Harvard Researchers: Airlines Misrepresenting Fare Surcharges as 'Taxes'
Have you ever wondered why the taxes on airline tickets are so high that the taxes far exceed the advertised fare? According to HBS professor Ben Edelman and Harvard student Xiaoxiao Wu, it’s because sometimes the “taxes” aren’t actually taxes. In a new post on Edelman’s blog, the researchers chastise several airlines for their ticket pricing practices:
In one round trip New York-Paris ticket we quoted in January 2012, the fare was listed as $230 while “tax” was listed as $598.14 — fully 72% of the listed total. If government taxes were actually as large as Air France claims, many passengers might want to complain to responsible politicians and regulators. And passengers might have a different view of cramped seating, unpalatable food, or other service shortfalls on a $230 ticket versus a $828.14 ticket. But in fact, specifically contrary to Air France’s characterization of $598.14 as “tax,” the majority of the “tax” was not charged by any government, airport, or similar authority, and rather was retained by Air France to defray its ordinary operating expenses.The researchers go on to cite several airlines for violating Department of Transportation rules regarding ticket price advertising, including Air France ( “False characterization of ‘tax’ on web site prior to purchase”), American Airlines (“False listing of ‘tax’ on web site prior to purchase), and British Airways (“Fuel surcharge of an amount impermissible under DOT rules”). They include both screenshots of fare advertisements on the Web and transcripts of phone calls with ticket agents.
Edelman has filed multiple complaints with the Department of Transportation regarding the pricing practices of American Airlines, British Airways, and Cathy Pacific. To read the complaints in full, see “Misrepresentation of Fare Surcharges in Airline Price Advertising.”
(This articles appeared in Forbes on February 7, 2013)