Travellers Down Under are celebrating the end of punitive surcharges on airline tickets after Australia recently became only the second jurisdiction in the world to ban profiteering on credit and debit card fees.

But it remains to be seen how airlines and others will react in the long term after the government closed off a lucrative source of so-called ancillary revenue that had been earning them as much as $A68 on an airline booking for a family of four.

And the unintended consequences will be closely monitored after the first credit/debit card surcharge ban in the European Union, introduced in December 2015, prompted airlines to introduce new fees to circumvent the government action.

From September 1, the four major airlines in Australia have dropped the flat surcharges on ticket purchases of $A7 per booking for Qantas and Virgin Australia and $A8.50 per sector on Qantas low-cost subsidiary Jetstar and Virgin Australia low-cost subsidiary Tigerair.

However, in response to "indicative" guidelines published in May by the Reserve Bank of Australia on the cost of transactions that companies such as airlines are now banned from exceeding — 0.5% for debit cards and 1-1.5% for most credit cards, but 2-3% for American Express —  the airlines have adopted widely varying standards that they're passing on to their customers.

On Jetstar, for example, the surcharge for a ticket purchase via debit card – previously a flat $A8.50 per sector or $17 per round trip – is now just 0.48 per cent of the purchase price – 48 cents on a $A100 ticket. Its competitor Tigerair's fees are nearly double that at 0.88 per cent for debit card purchases.

The downside is that many travellers, particularly business class travellers on international journeys could pay substantially more now under the percentage fee system than previously under a set fee, although Qantas now caps the surcharge at $A70 for both debit and credit cards.

What's not known, however, are the consequences for credit card perks after European consumers reported that some of theirs had disappeared. Euro airlines are also applying surcharges that are many multiples of the EU-specified costs of 0.2 per cent for debit cards and 0.3 per cent for credit cards.

Airlines in the United Kingdom, for example, have been applying surcharges of 1.5 to 3.0 per cent, as well as set amounts of up to £13 ($US17) on top. It's not yet clear what effect Britain's decision to leave the EU will have on UK government policy.

The chairman of the Australian Competition and Consumer Commission, Rod Sims, has anticipated the potential for unforeseen consequences.

"That's been a fair bit thought about," he told AirlineRatings.com. "Obviously this change is a government initiative but we did engage with government trying to think through negative consequences.

"The main one was that most people don't charge a surcharge and this could encourage them to do something they weren't doing before, but they could have done anything before and they chose to do nothing.

"It's not clear to me that being able to charge 1.5 per cent  is going to encourage them to do that we they could have done even more before. I don't think we're going to run into those sorts of problems."

Sims says compliance by airlines with the new regime has been excellent and he doesn't expect problems.

"What happens when you get a law that's targeted at a particular behaviour, the main companies like the airlines and the event organisers really know the game is up and we have engaged with them extensively and they've made the necessary changes," he says.

"They have, I think, realised the game is up and they've been very co-operative and the changes seem to be the ones that should be made.

Sims says, however, the ACCC will be watching closely.

"We'll see over time," he says. "I think this thing will be fairly self-policing. That is, you've got the companies that were seriously in the gun who have made the changes and other who probably aren't as visible, if they start charging these sort of things (high fees),  I think there'll be enough people aware of the fact that's wrong and will get contact.

"All it takes is a couple of contacts to us and we know there's a problem and we can get onto it.  It should be straightforward to follow up those who are trying to do the wrong thing."

America and Asia, meanwhile, are still relatively free of credit card charging restriction.

The US Congress about five years ago agreed to cap so-called "swipe fees" on debit cards. However, lobbying by banks left the cap at around 25 US cents – twice as high as initially recommended by the Federal Reserve and an estimated five times banks’ cost of processing debit transactions.

Congress has not yet addressed credit card fees.

Cathay Pacific A350-900, CX 705, Hong Kong-Bangkok, July 24.

Hong Kong’s international airport is quiet at 5am, the lighting subdued, the shops closed and the crowds thin. I’m trudging through the shuttered shops after discovering I’ve followed the wrong signs to the wrong lounge and I’ve cleverly positioned myself on the wrong side of the airport.

My goal is the latest widebody product from European aerospace giant Airbus and, after navigating what seems to be the world’s longest corridor and an endless succession of travellators ( I later discover I could have taken a people mover),  it sits waiting for me at Gate 67.

The Airbus A350-900 XWB (extra wide body)  is the new kid on the block and I’m taking my first revenue flight on a Cathay Pacific service between Hong Kong and Bangkok. There are only a handful operating in the world at this stage— about 30 had been delivered to seven operators by June 30 —  but hundreds more will enter service over the coming years and the A350 will be coming to an airport near you.  

The A350 is the competitor to Boeing’s increasingly ubiquitous 787 and you can pick it by the graceful aerodynamics of its curved wingtip. For plane junkies, this is much a piece of art as it is a feat of engineering.  The new wing design combines with other aerodynamic and system improvements as well as a carbon fibre fuselage and fuel-efficient Rolls Royce engines to deliver a 25 per cent reduction in fuel burn over the aircraft it replaces.  

Along with reduced maintenance requirements, this means a plane that is significantly cheaper to operate. Cathay ordered 22 -900s, 12 of which are due for delivery by the end of the year, in addition to 26 of the bigger A350-1000s. 

The plane edged out the 787 is a tight competition and Cathay has been putting it through its paces and training crew on high turn-around shorter routes prior to launching long-haul flights to Europe in September.  While it’s still early days, the airline has worked with Airbus to stay on top of maturity issues and is happy with the performance. It was the sixth operator to take the A350 and the head of the airline’s A350 program, Robert Taylor, says some early problems with the type were fixed by the time it received its planes.

“It’s quite a tough workout and, bearing that in mind, the aircraft’s performing well,’’ says Taylor. “The aircraft had an initial target of 98.5 per cent technical dispatch reliability for the first year and it’s around about that figure, and it’s around about that figure worldwide.’’

Pilots like it too:  Cathay deputy chief pilot Evan Summerfield says flying the jet is “absolutely fantastic”.

The aircraft has more electrical systems than the A330 and Summerfield says the main differences come prior to push-back. “Just setting up is lightly different with regards to the amount of interface there is with the on-board information systems and the EFB (electronic flight bag),’’ he says. “It’s all very straight forward. Once you actually release the park brake and you’re pushing back from the gate, it could be any Airbus –whether it’s an A330 or A340 – it’s very, very similar. If anything it’s lot more redundant, a lot more clever and just a lot nicer to fly.’’

For passengers, the new breed of plane is quieter, better able to handle turbulence and operates with a lower altitude cabin air pressure that allows you to come off a flight feeling more refreshed and less like a refugee from The Mummy Returns. 

Manufacturers are often blamed for seating but It’s up to individual airlines how many seats they cram in and how comfortable they make passengers in terms of space. Cathay has erred on the generous side in this respect with three refreshed cabins that sees the A350 equipped with 38 business class suites, 28 premium economy seats and 214 in the main cabin.

I’m in business in seat 16A on this relatively short flight of just over two hours. The overwhelming impression as I enter the business cabin is one of space. The vertical walls and larger windows make the 280-seat plane, already touted as the widest in its class, seem even bigger than it is.

The outsize luggage bins lining the side of the cabin are big enough to take roller bags on their side, meaning plenty of overhead storage, and the 1-2-1 configuration means everyone gets aisle access from the 38 thoughtfully-designed business class seats. 

The Studio F.A. Porsche-designed seats are based on the airline’s existing offering but offer a slew of refinements. There’s more padding, more in-seat storage, redesigned controls and a stunning 18.5-inch high definition touchscreen that uses the latest software to emulate a tablet. 

Shoes can be happily stowed under the ottoman and there’s a compartment to one side that can take a laptop and documents while the cabinet in which the noise-cancelling headphones are stored now also contains power and USB ports and also has room for spectacles and a phone.

The water bottle is out of the way in a “hidden’’ compartment in the retractable armrest while the easy-to-use seat controls and dimmable reading light are on the side of the seat with a touchscreen video handset that can play content independently from the entertainment system.

Privacy is a big factor in this design and you are not really aware of your fellow travellers. The other thing of which you’re not really aware is noise: there isn’t much.

Airbus says the cabin is 50 per cent quieter than older aircraft in terms of perceived noise — think top deck of an Airbus A380 —  and this one space where you can hear yourself think.  Whether it is quieter than its competitor is difficult to discern but there wouldn’t be much in it.  Although not noticeable on our short flight, the lower cabin altitude of 6,000ft, compared to as much as 8000ft in some other planes, helps fight jetlag and will be a nice plus on long range routes to Europe.

There are some jazzy features in the A350 cabin such as mood lighting with millions of colours, although the use of this tends to be muted during a daylight flight, and liquid crystal displays where the seat belts signs normally would be.                                                                            

The seat is comfortable and a great design for people who sleep on their sides which, according to airline’s research, is more than half of us.  The 75 -inch (190cm) long lie-flat bed slots snugly in with the padded area on top of the laptop stowage to provide a swathe of space at knee level and allow side sleepers to curl up comfortably. Simple, intuitive controls make setting up the bed a breeze.

The responsive touch screen is razor sharp and Panasonic’s user-friendly interface makes it easy to navigate. Cathay has expended its programming and is making it available on shorter flights across its fleet. In addition to a good choice of films and music, the A350’s system included 3-D maps, views outside the plane, e-zines, and live satellite news feeds from the likes of CNN and the BBC.

Those wanting their regular online fix can access the Internet for $US9.95 for one hour’s continuous usage or shell out a more cost-effective $US12.95 for flights of six hours or less and $US19.95 for longer flights.  Access is a bit slower than ground-based broadband but good enough for emails and Web surfing. The airline is also offering data roaming from your own mobile phone (you pay the roaming charges) but does not allow voice calls.

Service on the breakfast flight was up to Cathay’s usual high standard: friendly and efficient with hot towels and welcome drinks out quickly. A tasty full breakfast included fresh seasonal fruit, yoghurt, a choice of two hot mains and brewed coffee.

If anything, the flight was too short but it was enough to indicate Cathay’s new fleet of A350s is going to make flying to Europe via Hong Kong a serious option.

Steve Creedy flew to Bangkok courtesy of Cathay Pacific.

AirAsia X has been officially warned  by  New Zealand's  competition watchdog about its pricing practices after it failed to disclose a mandatory processing fee and forced passengers to opt out of a preselected luggage option.

The New Zealand Commerce Commission said the budget airline's practice of preselecting luggage at an extra cost to the advertised flight price and not properly disclosing a mandatory processing fee meant the carrier was likely to have misled consumers over the price of its services.

It issued AirAsia X, which began flying to New Zealand in March this year, with a formal warning but noted the airline had now changed its practices.

AirAsia X is one of a number of carriers to have crossed swords with competition regulators about hidden fees not included in the advertised fare and “opt out’’ charges which consumers end up paying unless they take action such as unchecking a box.

The New Zealand regulator began cracking down on the practice last year and Air New Zealand was among a number of companies to agree to stop using it.  In March this year, Jetstar gave court enforceable undertakings to the commission ending its preselection of a range of services.

 AirAsia X  agreed to change its online booking process from July to sell checked baggage on an ‘opt in’ basis and to disclose the processing fee early in its booking process. It also introduced an alternative payment method that enables customers to avoid the fee entirely.

Commerce commission chairman Mark Berry said AirAsia had cooperated fully with the investigation and a warning was appropriate in this case.

“We have been proactive about tackling opt out pricing, with the travel industry a particular focus for us,’’ Berry said. “We are pleased that AirAsia has moved to improve their pricing practices, including how they disclose their processing fee, after we contacted them with concerns when they re-entered the New Zealand market earlier this year.’’

“Since we began investigating opt out pricing last year we have now seen seven companies put an end to this practice, which is great for consumers. We have made our position very clear on this issue and expect businesses to stick to an ‘opt in’ sales approach to avoid any possibility of breaching the Fair Trading Act.”
 

Alitalia and Virgin Australia have expanded their codeshare agreement to include 11 new destinations within Italy as well as additional ports in Australia.

The deal means Virgin’s Australian customers can now earn credit status and Velocity frequent flyer points on flights from Rome to Bari, Bologna, Catania, Florence, Genoa, Lamezia Terme ,  Naples, Palermo, Reggio Calabria , Turin  and Venice.

Alitalia customers will be able to codeshare on Virgin Australia services from Sydney to Adelaide, Melbourne, Perth, Ballina, Coffs Harbour, Hobart, Sunshine Coast and the Gold Coast.

“We are excited about the opportunity to encourage Alitalia customers to visit Australia and travel beyond Sydney through their expanded codeshare on Virgin Australia services,”  said Virgin Australia general manager alliances Chris Squires.

Both airlines count Gulf carrier Etihad as a major investor and the new Italian codeshares are in addition to existing arrangements on services  from Abu Dhabi to Rome Fiumicino and Milan Malpensa.

The agreements provide for full reciprocity across both networks, including lounge access, priority service and an increased baggage allowances for eligible members.

Virgin recently resumed its three times weekly services to Abu Dhabi after completing a refit of its Boeing 777 fleet with a top-tier business class product, which includes an inflight bar, and a refreshed premium economy cabin.

Mr Squires said the expanded codeshare relationship would make it easier for Australians to do business or visit friends and family in Italy.
 

Travellers Down Under are celebrating the end of punitive surcharges on airline tickets after Australia recently ecame only the second jurisdiction in the world to ban profiteering on credit and debit card fees.

But it remains to be seen how airlines and others will react in the long term after the government closed off a lucrative source of so-called ancillary revenue that had been earning them as much as $A68 on an airline booking for a family of four.

And the unintended consequences will be closely monitored after the first credit/debit card surcharge ban in the European Union, introduced in December 2015, prompted airlines to introduce new fees to circumvent the government action.

From September 1, the four major airlines in Australia have dropped the flat surcharges on ticket purchases of $A7 per booking for Qantas and Virgin Australia and $A8.50 per sector on Qantas low-cost subsidiary Jetstar and Virgin Australia low-cost subsidiary Tigerair.

However, in response to "indicative" guidelines published in May by the Reserve Bank of Australia on the cost of transactions that companies such as airlines are now banned from exceeding — 0.5% for debit cards and 1-1.5% for most credit cards, but 2-3% for American Express —  the airlines have adopted widely varying standards that they're passing on to their customers.

On Jetstar, for example, the surcharge for a ticket purchase via debit card – previously a flat $A8.50 per sector or $17 per round trip – is now just 0.48 per cent of the purchase price – 48 cents on a $A100 ticket.

Its competitor Tigerair's fees are nearly double that at 0.88 per cent for debit card purchases.

The downside is that many travellers, particularly business class travellers on international journeys could pay substantially more now under the percentage fee system than previously under a set fee, although Qantas now caps the surcharge at $A70 for both debit and credit cards.

What's not known, however, are the consequences for credit card perks after European consumers reported that some of theirs had disappeared. Euro airlines are also applying surcharges that are many multiples of the EU-specified costs of 0.2 per cent for debit cards and 0.3 per cent for credit cards.

Airlines in the United Kingdom, for example, have been applying surcharges of 1.5 to 3.0 per cent, as well as set amounts of up to £13 ($US17) on top. It's not yet clear what effect Britain's decision to leave the EU will have on UK government policy.

The chairman of the Australian Competition and Consumer Commission, Rod Sims, has anticipated the potential for unforeseen consequences.

"That's been a fair bit thought about," he told AirlineRatings.com. "Obviously this change is a government initiative but we did engage with government trying to think through negative consequences.

"The main one was that most people don't charge a surcharge and this could encourage them to do something they weren't doing before, but they could have done anything before and they chose to do nothing.

"It's not clear to me that being able to charge 1.5 per cent  is going to encourage them to do that we they could have done even more before. I don't think we're going to run into those sorts of problems."

Sims says compliance by airlines with the new regime has been excellent and he doesn't expect problems.

"What happens when you get a law that's targeted at a particular behaviour, the main companies like the airlines and the event organisers really know the game is up and we have engaged with them extensively and they've made the necessary changes," he says.

"They have, I think, realised the game is up and they've been very co-operative and the changes seem to be the ones that should be made.

Sims says, however, the ACCC will be watching closely.

"We'll see over time," he says. "I think this thing will be fairly self-policing. That is, you've got the companies that were seriously in the gun who have made the changes and other who probably aren't as visible, if they start charging these sort of things (high fees),  I think there'll be enough people aware of the fact that's wrong and will get contact.

"All it takes is a couple of contacts to us and we know there's a problem and we can get onto it.  It should be straightforward to follow up those who are trying to do the wrong thing."

America and Asia, meanwhile, are still relatively free of credit card charging restriction.

The US Congress about five years agreed to it agreed to cap so-called "swipe fees" on debit cards. However, lobbying by banks left the cap at around 25 US cents – twice as high as initially recommended by the Federal Reserve and an estimated five times banks’ cost of processing debit transactions.
Congress has not yet addressed credit card fees.

Airline competitors are queuing to join trailblazer JetBlue after it Wednesday operated the first regularly-scheduled commercial flight from the US to Cuba in more than 50 years.

JetBlue flight 387 made history when it crossed The Straits of Florida—that 90-mile wide swath of sea separating Cuba from the US — and touched down at Santa Clara Santamaria International Airport on the island nation’s once forbidden soil.

The landing marked the first time in more than half-a-century that a regularly-scheduled commercial airliner from the US has flown any route to Cuba, this time nonstop from Fort Lauderdale.

JetBlue 387 is the first in a flurry of US- Cuba flights that will be taking wing over the next few months.

 The US Department of Transportation had okayed half-a-dozen US airlines to offer flights to nine Cuban cities: JetBlue, American Airlines, Southwest, Sun Country, Frontier and Silver Airways.  On Wednesday,  DoT named eight carriers to provide service to the prize of the new pact,  Havana.

Set to join JetBlue on the Havana run are Alaska, American, Delta, Frontier, Southwest, Spirit and United.

The commercial aviation agreement between the US and Cuba allows each country to field as many as 20 daily roundtrips.

JetBlue, has been given 27 weekly flights from New York, Fort Lauderdale and Orlando while rival American has been granted four flights a day from Miami and one from Charlotte, North Carolina.

Delta gets 21 weekly flights to Havana, with daily flights from New York, Atlanta and Miami, while United will fly daily from Newark, New Jersey, and weekly from Houston.

Alaska will fly from Los Angeles while the other carriers into to fly from Florida, where there big numbers of Cuban expatriates live.

A US ban on tourism to Cuba remains in force and attempts to repeal it have been blocked in Congress by Republicans.  However, there have been no prosecutions during the Obama administration and Americans can travel legally to Cuba if they meet certain criteria.

Transportation Secretary Anthony Foxx, who was on board JetBlue Flight 387, says the flights represent an effort to “re-engage with Cuba.” Part of that engagement for US airlines will be to make formal application with Cuban government for approval.

Air travellers are embracing a new generation of baggage forwarders catering for people facing high ancillary luggage fees that used to be included in the price of an airline ticket.

Airlines now charge economy class travellers high rates for luggage beyond the first bag as a disincentive to free up valuable paid cargo space and, on long-haul routes, the impact can be dramatic.

One of the myriad of new baggage shipping specialists to have sprung up since airlines began their so-called ancillary revenue revolution nearly a decade ago has cited the case of a long-haul traveller recently quoted £1193 ($US1563) to fly a 25kg (55lb) second bag from London to Melbourne, Australia – and that is by no means an exception to the rule.

The quote, from the world's biggest international carrier, Emirates, is typical of the rates being quoted by major airlines.

Acccording to UK-based SendMyBag.com, another traveller was quoted more than £500 ($US655) to take a second bag weighing up to 23 kilograms from London to Dubai, in the Middle East, while a third was quoted £966 ($US1265) for a second 23kg bag flying from London to Tokyo, Japan.

"I don't think anyone at Emirates who are charging over £1000 for a second suitcase would believe that anyone who wanted to check a second suitcase was actually going to pay that," says SendMyBag.com founder, Irishman Adam Ewart. "They' are trying to dissuade people from checking bags.

"Well, you can charge and charge and charge and dissuade people, but some people have no choice but to travel with certain amounts of luggage."

Baggage fees are the tip of the iceberg in the airline ancillary revolution. According to Ewart, US airlines in 2007 charged a total of $US400 million in baggage fees, but by 2015 that had ballooned to $US4 billion. At the same time, overall airline ancillary fees soared from $US13.5 billion in 2008 to more than $US59 billion in 2015, according to US ancillary revenue consultancy IdeaWorksCompany.

Read: Airfare price revolution

Ewart's business was one of many that saw the opportunity when the user-pays phenomenon began replacing fully inclusive air fares to help airlines recoup the high cost of fuel.

"The business was originally established after my girlfriend had trouble travelling from university," he says. "I would travel over and help her bring a second suitcase from England (to Ireland) and one time we got hit with £50 or £60 excess baggage.

"This was back around 2006 when the low-cost airlines were really just starting to introduce bag fees for the first time and increasing them if they did already have them.

"So I set up this service handling luggage around the UK for the next couple of years. I left it pretty much as a small business for students, but then, around 2010-11, there was a fairly obvious shift for us with customers landing on the website in terms of what service they were asking us for."

Ewart says he saw the potential for a business servicing everyday flyers when he heard managers from European low-cost carrier Ryanair boasting that they had reduced the number of people checking in bags from 80 per cent of travellers to 20 per cent. That didn't mean that the 80 per cent who no longer bothered didn't need the luggage they were foregoing.

"Around 2010-11 it became obvious it was a worldwide phenomenon, so I started to scale up the business," Ewart says.

After looking after people travelling around Europe, the operation expanded to include travellers between Europe and America and finally global routes. New subsidiaries were established in the US and Australia.

"We've always had two sets of customers: our short-haul customers, some of whom are using us just for convenience – they can't carry the amount of stuff they want to take with them," Ewart says.

"And sometimes they using us to avoid the bag fees – we're simply cheaper than checking a bag with Ryanair or easyJet. Our long-haul customers have generally been people using us for convenience or that they can't carry everything – they're relocating. But in the last six months we've seen a real turn there.

"There's more and more customers using us on long-haul routes because they're saving money."

As an indication of why the luggage forwarding industry is booming, Ewart reveals that his rates are often hundreds of dollars cheaper than the rates being quoted by the airlines themselves.

"Our service for the long-haul routes has never been pitched as a service that's meant to be a lot cheaper than checking your first bag," Ewart says.
"It's really interesting that airlines now are saying that it could be $US1000 where our fee could be a $100 or $200, so there's a chance of saving hundreds – huge amounts. It's pretty crazy."

For the record, the traveller facing a $US1500 bill to fly a second bag from the UK to Australia was quoted £118 ($US155) by the baggage forwarder.
SendMyBag.com contracts global express freight carrier DHL, while other luggage forwarders use freight giants Fedex and UPS. Ewart says he has discovered that even though he can save people money, they still expect fast service.

"We've got customers with super-high expectations and that's OK – that's what we expect," Ewart says.

 Just like the freight airlines themselves, SendMyBag.com will soon launch a new app that allows customers to track their bags all through its journey. And like tripadvisor.com, the company's website has a section were customers rate its service and the company plans to publish its on-time performance statistics.

The only caution about using a luggage forwarding service is that things can go wrong.

"It is possible sometimes that there'll be a delay on a road – traffic accident, that kind of thing – so we do say to customers aim to receive the bag a  day before you need it," Ewart says.

"We're finding that hotels are happy to receive bags the day before and put it in their luggage room. It's a great service for the hotels as well because it allows the hotels to show a bit of customer service for their clients."

With the airlines relying more and more on ancillary charges, Ewart warns that even more baggage charges are on the way.

"I wouldn't be surprised to see further charges on first bags, especially for economy passengers for long-haul flights and I definitely think we're going to see new hand baggage fees appear across the next couple of years," he says.