European airlines expand credit card fees – will the U.S. be next?

by Janice Hough on December 11, 2009

finnair
Ryanair has long had a credit card surcharge on their tickets. Of course, Ryanair is also the airline whose CEO seriously talked about pay toilets, so it’s hardly a mainstream carrier.

But now the credit card surcharge is just beginning to take hold with major European airlines. Apparently both KLM and Finnair already have such a surcharge – 7.50 Euros – in the Netherlands. KLM’s only covers the cheapest fares, Finnair charges the surcharge for all reservations.

In addition, both KLM and Air France already have a surcharge in Sweden, as well as Australia.

Why just a few countries? Because there are laws about charging different prices for credit and cash sales.

According to an executive quoted in Business Travel News

“It may only be possible in the Netherlands, Sweden, the U.K. and Switzerland. These are the countries which have not prohibited discrimination between payment methods as laid down in the European Payment Services Directive.”

But now Finnair is hoping to institute a surcharge for all bookngs made through travel agents in Europe. Apparently next spring, there will be legislation introduced in Finland to eliminate the current rules.

And Petri Schaaf, vice president of global sales for Finnair, states “In general, as long as there is a legal and technical possibility, we will consider it.”

Currently, there is no federal law in the U.S. against credit card surcharges. Some states prohibit them, and Mastercard and Visa prohibit them as part of their merchant agreement. American Express also strongly discourages adding any additional costs for its cardholders. (And Amex forbids merchants who also accept Visa or Mastercard from charging any fees to their cardholders, to keep their product competitive.)

So travelers in the U.S. are not looking at changes anytime in the immediate future. But currently, airlines absorb merchant fees. And since the major carriers have shown a penchant for passing any and all costs on to consumers, credit card surcharges surely are on their wish list.

Since U.S. airlines are already, to put it mildly, already struggling with their public image, and with reregulation becoming an increasingly large whisper, it’s probably not a great time for them to push for credit card fees. On the other hand, since it’s potentially the chance to hit the consumer with a three percent fee (or higher) it’s hard to imagine that airlines won’t try, just as soon as they think they can get away with it.

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Tagged as: air france, credit card surcharges, finnair, KLM, Mastercard, visa

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  • http://www.tripso.com/author/leocha Charlie Leocha

    Janice,
    FYI Ryanair flies more passengers than any other airline in Europe. I think it is very mainstream. Here in the U.S., Ryanair is one of the airlines that legacy fee-happy airlines are evidently striving to emulate.

    Regarding airlines trying to get out of paying the 3-something-percent credit card fee, United tried this last fall. They eventually relented after loud protests from ASTA and the issuing banks who would be liable for any consumer claims for service failures.

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  • http://www.eyeflare.com/ Jack

    I think it’s about time that Visa / MasterCard started applying the same rules to European merchants as American ones: No surcharges!

    Seriously, when was the last time you could pay for a plane ticket with cash? Not even travel agents tend to want cash payments, as the airlines want to see it done via a credit card…

  • Terry

    Cash payments, documentation, run to the bank, deposit to trust account, document, wait for monies to clear accounts, document, process payment two weeks (or face the risk of NSF if you don’t wait for clearance) later, book ticket, document, issue company cheque to airline, document, pay cheque fees, document, — sounds like a reversal to the dark ages. Totally ludicrous in an age of electronic ability. Not worth the additional time especially since airline commissions are few and far between (to say nothing of minimal). Yes, we can(do) charge a service charge–which opens a whole new bookkeeping issue of time and running around, depositing, waiting, documenting,… (oh, we’ve been down that road already with the airline booking, haven’t we?)

    I hope I didn’t convey too much frustration and sarcasm.

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  • Robert

    Charlie wrote – “Regarding airlines trying to get out of paying the 3-something-percent credit card fee, United tried this last fall.” What UA did was to restrict some travel agencies from using a credit card as form of payment for travel agency issued tickets. That’s different from a surcharge. Sabre and other GDS reservation systems now have the software to bury a credit card surcharge in the ticket. The credit card surcharge would appear with taxes so the ability exists if airlines want to turn it on.

    Terry wrote, “I hope I didn’t convey too much frustration and sarcasm.” … probably not enough!

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  • John M

    Let’s not overlook the fact that United has already started to pass along the credit card costs to some travel agencies. This means that the travel agencies will have to pass along those costs to the consumer. This wouldn’t be a big deal on a ticket that runs $150.00 but it becomes a really big deal when the ticket is $10,000.00. By doing this, United is accomplishing several things, first, they increase their profitability since they aren’t lowering the fare, even though they are no longer pay the cost to process the credit card. This is a 3% or 4% increase in the cost of the ticket to the consumer who uses a credit card through one of the agencies that United has hit.

    The second thing it does, is that it reduces the ability for the consumer to dispute the charge if there is a problem with their trip. The reason for this is because United is no longer the merchant, the travel agency is. By the way, the travel agency doesn’t keep any of the money that they collect for the airfare, just the fee that they charge.

    The third thing it does, is discourage consumers from using travel agents, which could come to include Expedia, Orbitz, etc. and thus drive consumers to United’s website. What’s the downside to that? The main one is that at United’s website is that the consumer only gets what the airline offers up. They won’t show you what the other airlines are offering and United may or may not show you all the flight options or combinations that you can get from a travel agency.

    As far as the airlines charging a service fee to use a credit card, they charge you a fee if you book over the phone or at the ticket counter, so what they are proposing is to charge you a fee to book with them since you have to pay by a credit card if you book online and since they charge to purchase at the counter, they have said that the consumer will pay no matter how the ticket is purchased.

  • DaveS

    All “fees” that are unavoidable – unless imposed by a government or outside agency – need to be illegal. This is simply false advertising, bait and switch. I am inherently hostile to any “service” provider that lies to me about prices.

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