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EC submits new airline regulation

Measure would force carriers to advertise full ticket prices

By František Bouc
Staff Writer, The Prague Post
August 2nd, 2006 issue

In its ongoing effort to impose greater regulation on the airline industry, the European Commission (EC) has proposed a piece of legislation that would force carriers to advertise the full price for tickets, including taxes and additional fees.

Introduced July 18, the bill requires airlines to show the total cost of a ticket, including credit card charges, government taxes, fuel surcharges and baggage fees, in advertisements and on Web sites. It is designed to make ticket prices more transparent and make it easier for consumers to compare different airfares.

"Consumers are being mislead by seemingly interesting fare offers and are only told the full fare at the moment of payment," the EC said in a written statement.

The measure would also force airlines to charge customers from all European countries the same price for specific routes. In the past, they've charged different prices for tickets depending on what country the traveler is from.

The EC has received numerous complaints about this, specifically from people who find they aren't allowed to take advantage of cheaper prices on foreign Web sites.

"Citizens must enjoy the benefits of the single market and have the possibility for more choice and quality," said Jacques Barrot, European Union transport commissioner. "They must be able to easily compare fares between airlines."

The draft legislation has to receive the support of all 25 EU governments and the European Parliament to become law, which could happen in late 2007 at the earliest.

Tough competition

As opposed to in some other European countries, airlines here are not required to advertise full ticket prices, and quoting the lowest possible fare has become a strong marketing tool for regular and budget carriers.

Indeed, the market has become so competitive that carriers have to slash prices even though rising fuel costs are threatening to put many into the red.

"In this market, price has become a key factor in attracting passengers," said Jan Schiesser, an analyst at Atlantik FT.

Nevertheless, national carrier Czech Airlines (ČSA), which was nearly 500 million Kč ($22 million) in the red last year, isn't concerned about the EC initiative.

Marie Macounová, the company's vice president for marketing, said ČSA started developing a more transparent system before the bill was introduced.

"Regardless of the practices of other airlines, we want to present our prices transparently," she said.

Some analysts, including Jaromír Beránek of Mag Consulting, which monitors the tourism industry here, said forcing airlines to advertise full ticket prices could hurt low-cost carriers, some of which offer flights for as little as 1 Kč.

Still, representatives of low-cost carriers said they're also not worried. Jan Čamek, spokesman for SkyEurope, the rapidly expanding Slovak carrier that entered the market in April, said the bill could actually work in their favor because budget airlines' fares only include the ticket price and an airport fee.

Regular carriers, he said, charge ticket-issuing fees and fuel surcharges. As a result, the budget airlines will still be cheaper and customers will notice a much less significant increase in the price of their tickets.

Increasing regulation

Brussels' push to make ticket prices more transparent is the most recent example of the EC's efforts to bolster regulation of the airline industry. Earlier this summer it introduced a plan that would introduce a tax on aviation fuel and force airlines to enter its Emissions Trading Scheme to make the industry more environmentally friendly.

ČSA's Macounová said these measures are hurting airlines by increasing costs at a time when many are struggling to stay in the black.

As a result, ČSA and other carriers are trying to lower costs. ČSA is focusing on boosting its online sales and check-in.

"E-sales represent a major opportunity for slashing costs," she said.

And some low-cost carriers are even considering not charging for tickets. They would offset the costs through advertising on board and on the hulls of their planes.

František Bouc can be reached at fbouc@praguepost.com


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