Consumers: Low-Cost Flight Information

Lord Mitchell Excerpts

Monday 27th February 2012 Lords Chamber

Asked by

[Lord Mitchell]

To ask Her Majesty’s Government what assessment they have made of whether British consumers buying low-cost flights on the internet have access to the information they require.

[Lord Mitchell]

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.