Law Firm Preparing to Sue British Airways over Fuel Surcharges on Award Tickets

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.

I’ve explained fuel surcharges in the past.

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:

  1. Limits the universe of potential participants in the program to folks who can afford to even buy the coach ticket.
  2. Disappoints members at the point of redemption, they feel extorted and disappointed and misled after years of loyalty.
  3. 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.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community Milepoint.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. […] View from the Wing reports on a potential US lawsuit against BA due to the high level of taxes and surcharges on Avios redemptions …..  Whilst it is easy to shout ‘mad Americans!’, it is difficult to argue that something shoudn’t be done.  At the most fundamental level, BA issues a new timetable and files new base fares with IATA twice a year …. so surely a fuel surcharge should only cover any sharp jump in oil prices over the last few months? […]

Comments

  1. I agree with the lawsuit. I refuse to play BA game of paying for my tickets “twice” (once with the miles and then again the industry’s second to none highest fuel surcharges and fees as no other major airlines comes close). So, I don’t fly BA or make stopover at London. I would rather save my hard earned money. If significant of us boycott BA, maybe they will get the message.

  2. Also, numerous airlines (passenger and cargo) have paid DOJ fines and civil settlements for having agreed with their competitors to impose fuel surcharges at certain rates.

  3. If it is successful (I’m not sure it will) it could impact a lot of European airlines – LH, VS, AF, KLM, etc who all charge YQ on award tickets.

    Whilst I don’t particularly like YQ (I’m UK based so am perfectly used to it) the BA system works for me. I can use an Amex voucher and get 2 tickets in J or F for less than it would cost me to buy the tickets in cash in Y.

    In addition, the changes last year to intra-Europe redemptions was a great benefit which makes them actually worth it. Previously there was little point as the value for miles was so low due to the high fees.

  4. and you have to wonder why people don’t have sympathy for the airlines when they make a mistake or 4.

  5. Fuel charges, like most “resort fees”, are a form of fraud. They allow the seller to advertise one price and then require you to pay a higher price to obtain the good or service.
    .
    While the new US “all-in” regulations prevent this from happening for paid tickets, you still see the remnant in frequent flier programs where the airline advertises “free” flights but still charges you 50 to 80 percent of the ticket price through the dodge of a “fuel surcharge”.

  6. I’m not certain BAEC ever advertises free tickets – rather the customer wants to hear “free” and incorporates that into his own mind. But I do agree, “fuel surcharges” are arbitrary amounts, and do not truly allocate the risk of fuel costs to the passenger. What would TRULY be a “fuel surcharge” would be a fee assessed on the date of travel and pegged to the current price of crude. Passengers would, however, balk at that uncertainty, and would certainly raise a different hoo-hah entirely were they to be assessed.

    For me, my blood pressure goes down considerably when I just let the carriers call these fees whatever they want, thinking of it my my mind as a co-pay I must pay to access BA’s superior award availablity. Indeed, the presence of fuel surcharges may drive that superior availability.

  7. A casual search on ba.com shows a good example of this. I picked random pair of dates for JFK-LHR r/t. The flights I picked as paid fare came up to $812.45. The fare portion of that was only $80.50 each way, so $161. The remaining $651.45 were “fees/taxes”, the largest of which was YQ at $438 (the much hated UK government’s APD was $101.60 on that itinerary).

    If you try to price out that same ticket using Avios, you will get the following options:

    40000 Avios + $ 651.45
    36000 Avios + $ 711.45
    32000 Avios + $ 761.45
    28000 Avios + $ 811.45
    24000 Avios + $ 861.45
    20000 Avios + $ 911.45

    The first option is what we would normally think of as the award, 40K points + taxes/fees. In this case BA is charging the full $651.45 of fees from the paid fare, so you’re paying 40K points to save $161.

    In the next few options, you’re essentially buying back some Avios (4000 for $60, 8000 for $110, etc. — terrible). In the third option you’re presented, you’re approaching the paid fare total, but still being charged 28K points. In the fourth and fifth options, BA wants you to pay MORE THAN THE PAID FARE *and* fork over another 20K-24K points! AND I wouldn’t earn any points for the trip! If I hadn’t checked the paid fare first, I might have thought that was a good deal if I’m low on points. In what world does this qualify as “award” travel??

  8. The courts should stamp on misleading claims, but I’m not sure that there have been any here. The courts should not involve themselves in commercial decisions. BA has decided to structure its program, and its value proposition, in a different way than US-based airlines. It can sell more premium seats, and more economy seats, for higher prices on the routes it flies. It’s therefore stingier with giving out miles. However, it makes up for this in being more generous in many instances with mileage redemption availability, particularly in premium cabins – but economy redemption, and the associated pricing, sucks. That’s BA’s decision. No one is forced to fly BA. The court must only involve itself if BA has set out to mislead people about its program – and I don’t think it has.

  9. Love what David said: and you have to wonder why people don’t have sympathy for the airlines when they make a mistake or 4. ba ha ha!

  10. @NB

    Charging fuel “surcharges” that aren’t is misleading to me. The airlines that are trying to pull a fast one by loading YQ charges that should be part of the rate, and I hate it.

    Back when BA’s India mistake was loaded, it was listed at something like $50 fare + $450 YQ/taxes. One man’s “almost free” is another man’s $500. I was hoping BA would have to eat some serious crow for the pricing practices, but I was disappointed.

  11. @Southern travel girl, apologies. An Amex voucher (American Express Companion Voucher) is the UK equivalent of the Chase Companion Voucher.

  12. Where do I sign up for this class-action suit & get my “fees” reimbursed for prior reward travel..?? 🙂

  13. I hope that the class action lawsuit goes through and that I’m able to be a member of the class. There really does seem justification for it.

  14. My issue with this has always been it’s a cost of doing business… it is the equivalent of hotels offering Free Rooms, but then there is a housekeeping charge, electricity charge, water charge and those could be as much as the cost of the room, so your free night wouldn’t be free. Fuel is a cost, why not charge a cleaning charge, GA charge, FA charge, Pilot charge… its silly and ridiculous

  15. Do BA really say ‘free’ fligths in the US? I’d be surprised if they did, they don’t anwhere else.

    And thouse people comparing redemption costs to that of the cheapest economy tickets, you are not comparing like with like, the cheapest economy tickets are non flexible, or very costprohibitive to change. The same can not be said of redemption tickets.

    I’d agree the BA programme still has a problem that it does not have a sensible redemption offering for the longhaul cheap economy flyer.

    However airlines and companies are free to structure their loyalty programmes how they wish. As consumers it is our job to look objectivly at them, and make use of them IF we wish, and HOW we wish.

    Hence, if you want good value from BAEC, don’t use it in this way. Use it for premium cabins, shorthaul in Europe, or for flying with partners in situtions where you will not be subject to a fuel surcharge (e.g. AA domestic, etc if based in US).

  16. “charging separately for ‘fuel’ means that you really aren’t providing travel between two points in exchange for the miles.”

    Exactly. It’s like selling for an exquisite suit of clothing for the emperor but leaving out the fabric. Someone wrote a fairy tale about that once…

    When (not if) these fees are imposed on AA flights using Avios, outrage will ensue. IMHO Avios is a treachery program, not a loyalty program.

    We can try to exploit the Avios program, but it’s like dating Jack the Ripper: Be prepared for a stab in the back at any time. It’s a short term relationship at best.

  17. @nsx, Avios already adds fuel surcharges to transatlantic AA flights under the fictitious designation of “Distribution & Development Levy – United Arab Emirates”. Obviously, the itineraries this fee is charged to have nothing to do with and do not include UAE. I just filed a DOT complaint about this.

  18. I just tried to book a flight from Newark to Nairobi via London on BA and after I found there was nothing but “world traveler + tickets left for my FF plan, I almost choked when I was told that the fuel surcharge was $850.

    The only other option was to fly on Delta or KLM through Amsterdam with an extra 8 to 10 hours of travel time….. well, so be it. I will go through Amsterdam and spend the day seeing the sights and use the $850 to buy a new camera lens.

  19. BA avios is a big cheat. They advertise lucratively but impose lots of fees, taxes, and regulations while buying the ticket using the mileage. I am glad to be part of any lawsuit against this BA – avios cheat…

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