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Amid the confusion, a privileged few are profiteering, but not the airlines, according to evidence from an Arkansas court. PricewaterhouseCoopers is accused by a group of clients of padding expense invoices by charging for full-cost airfares, but failing to pass on volume rebates paid by travel agents to the accountants. The class action lawsuit against PwC and its rivals Ernst & Young and KPMG suggests that hundreds of millions of dollars were pocketed over the past decade. PwC denied wrongdoing, but this week agreed to settle the claims for $54 million (£30.6 million).
This is the tip of an expensive iceberg. Air tickets are lolly for corporate lawyers, divas, pop stars and any self-employed person with a tendency to throw a hissy fit if his seat number is higher than a single digit. They may never use the posh seat; it is standard practice for a fashion model to exchange her first-class ticket when she arrives at the airport for a seat in coach and pocket the difference in a wad of cash.
One for the Inland Revenue, perhaps, but the wider issue is that air tickets are not just tickets. For some people they are just an entitlement to a seat (never guaranteed), for others they are exchangeable currency, but for the airlines the ticket is a means of carving up markets, discriminating against customers on grounds of nationality and cross-subsidising unprofitable business sectors.
It is simply done. Contrary to what you might think, airlines are not multinationals, but local businesses protecting their territories like medieval barons. And the seigneur will take his tithe. According to American Express Travel Consultants, Britain is the most expensive country from which to fly business class to America, with an average fare of 93 euro cents per mile. But hop over to Amsterdam and the journey costs 55 cents per mile while Swedish business travellers pay 30 cents.
It is all about competition, say the airlines. Swedes are less willing to pay for luxury so business fares are lower in Stockholm. There is some truth in this, but it is mostly tosh because it is not the customers that define airline markets, but the airlines themselves. Jan, a Dutchman, is charged a lot less than 93 cents per mile for a flight from Heathrow to JFK than his British friend John, who can, if he chooses, hop across the channel to Schiphol to get a similar bargain. Yesterday KLM was offering its fellow nationals return flights to New York in early January for €3,815. The same flights (including transfers to and from Schiphol) were available to anyone with a UK address for just €2,355.
One obvious solution is for Jan and John to swap tickets, such that John gets a discounted BA flight from the Dutchman while Jan benefits from a cheap KLM flight from Amsterdam. Unfortunately, the airlines have spotted this one; the long-haul voucher in your ticket is not valid unless you have transferred from a connecting flight.
The same lumpy seat, the same lousy meal, the same delay, but Jan and John are the beneficiaries of a very personal service. It is the ticket itself that is distinctive and worth a fortune, if only to the airline, which vigorously protects that distinction. Most airline websites are carefully tailored to prevent cross-border ticket shopping. Click on to the French BA site and you can buy a ticket from almost any airport in France to any BA destination, but you cannot start your journey in Britain. The European Commission, after hundreds of complaints from customers, has suddenly realised that the practice of carving up markets by national boundary is in breach of the European treaties.
BA at first denied that it engaged in differential pricing, but yesterday was hiding behind its lawyers who are, doubtless, preparing a robust defence to the Commission’s threat of a formal inquiry into airline ticketing practices. If BA was sensible, it would support the Commission’s crusade. Differential pricing is unlikely to be that important a part of the airline’s marketing strategy because BA already guards the most lucrative market in Europe.
BA can sell its New York tickets at 93 cents per mile to business travellers because of the City of London and its huge constituency of pampered people. It matters little to BA that travellers who work in other British industries with less padded margins cannot afford the premium prices. They can fly in coach or ship off to Schiphol.
The Commission would be doing everyone a service if they flung the book at the airlines. Airline tickets are a commodity — that is proven by the ticketing practices of easyjet and Ryanair, whose websites are accessible to all, regardless of nationality. If tickets were fungible, BA and KLM would have to find some other distinction than a tattered flag. If all prices were available to all, airlines might finally become a service industry worthy of the name.
Sad Queen Mary
AM I the only one saddened by the launch of the Queen Mary 2 from St Nazaire? There was something pathetic about the launch of a vessel that is really an exercise in nostalgia. When St Nazaire’s welders waved their caps at the Normandie 80 years ago they were celebrating a triumph of modern technology.
But liners are yesterday’s transport. Just weeks ago, Europe retired the Concorde and today we are asked to celebrate 150,000 tonnes of floating kitsch.
carl.mortished@thetimes.co.uk
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