David Bernstein passes along a link to a law firm that’s interested in suing British Airways Executive Club over fuel surcharges.
Lieff Cabraser is investigating charges that British Airways imposes excessive taxes and fees when members of its frequent flyer reward program redeem accrued travel miles for a reward ticket. British Airways states members may purchase “free” airline tickets with points through its Executive Club rewards program. However, it also imposes fees for “taxes and other charges associated with Reward travel.”
These other charges purportedly include items priced at a greater and excessive amount than when customers purchase BA tickets without using any reward points. In certain situations, customers have complained that the cost of their “free” frequent flyer ticket was nearly the same as, or in excess of, advertised fares on the same British Airways routes.
Really, they are a part of the price of the ticket. They are not a government-imposed fee. They are included in the purchase price when you’re buying airfare.
Airlines use them because it is cheaper and easier to add a fuel surcharge that applies to all fares in a specific market (city A to city B) rather than having to increase (or decrease) each and every one of the fares between given city pairs. And fuel surcharges have the added benefit of being added on after the fare is calculated, which means that they can raise price even for corporate or group discounts which apply to the base fare or specify a base fare.
Domestic award tickets in the U.S. used to be completely free (no cash payment collected on top of miles). The beginning of charges by US programs for booking award tickets wholly within the US was the introduction to the ‘September 11th security fee’. Airlines stopped paying that on behalf of award customers, and collected the cash instead.
American once started charging a $5 award redemption fee — even if you booked your ticket online. This was nothing other than a fee for using your miles. That fee went away. US Airways charges a fee for award redemption, when I book an international Star Alliance award ticket on US Airways over the phone they will not charge me a telephone booking fee since I cannot book awards on partners using their website (wish all programs were that friendly!) but they will charge me a $50 “Dividend Miles Processing Fee.”
These are just junk fees to be able to use your miles, when what was promised, suggested, or implied was ‘free travel’.
But since you’ve already accumulated your miles, the only way to use those miles for air travel is to book directly through the mileage program. You’re trapped, so they can hit you up for the fee.
The downside to the program is if you have a bad taste in your mouth after the redemption you are less likely to participate in the program going forward. The programs themselves are highly successful, they are hugely profitable — they charge their partners more for miles than it costs them to redeem those miles, many miles go unredeemed, it’s a multi-billion dollar business. And customers who redeem their miles tend to accumulate miles in the future even faster.
Years ago it used to be common to be given additional miles once you had cashed out your stash. Airlines wanted to keep you on the treadmill. They worried your loyalty would end if your mileage balance was depleted to zero. But they learned the opposite happened — the value of the program was reinforced for its customers when they redeemed their miles, and they became more rather than less engaged.
So making redemptions painful and unpleasant undercuts the long term value proposition for the program. It kills the golden goose.
And fuel surcharges often mean that when redeeming for a coach award, a customer is still paying almost as much for that ticket as if they had just bought it with cash. And the award doesn’t earn miles. And is less flexible in terms of which flights are available.
Even for premium cabins, where I often find the value proposition to still be worth it (I’ll pay less than the cost of a coach ticket to get a business or first class ticket), it:
- Limits the universe of potential participants in the program to folks who can afford to even buy the coach ticket.
- Disappoints members at the point of redemption, they feel extorted and disappointed and misled after years of loyalty.
- Reduces the perceived (and real) value of what is otherwise a profitable ongoing (loyalty program) business
Fuel surcharges are obnoxious. They are disingenuous. They have nothing to do with the cost of fuel, which is a part of the cost of transportation in any case. It’s one thing to ‘unbundle’ checked baggage, or meals, or seat assignments even from the cost of a ticket. But you can’t reasonably unbundle fuel from travel between points A and B. So charging separately for ‘fuel’ means that you really aren’t providing travel between two points in exchange for the miles.
But I imagine the question for a lawsuit must be whether there’s some sort of actual fraud or misrepresentation.
With the changes (mostly bad, very bad) to the British Airways frequent flyer program back in November, one modification was reduced fees on intra-European travel for members that have earned miles in the previous 12 months.
This is important because discount paid airfares meant to compete with low cost carriers would sometimes have lower fuel surcharges. And those lower fuel surcharges would not apply to award tickets.
It was possible to spend miles for a coach award and still spend more out of pocket cash than just buying a ticket straight away.
That seems to be one of the hooks for a lawsuit, as advertised. That members were being charged more for redeeming tickets than they could have purchased those tickets for.
I hate fuel surcharges. I think they’re disingenuous. I think applying them to miles that were earned prior to initially announcing the fees is probably deceptive — members earn miles on the basis of an award chart and fees, the promise of travel at a particular price — and retroactively changing the deal after you’ve spent your money and earned your miles is fundamentally unfair. But it’s also something the programs generally say they can do, it’s in their rules. And they haven’t lost lawsuits or settled major cases in a very long time. I’m not sure that a lawsuit will work, or that it should work. Mostly I just complain rather than resorting ot the courts, so perhaps I’m naïve…
Regardless, it will be interesting to watch if this lawsuit materializes.