Question for Short Debate
My Lords, I had hoped that more noble Lords would be taking part in this debate, since I am sure that most of us in our time have remonstrated against the budget airlines. But it is quality not quantity that counts and I am sure that we can have a very interesting debate this evening.
The debate features internet bookings for budget airlines. This, in my opinion, is just a subset of what my right honourable friend Ed Miliband has referred to as surcharge Britain. We all know what that means: all those little extra costs that it seems everyone these days attempts to load on to an unsuspecting public. We see them on bank overdrafts and on credit card usage. We see them on mobile phone charges and on online shopping. In every direction you turn there seems to be somebody there trying to suck that extra tenner out of you.
The logic for the growth in surcharges is obvious. As used to be said when I was in business, it goes from the top line to the bottom line, from gross to net, without touching the sides. In basic business there is generally a cost associated with generating revenue. Staff, depreciation, rent, electricity and the like all make up the cost of goods sold. It is the usual model. But today the quest is to persuade the customer to part with his cash without there being any cost implication. As I say, what hits the gross revenue line also hits the net revenue line. It is nice work if you can get it. The budget airlines in this country are brilliant at extracting the maximum amount of revenue from the poor old traveller and my speech today addresses what I believe is another example of rip-off Britain, or should I more accurately say rip-off Ireland?
I must declare a regrettable interest. I use Ryanair quite frequently, not because I want to and not because it is the cheapest—it is not—but because it is the most convenient. We have a house in Umbria in Italy and Ryanair flies to Perugia just 40 minutes away from where we live. Indeed, it is the only airline to fly to Perugia from the UK, so I have no option but to drive to Stansted, disengage my brain and all my other senses, only to re-engage when I am drinking my welcome cappuccino at Perugia airport.
I am going to say less than complimentary things about the budget airlines and Ryanair in particular, but I must say one thing in their favour. Their punctuality is the best. You can almost set your watch by their arrivals and departures. This is much better than other airlines. I am sure that most of your Lordships have used the budget airlines. When you sit down at the computer to make your booking you need a quiet room, a wet towel wrapped around your head and indulgent family members who are not bothered by constant swearing.
I spend a good deal of my time in front of my computer—my career was in IT— and I like to think that I am pretty adept at ploughing my way through the most complicated of websites, but the budget airline websites have me beaten. Much that is within their sites is designed to trap you. Every time you make a mistake or click the wrong click it is going to cost you money. Of course, if you use their sites all day long you will get the hang of it, but for the occasional user it is a hazardous and expensive obstacle course.
Let me deal with Ryanair first. I booked a flight the other day from Stansted to Perugia for 30 July this year. The headline price was £86.41. The final price was £136.89. This is a 58.42 per cent uplift for practically no extra cost to them. Within the headline price is a series of costs that I cannot understand. Taxes at £33.17 are clear enough. I will come back to those later, but be prepared for a bit of a shock on this one. There are two levies that leave me bemused: the EU 261 levy and the ETS levy. The former is £2 and the latter 25p. I have no idea what these are, but I will show your Lordships why they are important.
We come to the add-ons beyond the headline price. There is something called online check-in. This costs £6 and I presume that it is for using the internet. This is typical Ryanair Catch-22. It charges you for using the internet, but you can only book using the internet. Insurance—how Ryanair loves travel insurance—in itself is a rip-off, but it gets worse. You might have thought that the default position for insurance would be negative. You go to a pop-up menu of countries of residence and nestling snugly between Latvia and Lithuania you will locate “don’t cover me”. It is easy to make a mistake. Ryanair could have given you a yes or no option, but after its incessant haranguing and playing to my insecurities about falling ill abroad I gave in and this time selected minimum travel insurance. That came to £6.99.
Then there is priority boarding. I always choose it, but I do not know why. It costs £5 and you are supposed to be boarded ahead of the milling masses, but lots of people now chose it and there is not much that is priority about it. If you have to take a bus to board the plane it makes no difference anyway. But £5 here and £5 there—it is all gross to net. I took priority boarding. I also chose to be notified by SMS text, this time for £1.50. There are no costs associated with SMS text. I then went totally berserk. I decided to check in a piece of luggage: 15 kilos for £25. If you exceed your weight by even one kilo it will cost you £20. It is little wonder that people approach the check-in scales in such a state of panic.
Finally there is payment. Using a debit card or credit card costs another £6. It is Ryanair Catch-22 all over again: you have to use a debit or credit card, you have no option, but it charges you. So that is it: £86.41 becomes £136.89, but it does not stop there. Two years ago some Mexican friends visited us. They arrived at Stansted and they committed Michael O’Leary’s mortal sin. They had not printed out their boarding cards. They did not know that they had to. They had to go to another queue to get their boarding cards and were fined £60 each. The cost to Ryanair is zero.
The most modern airlines now send boarding passes to your smart phone. You can bet your boots that Ryanair will do everything it can to resist this development, not when it has such a nice little earner. Once again, it is gross to net. There are a few other little gems about Ryanair’s terms and conditions. It charges £20 for an infant under two. All other airlines allow babies and toddlers on for free, especially since they do not take up a seat, but I guess a toddler weighs the same as a piece of baggage, so it makes sense to charge for it.
One thing has always puzzled me about Ryanair. How do you cancel a flight? I have looked all over its website and you cannot cancel a Ryanair flight. You can choose another date, for a fee of course. You can even change the name of the passenger, for a much bigger fee, but you cannot cancel. This prompts a question that I would like to pose to the Minister or even to Ryanair itself. What happens to the tax for those who are no-shows? I have talked about the airport tax and I have also mentioned the EU 261 levy and the ETS levy. This comes to £35.18. Where does it go? Ryanair says that you can write for a tax refund, which it will send you, minus its ubiquitous £6 administration charge. There is a slight problem, however, in that you have to write to Dublin.
You incur a UK tax charge that is levied by HMRC on a flight that originates in the UK, but if you do not take that flight you have to apply in writing for your tax refund to a company headquartered in a foreign country and on your refund entitlement it levies an administration fee. I would be interested if the Minister has any idea how many people ask for tax refunds from Ryanair on no-show flights. Could it be expressed as a percentage? My bet is that it is precious few.
This prompts another question. If I am a no-show and if I have not applied for my tax refund, where does the £35.18 tax go? If I have not taken the flight, it would seem to me that no tax should be due. It must go to somebody. Does it go to HMRC? It should not because the Revenue is not due to receive tax for flights not taken. Does it stay with Ryanair, perhaps in some suspense account? I do not know the answers, but I know that when I cancel a flight with British Airways the tax is refunded to my credit card immediately, and that when I attempt to cancel with Ryanair it is not. I simply want to know where the tax money goes, or maybe does not go.
To be fair, and for comparative purposes, I also booked a flight on easyJet, this time from Gatwick to Rome on the same day. Its headline price is £66.99 and it levies an administration charge of £9. Using a credit card, as you must, costs another £5. Insurance costs £9.53, taking one piece of luggage costs £15—this time for a 20 kilo bag—and priority boarding is £10.50. This comes to £112.02, an uplift from the headline price of 67.2 per cent—considerably more than Ryanair. However, in easyJet’s defence, the headline price is cheaper.
It seems as though I am doing something of a hatchet job on Ryanair as well as easyJet. In truth, this is the case. They deserve it; they force unfair charges on the public. Who else levies administrative charges, and what serious business charges credit and debit card fees when you have no option but to use those cards? Mr O’Leary, in his blunt way, makes his case very strongly: “If you don’t like it, don’t fly with us”. However, that is not good enough. When he said that he would charge £1 for usage of the lavatories, even though he meant it as a joke, most people believed him.
There are those who will argue caveat emptor: it is the buyer’s risk. However, I contend that the Government have a duty to ensure, first, that these airlines set all their costs to the default zero position on their websites; and, secondly, that their advertising highlights the average real fare, not the base fare, as well as the voluntary charges that we are all forced to pay.
My Lords, I draw attention to the various media interests in my entry in the register. In particular, in view of my comments this evening, I highlight my directorship of the Advertising Standards Board of Finance. I thank the noble Lord, Lord Mitchell, for securing this debate. As we escape from the clutches of winter and many people think about their annual holiday, this is a timely and important subject to discuss. Many hard-pressed travellers will have cause to be very grateful to him.
At the start of my remarks, it is important to highlight three general issues with regard to the information that people receive when booking flights online. First, unfair credit card charges are not solely the preserve of the airline operators. In recent months, I have cursed at my computer screen—which is not an unusual experience in view of my technical illiteracy, but is driven by a sense of injustice on these occasions—when I have had to pay credit or debit card surcharges when buying flowers, wine and chocolate. The latter two are certainly important components of life. This practice, if thankfully not widespread, occurs on too many websites and not just those of airlines.
Secondly, where airlines are concerned, this is not a practice that is restricted to the low-cost ones. Table B1 on page 58 of the OFT report of June 2011, which is very helpfully highlighted in the excellent briefing note produced by the Library for this debate, showed that debit card surcharges were also being levied by bmibaby, Air Berlin and Jet2 at that time, while Iberia, Virgin Atlantic and British Airways were also levying a range of credit card surcharges. Although I have not personally booked flights on all these lines—I obviously need to get out a little more—I suspect that they are all levied with different degrees of transparency. Some are admirable, and I particularly commend the British Airways site, which now identifies many key costs involved in your final fee, including the amount of tax that goes to the Chancellor. Transparency is key.
My third general point is that it is always regrettable when an issue such as this is taken as an opportunity simply to bash the low-cost airlines. I know that this is not a popular thing to do but I will briefly stand up for Michael O’Leary. In recent years, he and others have transformed the airline industry, opening up parts of Europe that once no one ever visited and making air travel affordable to many who could not afford it. Like the noble Lord, Lord Mitchell, I declare an interest as a regular Ryanair passenger to Perugia. However, I think I am 20 minutes nearer the airport than he is, so I get to the cappuccino a little sooner. When levying justified criticisms about how websites operate, we should not forget the contribution that the low-cost airlines make to the consumer.
The reason why passengers feel some injustice when booking holidays on low-cost airlines is that, unlike some other transactions, the booking of a holiday is a major expenditure for consumers, for which they have often saved hard and sacrificed. The levying of a surcharge, particularly if you are not warned about it in advance and are unable to make a meaningful comparison with other airlines, is painful and unfair. However, it is not just the lack of transparency over credit and debit card charges that can be so annoying. In such a dynamic sector as the airline industry, marketing campaigns and websites often sail too close to the wind in terms of providing clear and accurate information, not just about fares and charges but about the provision of free and discounted tickets, availability, travel periods, journey time comparisons, environmental claims, airline comfort and airport names. Those of us who know people who have been stranded for an hour and a half outside Barcelona Airport, thinking that they were going to Barcelona, will know what I mean.
Since the remit of the Advertising Standards Authority was widened in the spring of last year to cover digital advertising, marketing communications on company websites, including the websites of all airlines, are now covered by the provisions and protections of the mandatory advertising codes from the Committee of Advertising Practice. Travel advertising and marketing communication is one of the ASA’s top 10 most complained about sectors. As a result, the ASA has over the years issued guidance to those involved in the travel industry to enable them to ensure that their communications keep within the codes and consumers are protected. In particular, I commend a recent guidance note for the travel industry, which was issued by the Committee of Advertising Practice. It was drawn to my attention by the noble Lord, Lord Smith of Finsbury, who does such an effective job as chairman of the ASA. It covers each of the key areas, setting out rules in a clear and straightforward fashion to ensure that consumers are protected. It is an excellent note.
The ASA is important in considering this issue because of the time that it will take for statutory regulation to deal with this area. I welcome the fact that the Government are consulting on draft legislation to bring forward the provisions of the consumer rights directive relating to above-cost surcharges. I understand that such a move will enable the Committee of Advertising Practice to tighten up its own rules even further. The CAP is currently bound by the unfair commercial practices directive, which is subject to maximum harmonisation.
I understand that the Government’s aim in this area—rightly so—is to ensure that consumers have the information that they need to compare prices readily and that pricing practices are fair. The ASA already requires all taxes and other compulsory charges paid at the point of purchase of the ticket to be clear and up front, and its systems are robust, responsive and flexible. The ASA should remain the first port of call, with the Office of Fair Trading as its statutory backstop for this thorny issue, the tackling of which is of such importance to tens of thousands of hard-pressed travellers. I would be grateful if the Minister could bear those possibilities in mind when considering this issue.
My Lords, I am sure that it is not only in your Lordships’ House but outside it that many will be gratified by the noble Lord, Lord Mitchell, securing this debate to draw attention to the problems of what are described in the Question as low-cost airlines but are probably more correctly described as no-frills flyers. They are no longer low-cost for many people, which is the issue that I want to focus on. As the noble Lord, Lord Black of Brentwood, indicated, the advent of these no-frills flyers introduced many people to the opportunity to go to places that they had not been to before, or had been to and wanted to return to much more frequently than they could previously afford. On the face of it, this is an excellent thing; it is the democratising of airspace in many ways. However, it has led to many unexpected, untoward and, in some cases, counterproductive effects for people.
First, it meant that many more people flew. For those who are concerned about the environment, this was not entirely a positive outcome. Indeed, one of the results was increased pressure on the Government to raise the taxation of all airlines to deal with the fact that more people were flying, and it would be a good idea to reduce the number though taxation for the environment’s sake.
However, the consequences went much further than this. The airlines were able to operate as low-cost in the first few years because they started off paying their staff much less than the established airlines did. They had smaller fleets and when they enlarged them they kept to the same models of aircraft, which were much cheaper for them to service and replace than the traditional airlines. However, when it became clear that, even with these benefits, it was not possible for them to keep their low prices, they tried to keep the reputation for low prices by the headline price being low and all the other additions being added in.
One could look at that as a simple, tactical sales device—outlined by the noble Lord, Lord Mitchell, so elegantly and in such detail that there is no need for me to go into it in great detail—but the purpose of the whole exercise is effectively to continue to deceive the population into thinking that these are low-cost flights when in truth that is no longer what they are. All sorts of things that one would deem to be the proper costs of any operator and that have been described by the noble Lord—their insurance, their administration, the provision of boarding cards and so on—were separated out as though somehow these were other charges. The idea that was put about by Michael O’Leary and others was that, in order to enable more people to be able to afford to fly, people should not have to pay for things that were only in the interests of some of the fliers. For example, if you do not want to bring many suitcases with you, why should you pay a large amount for those who are? That seemed like a noble argument—that everyone should have the possibility of flying without paying for things they did not want and that only some people would want. In fact, as has been demonstrated in this debate, that is not where we are now. It became more and more an operation of deceit which reflected a culture which had developed with some, but by no means all, of the no-frills flyers.
I became aware of this culture when I took a Ryanair flight—something I did not make a habit of doing before and made a determined effort never to do again—to France with my wife. Unfortunately, during the short time we were there we had an accident and she was unable to walk to the plane when we got back. She needed to have a wheelchair to take her to the plane. We never suspected that it would not be possible to get a wheelchair without booking in advance and paying for it, but that was absolutely the position of Ryanair. When we subsequently checked we could find no other airline in the world that was charging people for the use of a wheelchair, but that was the Ryanair position. When it was challenged—not by us, but by others—at a European level, the company lost but they found another way of putting a charge on: 50p for everyone to pay for the disabled.
To me, the issue was not that precise problem, though it was of itself significant; it was what it represented about the culture that had developed in Ryanair. It was not a culture that was concerned to democratise airspace—that had a feeling that ordinary people ought to have the chance to travel more, enjoy more holidays and see more of the world. It was a dishonest and uncaring culture for people who were simply seen as milch cows to be treated very much as milch cows and herded through in as large numbers as possible.
People find themselves in increasing difficulty because they started by believing that they could fly to Perugia or wherever and could get themselves an inexpensive home. That would mean they would continue to have to fly there and it became increasingly problematic for many of these people to maintain themselves. Added to this is the fact that, in many places, this is the only way to get to that particular area. Most of the airports subsidise Mr O’Leary. He actually asks to be paid to fly to their airports while most UK operators find they have to pay the British Airports Authority and others in order to maintain a service. When a local authority that pays Mr O’Leary the subsidy says it is not in a position to pay any more he simply, at the drop of a hat, stops flights to that area and all the people who have become dependent on those flights find that it is impossible for them to continue. That is just part of the culture which has developed.
One might say that it is up to people to watch out for themselves and that this is just one airline or a small number of them. This is not so. When you introduce this kind of commercial practice it becomes increasingly difficult for other airlines to function without adopting similar practices. This was the problem in the banking world. I remember asking the chairman of one bank if it was really the case that most of the people on the board of the bank understood the complex instruments that were now being used in banking. He laughed and said that hardly a single one had the remotest idea. All they knew was that the other banks were doing this and making a profit so they had no alternative but to go down that road or lose custom. That is what has happened in the airline industry, not only in the way of charging but also in the way of treating the customers. It is not just a question that the buyer should beware. The whole airline industry has been adversely affected by this negative, disrespectful way of treating customers which cannot be sustained economically without all the complaints and difficulties which have already been referred to.
It is serious, because it is like a virus which pervades things and deteriorates them, and that is exactly what has been done. It becomes very difficult to reverse the process unless there are some regulations or pressures that require operators to behave in a different way. Here is where government comes in. I have some questions for the Minister. Which? submitted an OFT super-complaint on credit and debit card charges in March 2011, leading to a promise from HMG just before Christmas last year that the Treasury would ban excessive card surcharges by the end of 2012, with a consultation in the early part of this year. On 8 February, the Financial Secretary to the Treasury, Mark Hoban MP, said:
“We have brought forward legislation to tackle excessive and opaque card charges with the aim of banning above-cost surcharges from mid-2014”.
I am glad it is moving ahead, but it seems to have slipped by 18 months over the period of the consultation. Why has this delay arisen?
It would be perfectly possible for the Government to press the airline operators—not just Ryanair—to differentiate out clearly those elements of their charges which are properly being paid to Governments as a tax from lots of other things that they describe as levies, surcharges and fees and which they bunch in as though they were being imposed on the airlines by the Government and other authorities. It is actually just a deceit because they are part of their own essential operating costs that would be absorbed by any other business. Is it possible for the Government to ensure a degree of transparency, clarity and honesty in these charges?
My Lords, I thank my noble friend Lord Mitchell for giving us the opportunity to debate this interesting issue. I must admit to feeling a bit inhibited about contributing to the debate as I do not have a property near Perugia—which is a matter of deep regret, as it is somewhere I have visited—but I will, nevertheless, do my best. It is an important issue and so we are grateful not only to my noble friend Lord Mitchell but to Which? for bringing the super-complaint to the Office of Fair Trading.
The complaint isolates some of the key issues and I will quote from it. It states:
“Which? considers that the following features individually, or in combination, significantly harm the interests of consumers: The practice of advertising incomplete or partial prices, by, at least, omitting surcharges for payment method from advertised prices, which, due to behavioural biases, means consumers are unable to effectively and efficiently shop around and make like-for-like comparisons”.
Bearing in mind that we are talking about trying to book online, that is a very valid point. The complaint refers to:
“The lack of reasonably or practicably available alternatives to avoid or mitigate surcharges for payment method”.
Again, all speakers in this debate have demonstrated that that is the situation. The complaint also mentions:
“The conduct or practice of retailers that impose a surcharge for payment method, hidden or not, that exceeds a reasonable estimate of the costs for processing consumers’ payments”.
That has been amply demonstrated. The complaint states:
“These features lead to widespread detriment, including: Price comparisons being much harder so weaken the competitive process between retailers … Consumers making poor choices between competing passenger travel services and between other alternative goods and services from which they may choose … Consumers spending more time and money searching the market than should be the case … Consumers often being misled over actual prices and being frustrated at being asked to ‘pay for paying’ … Paying for goods or services is not, in Which?’s view, an additional or optional feature of a product but a necessary pre-requisite intrinsic to the conclusion of a contract. Even when the retailer offers a number of alternative payment methods, that retailer retains a monopoly on the setting of the prices that the customer will pay for different payment methods”.
That has also been demonstrated during this debate. It does not matter which way you turn, you will be surcharged whether you use a debit or credit card. We know that if you use a debit card, the transfer is almost instant. Which? in its super-complaint demonstrated beyond any doubt that such practices were detrimental to the interests of consumers and that there certainly was not a reasonable marketplace.
Which? went on to state:
“If any additional charges are to be introduced during the transaction, for payment method or other mandatory services, these should reflect only the reasonable additional costs incurred by the retailer as a result of the specific choice of payment method”.
Again, we have heard that the charges do not reflect the additional costs but seem to be an opportunity to bump up the total cost of the booking. If consumers were fully aware, they would be able to,
“switch away from retailers that did not follow this practice,”
of revealing the true costs. Which? continued:
“However, under real world market dynamics in a number of markets (including travel markets) this does not occur, and long term consumer detriment results”.
I refer to the comments of noble Lords. My noble friend Lord Mitchell talked about the iniquities of budget airlines although I have to say that it is not necessarily only budget airlines that use such practices. We have had further reports that airlines such as Lufthansa and Swissair have decided to charge for using credit and debit cards. It is not just the budget airlines, although I know that we have focused on airlines that are, in theory, low cost. The noble Lord, Lord Black of Brentwood, brought that to our attention.
The noble Lord, Lord Alderdice, gave an analysis of how the low costs were achieved. He might also have mentioned low pay and conditions of staff, although I did not hear him say that. It is another intrinsic factor in achieving these prices. Like the noble Lord, I was hopeful when the Government, in a letter to the chief executive of the Office of Fair Trading, seemed to be optimistic. They referred to the consumer rights directive that is supposed to be a pan-European solution and stated:
“It requires that traders limit payment surcharges to the costs incurred by the trader in respect of a given means of payment. The Government will therefore consult, early in 2012, on draft legislation to bring forward the provision of the Consumer Rights Directive relating to above-cost surcharges in advance of the transposition deadline of June 2014”.
We seem to have slipped a bit from that seemingly admirable move on the part of the Government. I would therefore welcome the Minister’s response on why it does not look like consumers will see much benefit or progress before 2014.
I have dealt with what I consider to be the key issues, given that noble Lords have already set out the detail of the major problems in relation to online booking for low-cost airlines. I await the Minister’s response.
My Lords, I am grateful to the noble Lord, Lord Mitchell, for introducing this Question for Short Debate and to all other noble Lords who have contributed.
In an open free-market economy such as ours, with its age-old emphasis on enterprise and initiative, there can be no objection to firms choosing business models that suit their aims, even if it causes them reputational issues. My noble friend Lord Black of Brentwood described some of the benefits of low-cost airlines. They have been innovative and successful, and have grown into important players in the aviation industry, employing substantial numbers of people and utilising great amounts of capital. Schedule airlines, operating to different business models, are holding their own. I should therefore like to add to the premise of the noble Lord’s debate that people buying scheduled airline tickets on the internet also need access to the information they require.
The UK aviation market is diverse and supports consumer choice. What suits a solo flyer with no baggage might not suit a family of four with hold baggage who would like a meal on their flight. The UK’s aviation market has evolved to support these different needs. As a consequence of this diversity and choice, air fares can come with a range of extras, fees and charges. Airlines are required to publish on their websites the information about these fees and charges, but it can be hard for consumers to compare them when they are shopping around for the best price for an air ticket, as has been pointed out by many noble Lords.
The Government’s position is to support the aviation consumer in two principal ways. First, there must be transparency about what is and what is not included in the price. The consumer must know how much to pay in total before he clicks to accept the deal. Secondly, adequate information must be provided for the consumer to make an informed choice on which airline to fly with, regardless of the business model that that airline follows. I will give examples in support of that position.
EU Regulation No. 1008 sets out common rules for the operation of EU air services. Crucially, it sets out the transparency requirements for the display of air fares. Prices are required to be displayed inclusive of all unavoidable and foreseeable taxes, fees and charges at all times. Optional services such as checked baggage or priority boarding are required to be offered on an opt-in basis only. These services should be clearly and unambiguously displayed at the start of the booking process. These requirements are designed to ensure that consumers are able to compare the prices of flights across a number of airlines and that consumers select only the optional extras that they require. The requirements are strongly supported by the Government.
I now turn to another specific proposal that will significantly help consumers. We wish to help purchasers to compare services from different providers on the basis of accurate information. Aviation markets can deliver best value only where objective service information is freely available so that passengers and freight owners have genuine choice between suppliers. We have therefore included in the Civil Aviation Bill currently being considered in Committee in another place a new information duty on the CAA either to publish, or to arrange for the aviation sector to publish, consumer information and advice that it considers appropriate to help people to compare aviation services. This new publication duty would allow the CAA to move into areas where it cannot always obtain information from public sources, such as delays, complaints, baggage handling and environmental performance. The CAA would be able to penalise companies that withheld the data requested. The CAA must also ensure that the benefits of providing information outweigh the costs, so that it does not duplicate existing information or provide data that consumers do not want. The best protection for consumers in terms of choice and value lies in the operation of a competitive market. Consumers need clear information on price and service quality in order to make informed choices, and to ensure that markets deliver consumer benefits in practice. I look forward to discussing these, and other, aspects of the Bill further when it is introduced into your Lordships’ House.
We share consumers’ concern about the high level of payment surcharges applied by some companies, and that often people are not aware of the level of these charges until almost the end of the booking process. This makes it difficult to compare prices and shop around for a good deal. It is not right that a business tries to hide the true cost of its services by implying that its prices are made up of elements beyond its control when they are not.
What are the Government doing? First, consumers are already protected against misleading pricing under the Consumer Protection from Unfair Trading Regulations. Secondly, as mentioned by my noble friend Lord Black of Brentwood, last December the Government announced their intention to consult on early implementation of the payment surcharges provision of the new European consumer rights directive ahead of their transposition deadline in 2014. The provision will ban businesses, in scope, from charging customers fees which exceed the costs for using that means of payment. The Government plan public consultation on early implementation within the next few months, with the aim that new UK rules could take effect by the end of 2012. The Government will publish guidance prior to the change taking effect to help businesses adjust their pricing strategies to comply with the provision. I stress that this work is about ensuring transparency in headline prices, and not about price control. The aim is to ensure that only the true cost of using a particular means of payment can be charged separately where a business wishes to do so.
I have been asked several questions. I will my do best to answer them, but if I fail, I will of course write in the usual way. On the general point about ticket transparency and how consumers can effectively compare prices, including hidden charges, the Civil Aviation Authority has published a table showing the optional charges which apply when booking with major airlines operating in the UK. This is a valuable tool which will assist consumers in making informed decisions when booking flights.
The noble Lord, Lord Mitchell, asked me when we will stop airlines charging huge fees for printing a boarding pass at check-in. The business model adopted by some well known carriers requires passengers to check-in online and print their own boarding pass. This is legitimate so long as people are clearly aware of it. There is no restriction on the level of charge that an airline may impose for this service. The sum of €40 has been widely quoted. This appears rather excessive, and is unlikely to reflect the true cost to the airline of printing a pass. This practice, along with the identity of the carriers which employ it, has been well published, including in your Lordships’ House tonight. Wherever possible, consumers should take steps to avoid liability to pay the charge. If this appears unfeasible, it is perhaps a factor which they should take into account before booking the flight.
The noble Lord, Lord Mitchell, also talked about the EU 261 levy. EU Regulation 261/2004 gives air consumers rights to assistance and compensation in the event of their flight being cancelled or delayed for over three hours, or if they are denied boarding—that is, bumped off the flight for someone else. In April 2011, Michael O’Leary announced that Ryanair would impose a €2 EU 261 levy on its air tickets. This was marketed as a measure forced on the airline by the EU. In fact, it is a form of Ryanair self-insurance to pay for the obligations that Regulation 261 imposes on the airlines.
The noble Lord, Lord Mitchell, also asked how often consumers compare prices effectively, including hidden charges. I have mentioned the Civil Aviation Authority table. He also asked about the refund of taxes when passengers do not fly. Government taxes, such as air passenger duty, should not be paid if the passenger does not fly. Many carriers will refund this element of the fare on application. However, they may charge an administration fee for doing so and in practice this may swallow up most or all of the amount due to be repaid to the consumer.
My noble friend Lord Alderdice told us, with some justification, about his distressing experience of no-frills airlines. EU Regulation 1107/2006 gives those who are disabled or who have reduced mobility rights to travel. Wheelchair access to aircraft is not chargeable.
My noble friend also talked about the Which? super-complaint. In 2011, the Which? consumer magazine submitted a super-complaint to the OFT, calling for it to investigate excessive surcharges for paying by credit or debit cards.
My noble friend Lord Alderdice also asked about the delay in the implementation of the consumer rights directive until 2014. Although the directive will take two years to come into effect throughout Europe, it is due to be transposed into national law by mid-2014. The OFT has said that companies should be up-front about charges straight away, and the Government propose to consult on early implementation in the UK.
My noble friend also asked what assessment has been made of the effectiveness of Article 23.
My Lords, I think it is probably better if I concentrate on answering as much as I can and, if necessary, write to my noble friend.
Aviation is fundamentally an international business. The Government do not intend to introduce tighter restrictions on airline pricing policies in isolation. The European Commission has undertaken a fitness check on the fare transparency requirements, during which it has taken evidence from airlines, the travel industry, enforcement bodies and consumer groups. Its findings have yet to emerge but we understand that the evidence suggests that the rules are not enforced consistently across Europe.
In conclusion, we take this matter seriously. I am grateful to the noble Lord, Lord Mitchell, for posing his Question this evening.
I do think that the noble Earl should clarify the situation because now I am confused. I thought that he had given us a more helpful answer when he said that the consultation on the payment surcharges provision would take place during 2012 and that the new rules would be introduced in 2012. However, the last comment that he made in response to the noble Lord, Lord Alderdice, left us somewhat confused. Will the Minister clarify whether the rules are likely to be introduced in advance of the European directive in 2014? What timetable are the Government working to?