Flyer beware, ‘free’ flights with reward miles can pack hefty price
So much for Natasha Haynes’ free flight to Los Angeles.
The new mother from Vancouver spent years keenly accumulating Air Miles reward miles by shopping at certain retailers, like Safeway grocery stores, while avoiding others all with an eye toward treating herself and her husband with a vacation to L.A. using the points.
But when Haynes went to collect her long sought-after prize, she was stunned by what she discovered. The taxes and fees Air Miles asked her to pay on two round-trip tickets totaled $446.56 – a sum that was only about $300 cheaper than the cost of two tickets purchased directly from the airline, WestJet.
“I don’t see why by law they’re allowed to charge double the fees and taxes,” Haynes said in an interview. “To me, it doesn’t make sense. I don’t want to give them the extra money, for really what?”
A call to Air Miles customer service yielded little but a promise from the call-centre manager to let his boss know “right away,” Haynes said. “They didn’t have a proper explanation.”
Haynes isn’t the first person to encounter sticker shock when redeeming points for flights, with many flyers facing unforeseen charges from Air Miles and other rewards programs that often label or associate their own charges with the normal taxes and fees paid on airfare.
On top of a $15 administration fee Air Miles collects, the rewards program charged Haynes $105 for “Security/Fuel Charges” despite the fact the ticket already packed a U.S. Security Fee of $2.70 and Canada Air Security charge of $12.10.
The “Security/Fuel Charges” wasn’t present on a ticket for the same flight Haynes went through the motions of booking through WestJet to compare.
Where that money goes is a mystery that only Air Miles and WestJet know for certain, but experts suggest most if not all of that sum winds up in the pocket of the airline.
An analyst who covers one of the country’s other big rewards programs said the same mechanics apply to it.
“For the same flight, the fees are higher for the [rewards program] ticket than on the [airline] ticket. That’s not [the reward operator’s] fault, it’s the airline, which is technically gouging the plan members at the expense of the rewards plan,” the analyst said, asking his name be withheld.
Haynes says she’s spent years strategically planning where to shop in order to maximize Air Miles points, a routine she says she’s halting.
“I’m stopping altogether because of this. For us, we go to Safeway to collect most of our points and Safeway is a more expensive grocery store than what I could be going to.
“For me to be going to spend the extra money to collect points and end up having to pay way extra down the road doesn’t make any sense.”
The incident has turned Haynes off the program, she said.
“This creates quite a bit of disappointment for the consumer. What they expect when they go to get a ticket is that it would be free, but with the taxes and extra fees, you end up paying two thirds of the price for the so-called free ticket,” Andrew Ching, a Rotman School of Management associate professor of marketing at the University of Toronto said.
He suggests redeeming points to get cash or gift cards is a better use of miles. “Using the cash rebate is probably the most transparent for the consumer, because there isn’t anything like surcharges. It’s very explicit about how many points you need.”
An explanation to frustrated program members is also warrented, Prof. Ching suggested.
“For consumers, they need to be aware of it. And for Air Miles, they might want to investigate their own policy and offer an explanation to why the fees they charge, the taxes they charge can be so different from the airlines. If there’s a legitimate reason, it’s better for them to explain it.”
Neil Everett, chief marketing officer for Air Miles Canada, said in an email message the program sets the number of miles required to redeem a ticket to be “equivalent to the base fare, excluding surcharges and taxes, which the collector pays.”
The fees and taxes “vary depending on the airline partner,” he said. “All of the fees and surcharges, other than the Air Miles service fee, are collected and remitted to the appropriate parties.”
Everett didn’t elaborate on who the appropriate parties were. WestJet, the carrier Haynes wanted to book her flight to L.A. through, said it doesn’t disclose details of contractual agreements with companies that purchase and re-sell seats, or sell seats on the carrier’s behalf.
“What I can tell you in general terms is that the fares that people buy through Air Miles are different from the fares bought directly from WestJet,” Robert Palmer, a spokesman for WestJet said in an email message.
“There are various taxes, fees and surcharges on both types of fares, which are paid by the guest and then remitted to the appropriate parties.”
New rules came into force in December from the Canadian Transportation Agency, the airline industry’s regulator. They demand that consumers can “easily determine” the full cost of advertised airfares, including surcharges and applicable taxes. The CTA has been monitoring industry marketing since to ensure compliance.
While Haynes was presented by Air Miles and WestJet with a breakdown of the fees and taxes that applied to her two tickets, she says she was still left scratching her head about the $210 Air Miles asked for that WestJet wasn’t billing for the same flight.
Frustrated and disappointed, she says she’s planning instead to fly out of Seattle.
“Considering how much we had to spend to get the points and then to have to pay the extra money, to me I’d rather take that $446 and put it toward the flight down there instead of just giving to Air Miles,” Haynes said.
“Monitoring air prices advertising is an on-going effort that will help us reach our goal of price transparency and will ensure consumers can easily determine the total price of advertised air services,” a spokesperson for the agency said.
© 2013 Shaw Media