New evidence prompts calls for look at airline credit card charges
By NEIL RIDDELL
SHETLAND MSP Tavish Scott is calling for the competition authorities to launch an investigation into Flybe’s credit card charges, which run into several pounds for transactions which are understood to only cost the company a few pence.
There has been widespread anger in the isles at the imposition of the charges – which are levied at a rate of £3.50 per passenger per flight, with a minimum charge of £5.50 – but the company reacted this week by describing it as “basically the norm” across the aviation business and blaming credit card companies for the high fees.
However, financial services industry insiders confirmed that the merchant usually pays a per transaction fee which is “at the lower end of the scale in terms of pence”. When asked whether the charge levied against it by credit card companies for each transaction was above or below £1, Flybe declined to respond.
A similar model is operated by fellow budget carrier Ryanair, which according to its website charges a £4 payment handling fee per passenger, per flight, to cover administration costs. Mr Scott said that given such charges appear to be fairly widespread practice within budget airlines, he is calling on the Office of Fair Trading (OFT) to investigate the issue.
The MSP said it was not clear why some small businesses in the isles could charge only 30p for using credit cards while large airline companies were charging several pounds. “No doubt the airlines will argue they have nothing to hide, so would therefore be comfortable giving evidence to the OFT,” he said.
A spokesman for Visa Europe said he was not in a position to comment on exactly how much Flybe has to pay out, but that the sum would be the same irrespective of the number of flights booked in each transaction.
He said: “It would be normal practice for a single fee to be paid by the merchant to the Visa acquiring bank in respect of one transaction, regardless of how many flights are sold in that transaction.”
The charges also apply to debit cards, with the exception of Visa Electron, at a rate of £1.50 per person per flight and are non-refundable. Defending the charges, a spokeswoman for Flybe – which takes over the Loganair franchise from 26th October – described them as “an inescapable way of life in modern commerce” and pinned the blame on the credit card industry.
She said: “They levy a processing charge per transaction that makes up to 60-70 per cent of the charge we levy. They additionally ask all airlines to maintain significant cash reserves to cover their losses in case of claims against them (ironic, given the current state of the banking sector), which we have to finance and which makes up another 15-20 per cent of the charge.
“Finally, they operate a complicated administration system on card charge backs, which require us to maintain a reasonable-sized administration department, which accounts for the remainder of the booking charge. The only alternative to not charging for their costs is to put up the fare base, this we know our passengers would find equally unacceptable.”
But the lack of transparency in the online payment system operated by Flybe has also been criticised by consumer watchdogs, including Which? By law, flight prices in adverts on billboards and newspapers must include all taxes and charges, but the law does not apply to the companies’ websites.
Consumer Focus Scotland argues that there should always be a fair and open relationship between consumer and company. A spokesman said: “Companies of course have a right to charge a fair price for their product, but that price should be clear and transparent from the outset, so that consumers can be re-assured that companies are recovering their costs and not making excess profit.”
ZetTrans chairman Allan Wishart said it appeared Loganair, which he feels has served Shetland well over the years, had now tied itself in with an operator which has “a completely different modus operandi”. He said: “I think there needs to be ways of looking at it, to see how the high charges can be mitigated – it’s what’s troubling a lot of people.”
But Flybe’s chief commercial officer Mike Rutter hit back at what he described as “intimations” in recent media coverage that his company did not understand the needs of local communities and denied that the booking system lacked transparency.
“I don’t think anyone is more attuned to their needs,” he said. “Unlike the previous incumbent we’ve had 27 years of experience serving places such as Guernsey, Jersey and the Isle of Man. Understanding places where airline service is a lifeline, not a luxury, is very much in the company’s DNA.
“[The charges] are not unusual things and will take some adjustment in getting used to. When we show you what the price of a flight is, we’ll show you how much an airport takes of that, what the government takes and what the finance community takes from us. Please feel free to wave [the high charges] in front of Visa and MasterCard.”
He added: “I want to be absolutely clear that these decisions are Loganair’s, not Flybe’s. Every single charge has been brought about by Loganair working within the Flybe system.”
The Shetland Times was unable to get any comment from Loganair before we went to press yesterday as its sales and marketing manager Susan Blacklaw and acting chief executive David Harrison were both on holiday, while chairman Scott Grier was in meetings all day.
? Meanwhile, Loganair this week had better news for concerned offshore worker Tommy Bain, who contacted The Shetland Times a fortnight ago to complain that he faced a £25 charge every time he wanted to change a return journey as a result of getting stuck on the Lomond platform due to bad weather.
Following an intervention by MSP Tavish Scott, Loganair’s acting chief executive David Harrison wrote to Mr Bain informing him that the decision has been reversed and offshore workers would no longer be charged to change their flights.
Last week Loganair also announced that it was backing down over plans to introduce a 15kg weight limit for baggage on flights between Sumburgh and the UK mainland.