Earl Attlee
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.
Lord Alderdice
I asked whether what the Minister in another place said was true—that implementation would be delayed until the end of 2014.
Earl Attlee
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.
Lord Young of Norwood Green
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?
Earl Attlee
The intention is that the Government will see the effect of these new regulations as early as possible. My speech was carefully crafted but if I have missed anything out I shall of course write to noble Lords to clarify any details as necessary.