The facts about ‘tax’

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This has long frustrated travel management consultants, admits Claude Vankeirsbilck, chief sales officer at Tourvest Travel Services (TTS). “Airlines use the general term ‘taxes’ to hide fuel surcharges, and other costs. Obviously, as businesses, they are entitled to make a profit; however, we feel that there should be more transparency.”

This is a point of concern for Vankeirsbilck and his industry peers. Corporate clients, who have loyalty agreements in place with airlines, aren’t receiving the full benefits of those agreements. “With airlines charging less for actual fares, and more for taxes, the agreements aren’t as rewarding for clients as they should be,” Vankeirsbilck comments.

Airport taxes

It’s no wonder, then, that travellers balk at the mere mention of the word ‘taxes’. The proposed increase of South African airport tax is a case in point. At present, Vankeirsbilck notes, airport taxes are negligible, standing at less than R100. Airport service charges imposed by ACSA (Airports Company South Africa) stand at R42,98 per departure for domestic destinations; R89,47 for countries such as Lesotho, Swaziland, Botswana and Namibia; and R118.42 for international flights. The increase that ACSA has requested the Department of Transport to enact would see this figure rise significantly, by 133%.

ACSA’s argument is that there have only been slight increases in airport tax over the past four years. During this time, ACSA has been busy with upgrade programmes at the major airports, and took the decision not to implement major increases in taxes until construction was completed. Priscillah Mabelane, ACSA’s Executive Director: Finance, notes that although ACSA submitted an application for a steady increase in charges in 2006, this was vetoed by the regulator – hence the sudden, larger increase. Even so, the increase on domestic charges would be just R57. The increase is further justified when you consider that ACSA has also been busy with the construction of Durban’s new airport at La Mercy, a project which the company capitalised itself, and for which it is now seeking to recover the costs. At the time of writing, the increase had yet to receive the thumbs-up. Vankeirsbilck estimates that we’ll only start to see the impact on travel costs from early 2010.

 The hidden costs

What concerns Vankeirsbilck is that the ‘tax box’ enables airlines to hide their cost of sale by calling it by a different name – after all, tax charges should be kept separate from fares. The fact that most taxes relate to fuel surcharges demonstrates the flaws in the practice. “Yes, the oil price is, by nature, fairly volatile, and it stands to reason that airlines would need to adjust their prices accordingly,” he says. “However, when you book a hotel room, you don’t pay a basic charge for the room, plus another for the use of electricity. Just as providing electricity is a cost of doing business, so too, is buying fuel with which to power aircraft – and as such, we [members of the travel industry] argue that it should be included in the fare.” As a member of the Association of Travel Agents of South Africa (ASATA) Board, Vankeirsbilck and his industry peers have made frequent attempts to engage the airlines around the issue, and it is now being taken up at the Department of Transport.

Sadly, it’s not that simple. Although this discussion is taking place at a local level, the airlines’ defence is that they belong to IATA (the International Air Transport Association) – and the IATA guidelines support the practice. As Vankeirsbilck says, “No one is begrudging the airlines making a profit; it’s just that there should be more transparency about it.” “Taxes are legitimate – but extra charges shouldn’t be called tax when they’re not,” he reiterates. “As travel management companies, the practice places us in a difficult position, as the fee structures are difficult to understand – by all appearances, they change at a whim. There’s often a huge discrepancy between advertised prices and actual prices.”

Then there are the corporate clients who, he points out once more, are not being fully rewarded for their loyalty, as per their agreements with the airlines. “The reality is that it’s not the airlines that emerge as the ‘bad guy’. It’s us TMCs who appear to be at fault, because clients don’t understand why we are not giving them the price that has been advertised. They don’t realise that we are merely the intermediaries.” Mabelane, too, comments on the inaccuracy of using ‘airport taxes’ as a handy catch-all phrase for what does, in fact, amount to the airline’s own charges: aviation coordination services, airline aviation insurance premiums and, yes, the fuel surcharge. “It is the single largest component in the so-called ‘airport taxes’, the very taxes for which ACSA is unfairly required to carry the blame.”

Protect yourself

Vankeirsbilck advises travellers to educate themselves around ticket pricing, so that they understand how much money will be spent on the actual fare, and how much goes towards airport taxes, passenger service charges and fuel surcharges. “This will give you a clearer picture of the actual end price,” he points out. As for corporate travellers, Vankeirsbilck says: “In this case, it pays to demand transparency. If you have a loyalty agreement in place, make sure you are rewarded for your loyalty, and ask for assistance from your TMC if you require more information regarding reward structures. 

Vankeirsbilck notes that a degree of progress has been made, in that airlines now give advance notice of price changes. And he’s hopeful that still more change could be demanded from government, now that the Department of Transport is involved – after all, previously airlines could adjust prices without obtaining approval from government. “Government would be able to demand cooperation from IATA,” he explains. He’d also like to see the Advertising Standards Authority playing a role. “The issue is well within its scope,” he insists, “as advertising one fare, when the actual price to be paid for travel is quite different, surely amounts to false advertising.” For now, however, travellers must remember that they’ll often have to pay more than they had bargained for, so they should be mindful of the fine print.

Lisa Witepski