It's Right to Investigate Airlines' Levy on Credit Cards, but It'll Cost Us
The cost to the airline Monarch of ditching debit-card fees could be higher than you'd think. The carrier has decided to break ranks with the industry and do away with the levy in favour of a one-off charge on credit-card users.
Monarch's move has been welcomed by consumer groups and comes as the Office of Fair Trading (OFT) investigates the levying of booking fees on debit and credit card payments by the airlines. These fees, so often charged by the airlines, as well as entertainment venues, are completely over the top. A card transaction that in reality costs no more than a matter of pence is passed on to the purchaser in multiples of pounds. The OFT's investigation of this routine fleecing is long overdue.
However, what many people haven't picked up on is the potentially massive hole any OFT action against these fees will create in the airline industry's profits if card fees are banned or reformed so that they represent the true cost of the transaction.
I have been doing some back-of-the-envelope figures on this. Say a budget airline, lets call it Rilleyair, charges a card fee of 6 per ticket and flies some 70 million passengers a year. Now being ultra conservative, let's presume that 50 per cent of tickets come with a 6 fee attached, that's around 200m of extra income.
Now considering that nearly every penny of these charges - particularly for debit cards - is pure profit, at a stroke Rilleyair will lose a massive revenue stream. And in order to replace this 200m in profit, it will have to somehow increase its revenues by a couple of billion a year at least.
Personally, I don't care for Rilleyair's profits, particularly when they are in part built on excessive card charges. However, where I may come to care is when the airlines - and not just Rilleyair, they're nearly all as bad as each other - look to repair this huge hole, which I estimate could be as high as 1bn, in their profits. As with the banks, we will see the "waterbed" effect in action - basically, when you push down on profits in one area it pops up somewhere else.
Of course, the OFT shouldn't concern itself with this in its investigation, it needs to look at the arguments for and against independently, but if consumer groups get what they want it probably won't be long before passengers are hit with yet another unfair charge.
Co-operative care homes
At long last BBC's Panorama has abandoned its idiotic habit of having its programmes fronted by celebs - Peter Andre reports on Fukushima looked for a while a dead cert. It has got back to proper journalism and its programme on the abuses in a privately run residential hospital made difficult watching and rightly sparked a national debate. …