Posted by Seth on July 19, 2010 under News | 
No, it isn’t a real bank, but Southwest Airlines sortof operates like one with respect to their fares and change fees. How so? Buying a ticket is essentially making a deposit into that bank and the money in one’s account could be applied to any future ticket with the only limitation being the expiry of the funds based on the date of the initial deposit. The tickets themselves are non-transferable, but the value associated with them could be assigned to another passenger. This is no longer the case.
Airlines and their operations are governed by many different things, but when it comes to interaction with their customers the Contract of Carriage (“CoC”) is king. Regardless of what is mentioned in marketing materials, what an agent tells you or what you might think you are supposed to receive, it is the CoC that ultimately determines what will or will not happen. Airlines generally don’t tinker with their CoC very often and when they do it is generally a minor tweak. Southwest quietly issued an updated CoC last week, their 7th major revision in the company’s nearly 40 years of operations. Among other things, this change to the “Bank of Southwest” is included in the latest CoC update.
Refundability and Transferability of Funds
While the vast majority of tickets that Southwest sells are nonrefundable, the carrier makes it possible to “bank” the value of those tickets for future travel in case plans change. With the July 14, 2010 revision of the CoC a new phrase has been inserted into the clauses describing the value of these Ticketless Travel Funds (“TTFs”): “for the originally ticketed Passenger only.” The previous CoC §90(B) read:
Nonrefundable tickets – Passengers who purchase restricted, nonrefundable tickets are not eligible for refunds…the fare paid for unused nonrefundable tickets, upon surrender of the usused ticket or portion thereof, or with the Ticketless Travel confirmation number and proof of purchase sufficient to Carrier, may be applied toward the purchase of future travel, without penalty, provided that travel is completed within the ticket’s eligibility period.
The new version §4(C)(3)(ii) reads:
Travel Credit. Unless otherwise stated by Carrier, the fare paid for unused nonrefundable Tickets, including taxes, security fees, and Passenger Facility Charges, may be applied toward the purchase of future travel on Carrier for the originally ticketed Passenger only.
Read more of this article »
Posted by Seth on June 5, 2010 under News |
The Department of Transportation (DoT) has been rattling their saber quite a bit lately, handing out fines to a number of carriers and revising rules to better protect passengers, mostly under the auspices of enforcement against “deceptive trade practices” in whichever way the DoT chooses to interpret that clause. The most recent big-name actions coming from the DoT included notable fines for failure to comply with reporting requirements and insufficient notification of passenger rights when flights are overbooked. Oh, and the recently implemented 3-hour tarrmac hold time rule.
That was a pretty busy first half of the year for the DoT but they are not done yet. This week they’ve unveiled a slew of proposed rules changes to the rules. Most of the proposed rules appear pretty solid though there are a few which are questionable at best. Tarmac delay rule enforcement would be increased from domestic carriers to all airlines operating planes of 30 or more seats in the United States, for example. But beyond that change there are three significant areas that could see dramatic revisions in policies as enforced by the airlines.
Denied Boarding Compensation
The idea of permitting airlines to overbook flights and hope to have the correct number of passengers by the time the door closes is one that has been in effect for nearly 50 years, originally prescribed by the Civil Aeronautics Board way back when they ran the show for airline policies. Even after deregulation and the dissolution of the CAB the voluntary/involuntary denied boarding policies have more or less thrived. Passengers have often been willing to accept bumps and the airlines would pay out compensation either under the voluntary rules or the forced comp scheme of IDB as set by the Feds.
Unfortunately, however, the IDB comp is often not keeping pace with the economy or the changing landscape of air travel. The dollar amounts are fixed rather than tied to an annual adjustment rate such as the CPI. Moreover, there are some holes in how the compensations offers are presented to customers at the gate. Generally there isn’t much time to fully educate these passengers of their rights and the airlines have been taking advantage of this rushed environment to convince passengers to take company credit vouchers rather than cash or check compensation that they may be entitled to. Similarly airlines will offer a “free round trip ticket” without sufficient details of the restrictions surrounding those tickets. The DoT is suggesting that the rules be changed on this front such that any offer made verbally include all the options and details, not just the one that is best for the airline with the alternate options buried in fine print.
If a carrier offers free or reduced rate air transportation as compensation to volunteers, the carrier must disclose all material restrictions on the use of that transportation before the passenger decides whether to give up his or her confirmed reserved space on that flight in exchange for the free or reduced rate transportation.
Additionally, the DoT is altering the definition of what “confirmed reserved space” means with regard to denied boarding compensation. Currently “zero fare tickets,” those from certificates, frequent flyer points or consolidator shops where the actual price is not stored in the PNR, would not be eligible for denied boarding compensation. The DoT suggests that this be changed such that zero fare tickets are included. Determining the value of those tickets for the purposes of compensating the customer my be difficult as there is no good way to translate the value of points to dollars. One proposal is to use comparably priced tickets from others on the flight. Another is to simply refund double the number of points redeemed for the travel, plus the cash component paid for taxes and fees. Either way, this change will be good news for protecting folks on the “free” flights, tickets which are generally anything but.
Of course, increasing the compensation requirements may induce the carriers to reduce their overbooking thresholds. They overbook because they generally get enough volunteers to accept a voucher – and only about 35% of those vouchers are redeemed – to the point that they can still make money handing out the chits. As loads increase such that the airlines are less able to accommodate passengers on a re-route in a timely manner it becomes much less convenient for the customer to the point that a $200 or $400 voucher is less likely to solve the problem if it also involves a delay of a couple days rather than a couple hours. Hopefully this new set of regulations helps on this front.
Full Fare Pricing
The DoT holds a unique position in its ability to control pricing advertising rules over airlines. Neither states nor the Federal Trade Commission have jurisdiction; it is just the DoT. And for quite some time now the DoT has had a policy that
…states that the Department considers any advertisement that states a price for air transportation that is not the total price to be paid by the consumer to be an unfair and deceptive practice in violation of 49 U.S.C. § 41712. However, the Department’s enforcement policy regarding this rule has permitted certain government-imposed charges to be stated separately from this total price. Under this policy, taxes and fees that are collected by a carrier on a per-person basis, are imposed by a government entity, and are not ad valorem in nature are allowed to be excluded from an advertised fare. The existence, nature, and amount of these additional taxes and fees must be clearly indicated where the airfare first appears in the ad, so that the consumer can easily calculate the total price to be paid. The Department has consistently prohibited sellers of air transportation from breaking out any other fee, including fuel surcharges, service fees, and taxes imposed on an ad valorem basis.
In other words, the airlines have to publish everything except the per-passenger taxes as a single number and they have to make it very easy for a customer to figure out what those extra taxes are. Unfortunately airlines are stretching the limits of what those fees are the DoT is now suggesting that the rule “include a requirement that all advertisers include all mandatory fees in the advertised price.”
One quirk of such a plan is that each airport has a different Passenger Facility Charge item that is added on to a fare on a per-person basis but specific to a routing. So flying from New York City to Chicago to Las Vegas would price differently than New York City to Houston to Chicago or on a non-stop flight from New York to Chicago. This is just one of many hurdles that would need to be overcome to enforce a true “full fare pricing” scheme.
The policy would also prohibit the advertising of “one way” fares where a round-trip purchase is required. This is a pet peeve of mine and I would be quite happy to see it go away.
Another hurdle to overcome is the fact that carriers are racing to unbundle costs that have traditionally been considered part of air travel including checked baggage or carry-on baggage, meals, seat assignments and other similar benefits.The DoT is investigating the likelihood that pricing engines can accurately support the ability to allow passengers to specify a search not just by dates and city pairs but by the amenities required such as the ability to check a bag and have a meal on the flight. The GDS networks that handle the majority of the fare pricing for customers are not quite to the position where they can support these queries but it will be interesting to see what happens as they come about. Of course, it might mean deciding 9 months in advance if you’re going to check a bag on a vacation next summer, but you’ll have some idea of what it will actually cost in the end, much more so than is possible today. All booking documents such as e-Ticket receipts would be required to show the full details of these pricing details so as to inform the customer of any future charges as far in advance as possible.
Opt-Out Sales
The DoT is proposing to ban all add-on sales offers that require customers to opt out of a service rather than to opt in. These services often include advance seat assignments, airport transfers, travel insurance, show tickets and similar ancillary offers. These are generally high margin sales for the agents and confusing to the customer to figure out how to unselect all the offers. Even an educated consumer can be easily tricked by these opt-out offers as a good friend of mine experienced on a recent trip to Panama City and Mexico City.
Codeshare Service
Airlines love codeshare service. By creating phantom flight numbers one airline can sell service from another with virtually zero responsibility to actually deliver on that service. Whether through the outsourcing of flight operations to smaller, regional carriers or in setting up long-haul partnerships to provide increased global coverage, codesharing is generally a fantastic thing for the airlines. As part of approving international codeshare service the DoT has generally inserted this clause in the deal:
…the carrier selling such transportation (i.e., the carrier shown on the ticket) accept responsibility for the entirety of the code-share journey for all obligations established in the contract of carriage with the passenger; and that the passenger liability of the operating carrier be unaffected
When all the airlines had generally similar policies this was easy as there weren’t enough discrepancies in policies for it to matter. But as each carrier carves more benefits into nuance and minutiae the ability to deliver those benefits consistently across the codeshare is diminishing rapidly.When one airline permits holders of a certain credit card to check bags for free but then sells those customers a codeshare flight operated by a partner which does not extend that same benefit then the spirit, if not the letter, of this clause is violated. The DoT hopes that the revised rule will address this issue and require truly seamless applicability of benefits.
Peanuts
Finally, the DoT is back to looking at how to prevent peanuts from showing up on airplanes in the name of protecting people who have severe peanut allergies. In short, the DoT suggests that, “Airline passengers with severe allergies to peanuts have a qualifying disability as defined in Part 382.” A “qualifying disability” in this sense requires action to address it on the part of the carriers. The DoT once previously tried to issue a ruling on this issue. In 1998 they proposed that accommodations be made when the airline was informed in advance. Congress quite quickly stepped in and threatened to pull funding should that guidance actually be enforced.
The DoT isn’t giving up on the issue, however, and they are coming back with proposals for other ways to make such a ban stick.
A lot of the things the DoT is trying to require here are actually moves that will ultimately benefit the traveling public. Sure, I’d love to see more DBC vouchers in my travel funds kit but I also understand that protecting the folks who don’t understand how they work, the folks who will be left stranded for days at an airport waiting to get home, do need some protection. Probably not a ton of huge impact with these changes, especially with the current crop of GDS interfaces unable to actually produce the truly full fare costs including the al a carte services, but the ideas are definitely good ones. Hopefully the rest of the technology catches up soon to make it happen.
Want to read more about these proposals? Check out what Aviation Week, View from the Wing or Chris Elliott have to say about it.
Posted by Seth on May 17, 2010 under News |
It is rather uncommon for customers to be happy about an increase in fares. But if the expected new government coalition in the United Kingdom can actually deliver on their platform it stands that the airfares departing UK airport are quite likely to go up, and it might actually be a good thing for many customers. Indeed, it is possible that raising the airfares will result in lower total costs for many passengers.
Following the most recent round of elections there has been a bit of a scramble to establish a coalition government. One set of negotiations – between the Conservatives and the Liberal Democrats – resulted in the publication of their positions on a number of issues. Buried in point number 11, the section discussing environmental policy, is this bit:
The parties agree to implement a full programme of measures to fulfil our joint ambitions for a low carbon and eco-friendly economy, including: …
The replacement of the Air Passenger Duty with a per flight duty.
So how can one tax replacing another make any sense as a good thing for the passengers? In this case it actually does. The APD is assessed on a per-passenger basis currently. The rates are exorbitant for long-haul flights and doubly so for passengers traveling in the premium cabins. Moreover, the APD, as a tax, is charged individually to all customers even on reward bookings. As such a ticket between the UK and the USA can incur more than $200 in taxes alone.By removing the APD as a line-item that the individual passengers must pay it can be expected that the tax burden as an assignable, per-passenger cost will decrease significantly.
The airlines will still have a cost to bear on the per-flight taxes. And to meet this cost it is almost certain that the fares will increase. But that increase won’t be reflected on reward seats. And the airlines will actually be able to legitimately compete on fare pricing, choosing how to price their tickets and still meet their responsibility to the Crown rather than having such a large portion of the fare dictated to them.
Posted by Seth on May 17, 2010 under frequent flyer |
It is always a shame when the airlines make cuts to their loyalty programs. Certainly the value of the points in your accounts is likely to never be better than it is right now, but when the cuts happen they still sting a bit. Continental Airlines has been on a bit of a tear lately with cutting benefits from their offerings. These cuts are affecting both their most frequent customers – those with elite status – and the every day random customers as well. They really all pretty much suck.
So, what are the cuts in question? Some are relatively old news, like charging non-elites for the seats with more legroom. Of course, when they made that announcement they also made it clear that:
Extra legroom really means extra legroom. The seats that we’ll be selling have at least 7 inches of extra legroom. Specifically, our mainline aircraft will offer 10-12 extra inches on average.
So what happened in reality? They realized that they could also sell seats that have nowhere near that much extra legroom for more money, too. They’re charging for access to the bulkhead seats now on mainline aircraft, seats which have nowhere close to 10-12 extra inches. On top of this, those seats are now blocked from assignment prior to the day of travel. So even elites who can get them for no up-charge cannot actually book them in advance. This offers a small benefit to folks booking at the last minute as they have a chance for a decent seat, but it is a pretty raw deal for everyone else. I am looking at potentially flying to Los Angeles for a meeting on Wednesday and I see the bulkhead seats available but I cannot choose them. Not knowing that I can get a better seat has me seriously considering just skipping the flying and calling in instead.
Next up on the chopping block? Complimentary upgrades on flights to and from Lima, Peru. For the past several years (at least 5) flights between Lima and both Houston and Newark were eligible for complimentary upgrades. That benefit disappeared last week with the announcement that upgrades would now incur a mileage charge and likely a cash payment as well, depending on the fare paid for the ticket. What do customers get in exchange for this increase in cost? An ice cream sundae, assuming you’re going to Newark. There will be a minor upgrade in catering on the Newark flights. Folks going to and from Houston actually get nothing different than they do today, other than a guarantee that they’ll be riding in the back of the plane. The airline did actually upgrade everyone with a previously purchased ticket, essentially honoring the complimentary upgrades for folks who bought when that policy was in effect. This was a nice touch to be certain, but new purchases must pay the higher costs going forward. Sure, it is just one route, but that ice cream sundae is pretty damn expensive now.
Finally, there is the issue of their call centers. It was a few months ago that they announced their intention to shutter one of their three facilities, removing about 500 agents from their role. And now trying to get through to actually talk with someone is a tremendous challenge. Yes, the volcano is affecting a number of flights causing more calls than usual. But for a customer to be greeted with a recording stating that too many people are already on hold and that they should call back later, followed by the call disconnecting, is bad for business and bad for the customers. Sure, they’re saving a few bucks on the expense side of the ledger but the costs on the revenue side may eat up those savings and more.
Maybe it is no wonder I haven’t flown on Continental all that much this year. Sure, I’m still collecting points in their OnePass program, but I’m not particularly inclined to pay their asking prices for flights these days; the value simply isn’t there.
Related Posts
Posted by Seth on April 6, 2010 under News |
Spirit Air, always on the cutting edge of ancillary fees and revenue enhancement, has come up with a new plan for pricing their flights. Everything will be “a la carte” from the fuel to taxes to a booking fee to a soda on board. And, now, they’ll also be charging to reserve space in the overhead bins. From their press release:
In order to continue reducing fares even further and offering customers the option of paying only for the services they want and use rather than subsidizing the choices of others, the low fare industry innovator is also progressing to the next phase of unbundling with the introduction of a charge to carry on a bag and be boarded first onto the airplane.
This move is the first foray into what is probably the last unbundled service that airlines offer which was previously considered part of the services included in the fare purchase. Lavatory usage is still free – for now, RyanAir is still working on that – but no longer can one assume that carry-on baggage is part of flying. The carry-on baggage fee also includes access to early boarding of the plane, something else that the airline has routinely charged for. Yes, Spirit will still permit under-seat bags for free, but overhead space will require payment. And with the quite limited pitch that Spirit offers on their planes losing space to put your feet is a painful decision to make.
The cost for space in an overhead bin will be $20 for members of Spirit’s $9 club, $30 for everyone else if purchased before arriving at the gate and $45 at the gate. The $45 price is the same as it would cost to check the bag in the hold at the gate. The $30 at the counter is actually more than the $25 it would cost to check a first bag on a domestic flight and the same as the price for checking a second bag or a first bag internationally.
So the (many multi-)million dollar question is will this idea gain traction? Will other carriers follow? For now, the answer is no, but it is entirely to soon to know for sure. JetBlue has already released a post on their BlueTales blog mocking the idea a bit. No other airlines have commented on it publicly. For most customers the process of buying a plane ticket is split into two very distinct cost areas: the initial purchase and the day-of-travel expenses.
Over the past two years, since the charges for checked baggage started growing rapidly in the US, the carriers have not been able to drive significant differentiation of their products based on whether they charge for those checked bags; customers are still generally willing to pay $10 less for a ticket where they’ll have to pay $25 at the airport for baggage. Will this next step of unbundling be enough to make consumers actually look at the total price picture more closely before buying? I’m guessing no, at least not for the folks who are willing to pay the cheapest fares that Spirit offers. And that might just be enough for other carriers to consider a similar charge. Probably not, but there is a small opening there.
Some additional coverage on the story can be found at:
Related Posts:
Posted by Seth on April 5, 2010 under News |
Why, oh why, do the airlines make it so hard to figure out the pricing for a ticket? Yes, there are rules about what does and does not have to be included, but even that doesn’t seem to be enough to make things easy in most cases. I was doing some research on a flight recently and was presented with this fare display:
Yes, I picked the “$243” ticket but, no, none of the prices I was then presented actually were that number. The ticket is actually either $226.05 or $253.70, not $243. But that’s the advertised price. What gives?
Sadly, I actually know the answer. It has to do with which fees do and do not have to be included in the initial advertised fare since they can vary depending on the airports traversed in the USA. These Passenger Facility Charges are levied by the airports and used to help fund their operations and capital improvements. There are also the “September 11th Security Fee” that goes to pay for having the TSA harass passengers randomly and a per-segment flight tax that also goes to the federal government. Without knowing the final routing the PFCs and per-segment taxes cannot be reasonably computed.
But it still is ridiculous that airlines can have so many different “prices” when the only thing that customers really care about is the amount they pay out the door. It is a shame that the US-based carriers aren’t required to simply share the full price and that the US government actually makes it more complicated with the fees they charge rather than enforcing simpler rules.
Posted by Seth on April 4, 2010 under News |
At some point recently JetBlue has quietly increased the prices they charge for their “Even More Legroom” seats. Previously offered in the $10-$40 range, depending on the segment length, the new prices range from $5-$75. And while the prices are still somewhat related to the segment length, the correlation is not quite as strict. Indeed, there are a few quirks in the new price structure that have shorter flights more expensive than longer ones (e.g. Long Beach to Portland, OR is more expensive than Long Beach to Seattle).
The increases come as Continental has introduced an up-charge for non-elites to choose their exit row seats, ones with similar increases in leg room, and with much higher prices than JetBlue charged previously or even charges under the new scheme. Perhaps JetBlue is looking to cash in on the perceived value of that extra legroom and still remain comparatively less expensive. Or perhaps they are just pricing based on what the market will bear in general. Las Vegas is a more expensive market now. So is Burbank. Apparently those look like good opportunities to realize a bit more revenue. And JetBlue realizes tens of millions of dollars annually from the EML sales and other fees; increasing those numbers is easier than raising fares and has the potential to increase the carrier’s profitability.
Here are a few maps and charts that show some of the new EML prices from a few JetBlue hubs.
From Long Beach:
| From: |
To: |
EML Price: |
| LGB |
SFO |
$5 |
| LGB |
OAK |
$10 |
| LGB |
SMF |
$10 |
| LGB |
SEA |
$30 |
| LGB |
PDX |
$35 |
| LGB |
IAD |
$50 |
| LGB |
BOS |
$75 |
From JFK:
| From: |
To: |
EML Price: |
| JFK |
SYR |
$5 |
| JFK |
BTV |
$10 |
| JFK |
BOS |
$10 |
| JFK |
RDU |
$15 |
| JFK |
FLL |
$25 |
| JFK |
MCO |
$25 |
| JFK |
PSE |
$29 |
| JFK |
HOU |
$35 |
| JFK |
DEN |
$40 |
| JFK |
PDX |
$40 |
| JFK |
SEA |
$40 |
| JFK |
SFO |
$40 |
| JFK |
DEN |
$40 |
| JFK |
SJU |
$40 |
| JFK |
BQN |
$40 |
| JFK |
OAK |
$40 |
| JFK |
SJC |
$40 |
| JFK |
SMF |
$40 |
| JFK |
CUN |
$50 |
| JFK |
LGB |
$60 |
| JFK |
LAS |
$65 |
| JFK |
BUR |
$75 |
From Boston:
| From: |
To: |
EML Price: |
| BOS |
MCO |
$25 |
| BOS |
DEN |
$40 |
| BOS |
LAS |
$40 |
| BOS |
SEA |
$40 |
| BOS |
CUN |
$40 |
| BOS |
SFO |
$50 |
| BOS |
OAK |
$60 |
| BOS |
LGB |
$75 |
From Cancun:
| From: |
To: |
EML Price: |
| CUN |
FLL |
$10 |
| CUN |
IAD |
$25 |
| CUN |
MCO |
$25 |
| CUN |
BOS |
$40 |
| CUN |
JFK |
$50 |
The EML seats were never really a compelling value to me. The fact that most seats on JetBlue have 33-34” of pitch is quite enough for me. I’ll take them if they’re free (who wouldn’t??) but paying extra for them was quite uncommon for me. With the new, higher prices that frequency will drop even more.
UPDATE (4.4.10 20:44 EDT): The new pricing is apparently a one month trial to “to better match the value of these seats with customer demand, based on the route.”
Posted by Seth on January 29, 2010 under News |
A few months ago I wrote about some inquiries that Congressfolks were making over the unbundling of airfare components. Basically the airlines have been shifting more and more of the travel costs out of the base ticket price but the feds are only able to tax that base ticket price. The end result is that all the unbundled services are about 7.5% better for the airlines than simply raising fares by a comparable amount across the board.
It seems that the folks on the ill can take a break from that saber-rattling or at least find a way to refocus their efforts. The IRS released a ruling in response to a request from American Airlines, clarifying about 40 different scenarios and the taxability of each under the IRS code. The document is, as one might expect, a rather boring read. But it does provide some insight into just what the carriers can charge for without having to pay any taxes. In addition to any baggage handling the ruling addresses the taxability of buying miles (taxable), lounge memberships (not taxable) and fuel surcharges (taxable).
Probably not a huge surprise but it does confirm that the airlines’ decision to unbundle services and charge fees is more profitable for them than simply raising fares, to the tune of about 7.5%. In an industry that has been bleeding cash every little bit helps.
Related Posts
Posted by Seth on November 16, 2009 under News |
But before you get all excited about the fact that the feds might intervene keep this in mind: they aren’t doing it for the consumers. Sure, they may talk a big game but at the end of the day it always has been and always will be about the money. And it turns out that Congress is just now wizening up to the fact that the airlines are screwing the US government just as much as they are screwing passengers.
Every ticket sold in the USA is hit with a federal excise tax of 7.5% of the base fare. The feds like collecting that money and using it to fund various programs. But what happens when an airlines switches from selling $300 tickets to $100 tickets with a $200 fuel surcharge? The feds lose $15. Multiply that out by the millions of passengers that take to the skies daily and you can see where the feds might start to notice.
Who knows where this will end up. I know that many airlines love being able to use the fees as a means to increase revenue on reward seats, corporate contract discounts and many other types of tickets. And apparently to reduce their tax burden, too. On the plus side, good call by the accountant who figured this one out. I wonder if they were able to negotiate a percentage of the savings as a bonus??
Posted by Seth on September 10, 2009 under Uncategorized |
Every now and then I really wish that government was as polarized and incompetent as everyone seems to suggest. At least then they wouldn’t be able to cooperate and put together such a ridiculous effort as they did with S. 1023, the “Travel Promotion Act.” And the House has a similar enough bill ready to go. This one is going to become a law for real, and it sucks.
The concept is almost laudable. They want to promote the USA as a travel destination in the global market and such promotion requires money. And how best to get said money? Charge the people who are visiting, of course. In a move that seems to defy most logic I’ve considered the US government has decided to levy a $10 fee against every visitor who fills out an ETSA form – the required authorization for non-residents from our closest allies to visit the USA. Having to fill out such a form was bad enough. Having to pay for it just sucks. It is, essentially, the end of the free visa experience for visitors to the USA. Now everyone has to pay. Sure, is it “only $10” for many folks rather than $131, but it is still a ridiculous concept.
To make matters worse, there are some folks who seem to think that this actually makes us look good in the global market:
“The United States Senate today took a giant step toward regaining America’s position as the premier travel destination and strengthening our struggling economy,” said Roger Dow, president and CEO of the U.S. Travel Association. “Nearly every company, city, state and developed nation understands the power of promotion. By getting in the global game, America will create tens of thousands of new jobs and strengthen its image in the world as visitors leave with an improved perception of our country and her people.”
It is going to be very hard for people to leave with an improved perception of the USA if they don’t show up because we’re now charging admission at the door.
The bill was sponsored by a Senator from Nevada. Sure, they know a thing or two about self-promotion and advertising there.
I am obviously from a tourist-driven State. We spend a lot of money advertising, whether it is Las Vegas, Reno or Lake Tahoe, we spend a lot of money advertising to other places, including internationally. Nevada does a lot of advertising. The Las Vegas Convention Authority and private businesses advertise because it works.
What we are saying in this bill is, let’s do it as a country. Let us show how many amazing places there are to see. Let’s tell the rest of the world about it.
…
The United States has some amazing places to see. If we tell people about it, they will come in greater numbers. The studies are fairly significant on this. If you spend money to bring people, they will come. And when they come, they will bring their money.
But he forgets that there is is actually all paid for by the companies that are going to reap the windfall. Here we’re essentially taxing our visitors to fund the advertising coffers of big business. Why can’t they simply spend the money themselves? After all major cities (the ones he cites elsewhere in his testimony) have been been doing this for years. There’s another great bit of logic in his testimony:
In 1996, we eliminated a Federal program that was basically about promoting travel to the United States. We have had private programs and we have had public programs. None of them worked very well on their own–privately, because they couldn’t get the funding necessary; on a public side, it was because the government doesn’t run those things very well.
This is a public-private partnership that I believe can work. That is the reason I support this. It is the reason I think a public-private partnership, where some of the public funding is matched with private expertise, can bring more tourists to the United States.
So the problem was the money. And that is easy enough to fix when you simply take it from folks who don’t have much of a say in the matter, right? Or they can just skip their visits here and go somewhere they are welcomed with open arms, not a cash register.
It is going to hurt Americans. It hurts us because now the other countries – our closest allies in most cases – are now going to retaliate. They don’t have to, but they will. So now when we travel it costs more. I guess that doesn’t affect everyone since most Americans don’t even have passports, but it still sucks. Moreover, it is just one more disincentive to potential visitors. Now they get to warn the governments in advance that they will be visiting, be fingerprinted like a criminal when they arrive on our soil and they get to pay $10 for that luxury.
What is particularly entertaining about this (in a sad and pathetic way) is that history is repeating itself. Just over 80 years ago the USA reached an agreement with France to remove a $10 fee for visitors (though $10 was a LOT more money in 1929):
Foreign News: Visa Fees
Monday, May. 27, 1929
Each U. S. citizen going to France this summer will save $8—the price of three good dinners or 33 martini cocktails—through an agreement signed last week by the U. S. State Department and representatives of the French Government. Reciprocally, the price of French and U. S. visas has been reduced from $10 to $2.
The $10 visa fee, bane of U. S. travelers abroad, started in 1920 when U. S. consuls were instructed to collect $9, plus $1 for executing the application, from each and every foreigner who wanted a passport visaed. Delighted at finding a new source of revenue, several foreign governments instantly retaliated, charged all U. S. tourists $10 each.
Finding that U. S. citizens were spending millions on foreign visas — while little money was accruing from foreign tourists in the U. S. — the State Department started negotiations in 1925 to abolish or reduce the $10 charge. France last week was the 29th nation to comply.
I don’t know why they think it will be any different this time around.
So, yes, I hate my government right now. I hate that they are so short-sighted and that they don’t seem to understand the retaliatory effects this will have. I hate that they don’t see how much money it is going to cost American citizens – the same ones they claim they are trying to help. I hate that when I called my Senators yesterday to voice my concerns one aide didn’t know the Senator’s position (after he had already voted, it turns out) and the other simply left their phone off the hook so I could not call in.
I really wonder where I can expatriate to reasonably quickly and easily. I’m sick of this crap.
Posted by Seth on June 8, 2009 under Uncategorized |
Reading an airline ticket price these days is always an entertaining exercise. There is the base fare which is generally pretty easy to understand. And then there is a long series of letters and numbers representing various taxes and fees. These extra costs can add up to be rather significant, even more than the actual base fare in some case for travel. And now, if a group of developing countries have there way we will see another entry in that long line of taxes and fees – a tax to fund developing countries’ efforts to combat climate change.
The text of the tax was discussed at at a UN climate change conference in Bonn where it was proposed by the 50 least developed countries in the world. The target is approximately $10Bn in revenue from the tax. This is simply the latest effort from the developing nations to gain cash and support from developed countries to help fund their efforts in dealing with the effects of climate change. Previously a few billion dollars have been pledged and a few hundred million even given to the countries, but nothing that they consider significant enough.
So now they are coming after the traveling public. Folks who travel are an easy target for taxes. They are often levied by local governments and affect folks who don’t vote locally so they are easy to pass without risking reelection for the politicians. But the taxes also have a negative impact on the industry. As the prices go up discretionary spending gets reduced. In an industry that is predicted to lose $9Bn this year alone trying to extract another $10Bn seems about as foolish as actually expecting those numbers to hold.
Even worse is that the folks responsible for negotiating these taxes actually think they are a good idea:
“People are beginning to understand that innovative ideas could generate a lot of money. The Danish shipping industry, which is one of the world’s largest, has said a that truly global system would work well. Denmark would endorse it,” said [Connie] Hedegaard[, the Danish environment and energy minister.]
Working to address and solve the problems faced globally is a god idea. Doing it on the back of an industry and economy that cannot support it is a horrible idea. This falls into the latter category.
