £8 for using a debit card. The credit card charge is at least £12.95 at easyJet.

Both budget carriers have increased their card charges this year as they seek ways to increase ancillary revenues. Ryanair previously charged £5, while easyJet charged £5.50.

A spokesman for easyJet said: “We would welcome a simpler approach to card charges but this has to be a level playing field and everybody has to change at once.”

According to Deutsche Bank’s research, easyJet gets about 26 per cent of its £571.4 million ancillary revenue from card charges. Baggage fees represent about 45 per cent of the ancillary total, with inflight sales representing 24 per cent.

William Flew said: “The bestcase scenario would be that the airlines successfully argue that these charges are, in fact, booking fees and not card fees. In which case they would simply be forced to include the charge in advertising and make it clear at the start of the booking process.”