Businessman buys promoted tweet to berate British Airways
Hasan Syed was fed up with the way British Airways handled the problem of his father’s lost luggage. Read more…
Spanish airline battles competition from low-cost airlines and high-speed trains, labour disputes and economic crisis
International Airlines Group reported a first-quarter operating loss of €278m (£235m) as continued weakness at its Spanish carrier Iberia wiped out progress at British Airways.
The loss at IAG, Europe’s third-biggest airline group by market value, was greater than the €249m loss reported a year ago and above the average €230m loss forecast by analysts.
Iberia has been battling competition from low-cost airlines and high-speed trains, labour disputes and Spain’s deep economic crisis. It has been bleeding cash as revenue fails to cover high operating costs.
IAG took a €311m charge in the quarter relating to restructuring at Iberia, on top of a €545m charge in 2012.
IAG’s chief executive, Willie Walsh, said on Friday there had been “underlying revenue strength in strategic markets” but that there was “more work to be done” to restructure Iberia, Europe’s biggest carrier to Latin America.
IAG said BA had a strong performance in the quarter, boosted by business and first-class traffic, especially on transatlantic routes.
The company said it could not provide guidance for 2013 operating profit because it was waiting for shareholder approval for its fleet replacement orders, which could affect future profit forecasts.
European carriers including IAG, Lufthansa and Air France-KLM are slashing jobs and shelving growth plans as they grapple with soaring jet fuel prices, a weak economy and fierce competition from low-cost carriers and Middle East airlines.
Abolition of air passenger duty would create around 60,000 jobs according to British Airways commissioned report
UK-based airlines have launched a renewed attack on air passenger duty with a report that claims the UK economy would be boosted by £16bn a year if the tax was scrapped.
Commissioned by four British airlines including British Airways, the report by PricewaterhouseCoopers claims that the abolition of the tax would create almost 60,000 extra jobs in the UK in the long term. It adds that scrapping APD would pay for itself by increasing revenues from other sources such as income tax and VAT.
The boost to GDP would come from three main sources, the study says: extra investment by airlines; more tourist visits to the UK; and a boost for domestic businesses from more business travel.
PwC said: “Abolishing APD has the potential to reduce the cost of flying, making it cheaper for businesses to maintain relationships with overseas customers. In this sense APD could be regarded as a tax on exports.”
It added: “APD is at least as damaging to the UK economy, and probably more so, than corporation tax or fuel duty.”
Introduced in 1994, APD has since January 2007 increased by up to 260% for short-haul flights and up to 360% for long-haul flights. APD costs £13 for a short-haul flight and up to £92 for a long-haul journey.
General Workers’ Union says strikes are to protest against ‘unnecessary layoffs’
Unions representing most workers at the Spanish airline Iberia said on Thursday that they would stage six days of strikes immediately before the Christmas holidays in a protest against the company’s plans to lay off 4,500 staff.
The stoppages by Iberia ground staff and cabin crews will be held on 14 December and from 17-21 December.
Francisco Rodriguez, of the General Workers’ Union, Spain’s largest, said the strikes were to protest against the “unnecessary layoffs”.
International Airlines Group, the merged British Airways and Iberia, plans to cut 23% of the Spanish company’s staff, saying the carrier is “in a fight for survival”. The pilots’ union, Sepla, is not among the six unions backing the strike.
Airline to begin flights in spring after being offered slots British Airways was forced to relinquish after its takeover of bmi
Virgin Atlantic will be operating domestic flights from Scotland to Heathrow from spring after being offered all the remaining slots that British Airways was forced to relinquish after its takeover of bmi.
The airline will be moving into short-haul flying in the UK for the first time with daily flights from Edinburgh and Aberdeen joining the Manchester service already announced for April 2013.
European competition authorities compelled BA to give up 14 slot pairs at Heathrow as a condition of approving its merger with bmi, whose parent company IAG bought from Lufthansa last year for £186m in the face of protest from Virgin.
Virgin will also fly to Nice and anticipates discussions with the EU and the Civil Aviation Authority to decide how to assign the two slot pairs designated for Moscow.
Virgin has long maintained that its business case depended on winning all the “remedy slots” to feed in enough transfer traffic at Heathrow to its long-haul flights to the US and elsewhere.
The airline’s chief executive, Steve Ridgway, said: “We have fought hard for the right to fly short-haul and take a strong challenge to British Airways within these shores. For 28 years both airlines have battled for customers all over the world and it has meant that British consumers have ultimately had some of the world’s best flying and lowest fares.
“This is the beginning of an exciting new era in Virgin Atlantic history and we now feel a responsibility to everyone that has supported us in this challenge. Passengers can look forward to a great short-haul service with us but most importantly reap the benefits from the re-injection of vital competition we can provide on these routes.”
Virgin expects to announce an exact timetable in the next fortnight, and will lease an Airbus A320, which typically seats around 150 passengers, for its UK flights. Industry observers have questioned how it will replicate its brand on short-haul flights, and whether profits can be made on routes where bmi struggled.
Howard Davies has an onerous task in choosing whether we need a new airport or an expanded Heathrow
Sir Howard Davies, the man with the job of deciding whether Britain needs a new airport, must be looking with some alarm at the precedents. In 1971, after more than 18 months of work, the Roskill commission recommended that a four-runway airport to serve London be built at Cublington, near Aylesbury.
When Michael Noble, then minister for trade, opened the debate on the commission’s findings in the Commons, he said of its authors: “I hope that they may draw some comfort from one of my hon friends who said that the fact that he totally rejected their conclusion did not in any way diminish his admiration for the way in which they had done their work and presented their report.”
Their plan, of course, never got off the drawing board.
Committing the Conservatives to blocking a third runway at Heathrow was a key plank of David Cameron’s strategy to detoxify the Tory brand and prove that he would put polar bears before sharp-suited businessmen. It was also built on political expediency – he needed to win Conservative seats in the area. Further, it was a recognition that the building of a third runway would hurt Britain’s then leading role in reducing global carbon emissions
But with the economy trapped in a deep malaise Cameron is having a rethink. There is a strong lobby that suggests that UK plc needs extra airport capacity in order to boost future economic prospects. Also, the UK is on track to meet its Kyoto targets, albeit partly because of economic weakness. There is, too, an argument that the tax system may be a better way of reducing the number of unnecessary flights than a ban on building new runways. Flight travel is simply too cheap compared with rail fares – this is the fault of a tax system that gives an advantage to airlines.
George Osborne now firmly believes that if the UK really wants to build an economy that can properly connect with the rest of the world it needs more airport capacity. But the economic case is being driven largely by self-interested parties, not least British Airways, the British Airports Authority and the bodies that represent them.
It will be a crucial part of the Davies commission to identify the economic benefits a new airport or runway would deliver. Multinational companies make inward investment decisions on the basis of a whole range of factors, including the skills of the workforce, the strength of the currency and the generosity of state support for industry. Whether the chief executive can jet in direct from Chicago or Shanghai may be a marginal consideration.
However, those advocating the development of a hub airport may have a case. If Britain allows its one airport that comes close to being an international hub to become ever more clogged up while Amsterdam, Frankfurt, Madrid and Paris become transit points for Europeans, including enterprising Brits, wanting to get to the fast-growing economies of China, India or Brazil, there is a risk that economic opportunities will be missed, ambitions stunted, jobs lost.
However, if any British government is to press the case for extra airport capacity, it needs to make a convincing case for continuing to meet its ambitious carbon emissions target. As this paper said in 2008: “It will require a radical programme of wave and wind turbine construction, nuclear industry expansion and the building of underground vaults to store the carbon dioxide that currently pours from the nation’s coal, oil and gas power plants.”
Unfortunately, there is absolutely no evidence that this government’s energy policy is fit for that purpose. Indeed the government’s desire to pursue a dash for gas as a future energy strategy is precisely the wrong direction of travel.
Even if the case for a hub airport is established, Heathrow is not the only answer: Heathrow already creates all-but-unbearable noise, pollution and disruption for unlucky residents, and its transport links are groaning. Of those affected by noise pollution in Europe, 30% live in and around Heathrow. Is it really sensible to build more airline capacity in the middle of a major population centre?
There is a plausible case that bringing in as many planes as possible – the proposed estuary airport – over sea instead of hundreds of thousands of rooftops makes more sense. As importantly, a giant new airport would provide a powerful economic boost for an area where unemployment is high. Although characterised, until now, as a Boris Johnson vanity project, there is support from politicians of all persuasions to the east of London to try and create a hub – in all senses – which would address the historical inequalities and poverty to the east of the capital.
There is no easy solution. Davies will need wisdom and a good dose of political nous to weigh up the issues – the financial and environmental costs and any economic advantages. He should use his authority to seize the initiative and insist that the question of airport capacity in the UK be settled sooner rather than later. Otherwise, the likelihood of a repeat of the Roskill commission is all too likely.
BA insists we talk to Flight Centre; they insist it is down to BA. What now?
We booked British Airways flights through Flight Centre to travel from Manchester to Durban, South Africa via Heathrow in February. The day before our departure the agent told us that, due to heavy snow, the Manchester to Heathrow flight was cancelled. We were advised to travel by train to Heathrow and that the cost of our tickets would be refunded. We duly did so, and since April have been trying to claim the £108 fare. The Flight Centre told us we should do it direct through BA; BA said it was not liable and we should deal with Flight Centre. Now the agent declares that BA had promised a refund but since changed its mind? BK, Salford
BA insists that it would never have made such a promise. “We’d have advised customers to stay at home and rebook on to later flights when the weather had cleared, not to get themselves to Heathrow and hope for the best,” says a spokesman. “The customer would be entitled to a refund of the Manchester to Heathrow leg – around £20 – but that has to be claimed through the agent, and Flight Centre has never asked for it.”
Six days after I contact Flight Centre it claims that it had refunded you the money before hearing from me, which is curious for you tell me you received notification of this two days after my intervention and six months after you began your battle.
Mark King is away. If you need help email Anna Tims at firstname.lastname@example.org or write to Your Problems, The Observer, Kings Place, 90 York Way, London N1 9GU. Please include an address and phone number.
Tuesday is the cheapest day of the week to fly from the UK, according to a recent Which? survey. Here are 10 more money-saving tips for travelling on a very tight budget
If you’re about to book a holiday, think carefully about which day you plan to leave before you book the trip. According to research by Which?, Tuesday is the cheapest day of the week to fly from the UK. For example, flights with easyJet from Gatwick to Alicante on a Friday were, on average, 35% or £28 more expensive than Tuesday flights. The consumer association, which looked at 1,174 September flights to three destinations in Europe with three airlines – British Airways, easyjet and Ryanair, found that Sunday was, on average, the most expensive day on which to return home. For example, return flights with easyJet from Gatwick to Alicante on Sundays were on average 45% (£56) more expensive than on Thursdays. As well as cheaper days, there were cheaper times of the day to fly, though this varied across airlines. For example, BA’s cheapest outbound flights were in the morning (before 7.30am), but with easyJet the mornings (between 5.45am-11am) were their most expensive time.
Here are some more useful tips for keeping travel costs down. Please add your own money-saving advice to the comments below:
Make the most of cashback websites
We all understand that if you book a holiday through a travel agent, the agent earns a percentage of the total cost as their commission. It’s the same online: if you click a link on a website and make a purchase, the referring site gets to keep a certain amount of what you paid. Cashback sites such as Quidco.com and TopCashBack.co.uk flip this on its head: they provide personalised referral links, collect the commission, then pay the money back to you.
Quidco is currently offering 11% rebates on hotels booked with Eurostar, 7% on hotels booked through Lastminute.com and 5% on hotels booked through Opodo – just for clicking an extra link.
Example Click QuidCo link, book a £150 Eurostar hotel room and receive £16.50 back
Avoid booking fees on UK train travel
All UK railway ticket websites use the same database so offer the same range of tickets and prices as their competitors. Despite a thetrainline.com is no cheaper than its rivals – but unlike other sites they charge a £1 booking fee per transaction and an additional £3.50 if you use a credit card. Instead book your tickets through the train operators’ own websites. South-West Trains (southwesttrains.co.uk) doesn’t charge fees and even offers a 2.6% rebate on all tickets nationwide if you book through a cashback website.
Example York-Edinburgh off-peak return, booked through thetrainline.com with a credit card, £85.50. Same ticket booked through Quidco and South-West Trains, £78.90
Swap flights for the ferry
Want to escape at short notice but find flights too expensive? SailRail.co.uk is a little-promoted ticket left over from the days of British Rail. It enables you to travel from any UK railway station to Dublin for a flat rate of £43 each way, with all rail and ferry connections included. Simply turn up at your local station, buy the ticket and take the next train to Holyhead. You have an unlimited luggage allowance, there’s no check-in and a beautiful train journey is included for free. A similar service, the Dutch Flyer (stenaline.co.uk), allows travel from any London station to any station in the Netherlands for £39 each way.
Example Depart London Euston at 7.10am and arrive in central Dublin before 2pm, £43 booked on the day. Equivalent flights and airport transfers, over £130
Make the most of local deal sites
We’re used to seeking out discount coupon deals at home but few people check what’s on offer abroad. In the run up to your holiday keep an eye the foreign versions of Groupon and other coupon sites to grab a bargain. You could discover where the locals eat, save 50% on meals and gain discount access to popular attractions.
Example Groupon New York is flooded with offers for substantial discounts in local restaurants, such as a $40 meal for $20 at Lantern Thai in the East Village. The French version of the site is offering a helicopter flight over Paris for two for €189 instead of €480
Split-ticket your train journey
Even if you haven’t booked a UK train ticket in advance you can make substantial savings by split-ticketing. This exploits the fact that two tickets split at an intermediary station can be cheaper than buying one ticket all the way to your destination. This is perfectly legal as long as the train stops at the intermediary station. Train ticketing websites such as splityourticket.co.uk help spot combinations that may work.
Example An off-peak day return from Manchester > Bristol is £75. But a series of day returns from Manchester-Stafford (£20), Stafford-Wolverhampton (£5.80), Wolverhampton-Cheltenham (£22.30) and Cheltenham-Bristol (£8.20) are valid on exactly the same trains but cost only £56.30
Split-ticket your flight
Splitting tickets also works with no-frills airlines. Airlines such as Ryanair often sell off large numbers of cheap flights to unpopular destinations at a flat rate of £10 or under. Rather than take a direct flight. book two flights via an unpopular destination, leave an hour to transfer and reap the rewards. But there is a risk: if one flight is substantially delayed and you miss your onward journey, you’re on your own. Watch the website for flight sell-offs.
Use a card that doesn’t charge abroad
There’s no point in scrimping on your travel costs only to run up charges on exchange rates and card purchases. Most high street banks add fees to transactions made overseas and give a poor exchange rate. Consider getting a credit card exclusively for use abroad – Money Saving Expert recommends the Halifax Clarity card, which gives you the real exchange rate.
Example A purchase in a foreign shop on a standard Lloyds TSB debit card carries a £1 transaction charge and a 2.99% foreign exchange fee. The Clarity card charges the standard Mastercard exchange rate and no extra fees
Stay in someone’s house
Sites such as as the popular Airbnb.co.uk allow strangers to market a spare room or apartment for rent and provide you with the security of an eBay-style feedback system. Prices are often lower than in hotels, the rooms in better condition and the welcome friendlier.
Example A double room in a central Berlin apartment for £29 a night (airbnb.com/rooms/172374). The owner can recommend places to go and even offers a massage at the end of a long day’s sightseeing
Buy a local SIM card for internet access
If you’re going away for several weeks, especially outside the EU, avoid internet cafe charges and mobile data roaming fees by buying a local pay-as-you-go SIM card. Fierce competition among mobile operators means data deals can be even cheaper than in the UK.
Example 59,000 Colombian pesos (£20) buys a SIM card from the Tigo network that includes 3GB of mobile internet – more than enough to check your emails, research travel plans and send a photo back home, see prepaiddatasims.com/prepaid-phone-plans-in-colombia for more details
Compare, compare, compare
Before booking your holiday ensure you can’t save money elsewhere by using a “scraper” website to compare prices from hundreds of airlines and travel agents. Momondo.com provides a brilliantly designed calendar summary of flight prices that allows you to spot and avoid peak periods. And Kayak.co.uk comes with a fantastic set of apps for iPhone, Android and BlackBerry.
Example Search for a one-way flight from London to Istanbul in February on Momondo and at a glance you can see that prices vary between £40 and £107
Joris Luyendijk talks to a software salesman about adjusting to the world of high-frequency trading and the need for speed
Among the most read interviews on the blog is this computer programmer at a high-frequency trading (HFT) hedge fund. To understand HFT, he explained:
“Compare the movements of shares on the stock market with waves. Our company is like a surfer trying to spot a wave, ride it for a tiny moment and get out again before it breaks. On any given day, our computers buy and sell shares tens of thousands of times, holding them for very short periods, sometimes even less than a minute. No human being, or collection of human beings, could do the volume of trades computers are doing at the moment at stock exchanges across the world.”
Today’s case study operates in this world. We are meeting in Broadgate Circle in the heart of the City for a coffee and then lunch (ravioli for him). He is a jolly man in his early 40s with an easy manner.
“By now 84% of all stock trades on the New York Exchange are by HFT computers. This leaves 16% for human traders. Automated trading is the future, and my company sells software to hedge funds and investment banks that helps them improve their algorithms – the programme used by their HFT computers. Specifically it helps them respond to events ahead of the rest of the market.
“HFT is about being the fastest and exploiting that. There are two categories. You can invest in the hardware, hoping to gain a microsecond, ie a thousandth of a thousandth of a second. Better cables, more powerful computers, moving that computer physically closer to the stock exchange … Our business deals not in micro- but in milliseconds. Or you can invest in software. Our software analyses the news and interprets its impact on market sentiment – within 15 milliseconds. Usually the market reacts to events with a time lag of seconds, up to several minutes; if you know where the market is heading before it actually does, that’s very lucrative. Not only in equity (shares) but also foreign exchange (FX), bonds (“fixed income”) and commodities.
“Our clients are programmers and engineers who build the algorithms used by HFT computers.
“How does it work? While the markets are open there is a constant stream of events in the real world impacting those markets; from announcements by companies (takeover completed, quarterly profits lower than expected) and agencies (new drug approved by Food and Drug Administration, merger approved by Antitrust authority), to macro economic events and unexpected things like earthquakes, coup d’etats or exploding pipelines.
“All these come to us through reports by wire agencies: Reuters, Bloomberg, Dow Jones. What our software does is recognise the language in those reports and make them machine-readable. It identifies the company involved, and picks up terms such as “increase”, “profits”, “warn”. Ultimately the software converts these into a one-sentence line that appears in your inbox – say, “British Airways profits up” or “BP production down”. It adds a scale of minus five to plus five (red to green), depending on how positive or negative the event is for the company involved.
“Next the ‘quants’ (maths geniuses), programmers and engineers at hedge funds get to work by analysing how a similar event impacted the share price in the past. Simply put, they feed this into their algorithms, and next time when profits are up by that degree for British Airways their programme will try to get ahead of the most likely movement of the share price in response.
“In the old days, you’d read something in the paper, walk to the stock exchange and adjust your portfolio. Today, a computer decodes the electronic version of that paper and adjusts its portfolio in milliseconds. Whoever gets there first can make millions and millions.
“Most of my clients are in New York and London. Usually it’s a couple of dozen maths geniuses fronted by a handful of friendly doormen and posh-looking secretaries. Together they try to persuade institutional investors and extremely wealthy individuals to hand them lots of money to invest with their algorithm.
“You know what’s funny? I hardly meet Americans or English people in London or New York. At those hedge funds and quantitative trading desks, it’s mostly Russian, Indian, Chinese. Very, very, very bright people with incredible maths skills. It’s a world that takes some adjusting to. For one, they don’t do small talk. When one of them picks me up from reception and we ride the elevator, I have learnt not to start chatting away about, say, the weather. They simply don’t seem to understand. They think you’re attempting to communicate something apparently important about meteorological conditions. Same thing with innocent jokes … blank stares. At a typical meeting I get seated at a very long table, with around 12 engineers from the fund opposite me. I talk, they nod and you can tell: they know their stuff.
“I guess most have mild forms of Asperger’s, absolutely. I don’t mind that, by the way. ‘No’ really means ‘no’ for these people, and ‘yes’ is ‘yes’. You might argue that what I do – sales – is the total opposite of quants.
“High-frequency trading is incredibly expensive in the sense that the hardware is very costly, and so is the software. Only a limited number of players can muster those funds. Basically a cartel has cornered the market. If you are rich enough to get a piece of the action, then great for you. If not, well, there it is.
“We robotise events, you might say. What we don’t like is journalists trying to write beautifully. If in your first sentence you say ‘Facebook’ and then you say ‘the social media giant from California’, our programme struggles. The more standardised the reporting, the better. I do marvel at the inefficiency of it all. We have events translated into language, then decoded back again in machine-readable chunks.
“Cynicism is another thing. Traditionally machines are not good at understanding what you mean by ‘IBM is so absolutely, totally great … not!’ We are getting very good at this, picking up nuances. When people include emoticons, we include that.
“Apart from news wires, we are also analysing social media, as these can be important for market sentiment, too. We work across the world and we’ve learnt not only to translate but also decode from one language to the other. Take microblogging in China, which is huge. Suppose you want to monitor the response to a new product by Sony. Chinese people are very unlikely to say ‘This new product sucks’. They will say it’s ‘not as good as we had hoped’.
“By now I’d say we are getting that 98% right. You don’t need a literally perfect translation, with a one-on-one correspondence between the languages. You need to get the central message, the ‘product sentiment’.
“The chances of speculators manipulating social media for their own purposes? Well, this is not our concern, all we do is extract whatever is being said and make it machine-readable.
“There is safety in numbers, in the sense that if you follow hundreds of bloggers, it tends to cancel or filter out the nonsense.
“There are cases of false rumours ricocheting through the system like an echo chamber. At some point somebody began to tweet that the Swedbank ATMs in Riga were empty because the bank was bust. It even got picked up by respectable wires, and Swedbank ended up tweeting photos of functioning ATMs to quell it. There is a risk here, yes, as so much in social media is about passing on others’ stuff without checking it.
“We have an archive of all the news wires of the past decades. Everything that ever happened in those years is in there, allowing you to identify patterns. Basically, anything you and I could think of has already happened somewhere at some point in history. You want an example. The Facebook IPO. You know it’s being hyped so you go back in history to earlier hyped IPOs to establish a pattern you can trade on. For instance, you see how the big banks will prop up the price on the first day of the IPO, then let it collapse.
“Theoretically you could feed events for the entire world into a programme, but that makes for a very slow programme. So we offer sectors – oil or pharma – or countries or regions.
“For Greece, you might programme for the leftist leader Alexis Tsipras. You would need a meta-interpretation, though, of whether a Greek default would be good or bad. Once you have that, you can determine for every statement by Tsipras how this will make default more or less likely, and by what degree. This will allow you to trade on the possibility of a default ahead of others.
“In high-frequency trading your computer buys a share as its price is moving, then sells it immediately on to the next buyer, all within that same price movement. The algorithm is a middle man, exploiting a tiny advantage that comes from being there faster. I suppose high-frequency trading has no value to society. That’s not our concern. At the end of the day it’s a buy-sell market.
“Perhaps in the future we can cut out both the PR departments at public companies issuing the misleadingly positive press releases, as well as the journalists passing these on.
“A hedge fund, or companies themselves, or perhaps some other authority will issue machine-readable statements. Then everyone will have the same information at the same moment in time.
“It’s not easy getting appointments in banks to promote our product. You can’t just call up Goldman Sachs. Trade fairs are good places to establish contacts. I remember when we started out and I got my first appointment with a vice president (VP) in a bank. Boy, was I excited and proud. So I went to see this guy, who had his own phone – a big deal in banks, apparently. He had his own office, too. A tiny room, but with a window – another big deal in banks, apparently. Then I discovered decisions are taken far higher up the tree. Big banks have thousands of VPs – it’s quite a junior position!
“I rarely get to speak to board members of banks. It’s interesting how low key they are. Traders pull up in their Ferraris, they want to be seen. Board members arrive in silent limousines with tinted windows and quietly take the elevator to the top floor where there are deep layers of carpet, everybody speaks in hushed voices and there are lots of beautiful men and women asking if you want more excellent coffee.
“Investment bankers and hedge fund types are strikingly competitive and seem to turn everything into a game of one-upmanship. One celebrates his child’s third birthday by hiring a big boat, so now his colleague has to get an even bigger boat from his child’s birthday.
“How I know these things? They tell me. They laugh as they tell me, making fun of one another. But they all go along with it. It’s never enough and they never seem satisfied.
“They buy an expensive yacht with their bonus only to discover even bigger yachts in the harbour. They buy an $8m apartment on Central Park not realising they have to come up with $9,000 in service costs each month. This is how they get trapped. Or they trap themselves.
“Is it all about greed? With the quants I feel they derive genuine pleasure from cracking problems, from writing the best and most elegant programme. Making more money than anyone else is a marker of that, an expression they are the smartest guys in the room. At some point the money becomes a symbol, does it really matter whether you have 300 or 400 million?”
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Just a bag and the credit card fee can be £82. We look at the real cost of budget flights
Holidaymakers travelling to Europe this summer on budget airlines face soaring fees for taking just a single bag on the plane – and staggering costs if they have to make any changes to their tickets or discover at the airport that their bag weighs too much.
Ryanair’s new “high season” rate of £70 return for a 20kg bag to go into the hold comes into force in June and lasts to October, with an £80 charge if you’re heading to the Canaries, Greece or Cyprus.
If you don’t book online, but turn up at the airport with your bag, the fee rises to a staggering £130 one way.
Meanwhile, passengers on easyJet this summer face a charge of up to £32 for a 20kg suitcase on a return flight, up from £28 last summer, while Aer Lingus has hiked its bag charge from £24 to £36 return.
A Money survey of budget airlines’ add-on charges reveals that it can cost £100 to take your golf clubs, £110 to change the name on a ticket, £30 for extra leg room and £120 because your bag weighs 3kg over the limit.
What’s more, we found car hire offered by the “low-cost” airlines to be much pricier than rates that could be found elsewhere. But we were surprised to find ultra-cheap (basic cover) single-trip travel insurance offered by an airline, Jet2.com, that beat anything we could find searching elsewhere.
We researched costs at Aer Lingus, British Airways, CityJet, easyJet, Jet2, Flybe, Monarch, Ryanair and Thomson. Given the recent takeover of BMI by British Airways, we did not test bmibaby, its low-cost offshoot, which is due to close in September.
Ryanair was the highest cost airline for bags, credit card fees, name change fees, flight change fees, fees for taking on special items such as golf clubs, and even the fee for sending a passenger a text to tell them about the flight. It’s £1.50 at Ryanair and £1 everywhere else.
But easyJet, Jet2 and Aer Lingus have each introduced general “administration” fees which are slapped on to all flights, although quite what this covers is not made clear.
Jet2 also charges a fee for online check-in (£10 return) which, along with its other charges, makes the Leeds/Bradford-based airline second only to Ryanair in the add-on costs league (click on main picture for full table).
But Ryanair and Jet2 are by no means alone in imposing significant extra costs on travellers lured by the promise of low-cost flights.
When we tested costs for a one-week return flight for one person this summer to Malaga (in the case of Aer Lingus and CityJet we used London to Dublin), we found add-on costs of £34.95 at Thomson, rising to £58.10 at Jet2 and £82 at Ryanair. CityJet was the only airline to charge nothing whatsoever in add-ons. British Airways limited its add-ons to a £4.50 fee for paying by credit card.
The card surcharges are a huge moneyspinner for the airlines. The Office of Fair Trading found that UK consumers spent £300m on payment surcharges to airlines in 2010 and, in December 2011, the government said it would ban “excessive” card fees from the end of 2012. But that comes too late for travellers this summer and, in any case, may be circumnavigated by the airlines.
Ahead of the planned government crackdown, Ryanair no longer calls its £6 per-person-per-flight card fee a card fee. Instead, its site refers to the charge as an “administration fee” which “relates to costs associated with Ryanair’s booking system”.
For a family of four paying with a debit or credit card, the fee adds £48 to the holiday cost.
Navigating the add-on costs is a confusing business. Some airlines charge flat-rate fees, while others charge rates based on the total cost of the flight.
But the underlying cost of the flight may, for many people, still swing the equation in favour of Ryanair.
For example, the cheapest return on Ryanair from London to Malaga we could find, flying out at peak time this summer, on Saturday 4 August, returning one week later, was £146.22, but £188.98 on easyJet. However, if the traveller takes a 20kg bag, the price advantage over easyJet disappears.
Beware flying Ryanair if you are planning on taking your golf clubs or any sports equipment. The airline now charges £100 return to carry golf clubs – more than the cost of taking a human on many of its flights.
Other airlines surveyed by Money charged between £50 and £60, although CityJet takes them for free.
It can make for some interesting price comparisons. For example, Ryanair gives the cost of a one-week return from London to Dublin as just £40.98 in mid-June. But this jumps to £222.98 once the traveller takes a 20kg bag for their week away and brings their golf clubs.
CityJet charges a much higher base cost of £182.13, four times the price of Ryanair, but as bags and golf (or other sports equipment) go free, it’s cheaper to take CityJet.
Most airlines now push partner deals on car hire, hotels and travel insurance, which are mostly poor value, except for Jet2’s single-trip insurance.
Ryanair came out cheaper than other airlines on the car hire it sells to travellers when they are making a booking.
In our survey, we found that Ryanair wanted £92 for the hire of a basic car at Malaga airport for a week, compared to the £125 quoted by Flybe and £109 by easyJet.
But even though it was cheaper, don’t be lured into buying. For the same period, car hire booked through holidayautos.co.uk at Malaga airport was £72 for a Ford Ka, £77 for a Corsa, and £100 for a Ford Focus.
Travel insurance is another minefield. The budget airlines use every tactic possible to scare passengers into buying, and usually make it something that has to be “unchecked” before proceeding with a booking.
Cheapest was Jet2’s £5 offer for a week in Malaga, a third of the price of easyJet’s deal. It even compares well with the best deals available by searching on the likes of MoneySupermarket.com.
But you get what you pay for – Jet2’s cover for theft of personal belongings is limited to £500 and it has a £100 excess. Still, if you are just looking for basic protection against catastrophes such as medical claims, it’s good value.
Flying with a budget airline can save the traveller money, but largely by foregoing a bag and by accepting that once the ticket is bought, there can be no changes. Jet2 even bills itself as a “no-refund” airline.
If you do make changes after booking, the costs are eye-watering. Again, Ryanair tops the table of charges. If a traveller inputs the wrong name during online booking or wishes to change the name on a ticket at a later date, Ryanair will charge as much as £160 at the airport, or £110 online. Other airlines tend to charge £70-£80.
And woe betide the traveller who arrives at the airport with their bag bulging. If it is three kilos overweight it will cost £60 at Ryanair (one way) and £30 at easyJet.
Travellers who try to dodge Ryanair’s fees by stuffing their carry-on luggage to the limit are also taking a financial risk. The airline has a flat £50 fee for oversized cabin baggage.
Most travellers can also wave goodbye to their money if they have to cancel, and should claim on their travel insurance instead if it is the result of the death or serious illness of a partner.
Infants under two, travelling on a parent’s lap, have to pay £40 return on easyJet, Jet2 and Ryanair, even though they are not taking a seat. On very cheap flights, it can mean the baby pays more than the parent.
The “full service” airlines, such as British Airways, came out well in the survey, although BA introduced budget airline-style advance seat reservation charges in 2009, much to the dismay of regular travellers.