No Free Lunch
When prices don't tell all
By Cielito Habito
Philippine Daily Inquirer
First Posted 19:08:00 05/18/2008
MANILA, Philippines--What if your friendly neighborhood panaderia advertises in posters all over town that it is selling regular-sized pan de sal for 50 centavos (or even zero centavos!) apiece? What if hundreds of townspeople troop to the store to snap up the bargain bread, only to be told that (1) there are only five dozen pieces available at that price per day, and (2) there is a P2 "flour surcharge" on top of the price, bringing the actual cost to the buyer, VAT included, to P2.80 (or P2.25 under the "free" deal) per pan de sal?
Would you be surprised if the crowd turns violent and attacks the bakery and its owners for the perceived deception?
Fly for free?
No one is attacking the domestic airline offices, thank God, yet this is exactly the situation when attractive ads banner P99 or even zero airline fares to various points around the country. Or when the airlines offer seemingly generous "buy one take one" deals. You troop to the airline ticketing office with your hard-earned money hoping to snap up a great bargain, find that you have to line up for hours to get your turn at the ticket counter, and then discover that the "great bargain" is no bargain after all once fuel surcharges, insurance, taxes and other fees are considered.
Thus, I couldn't help feeling somewhat heartbroken when I recently overheard a couple of housemaids excitedly discussing their plan to take a short vacation back home in Mindanao after seeing one of those P99 fare ads. I didn't have the heart to tell them that it would really take one to two months' wages to pay for those P99 trips back and forth.
Sorry folks, but like we economists always say, there's no such thing as a free lunch.
Like Meralco
Don't get me wrong, I am not against these fuel surcharges, taxes and other fees per se, to the extent that they are legitimate costs incurred by the airline. What riles me is the way these charges are not included in the advertised prices, but only show up as a little "plus-plus" in the quoted fare, when they are part of the usual costs of providing the service in the first place. Not only are we consumers misled; we are also left guessing whether part of the amounts being additionally charged of us are indeed legitimate costs, or simply additions to the company bottom line--point one against the consumer. The current debates over Meralco pricing are no different. In our monthly electricity bills, most of us don't really understand exactly what we're paying for and whether we're being taken advantage of or not. Hence all this current brouhaha.
My other lament is on how this pricing practice opens the way for depriving consumers of certain rights that they normally should have. By calling them "promotional" fares, the airlines find an excuse to make the tickets nonrefundable, nonrebookable and nonreroutable. But how unusual are these fares really? It seems to me the bulk of their sales are made on the basis of these "promo" fares, while "full fare" is more the exception than the rule.
'Plus-plus'
What exactly goes into the "plus-plus"? I tried a comparative analysis online of lowest price quotes given by the local carriers for the same destination on the same dates and approximately same times (say, Caticlan/Boracay on June 25/27). A proper comparison beyond the all-in prices turns out to be impossible, as the airlines itemize the components differently, and give varying levels of access to the information on their booking websites--point two against the consumer.
You can count Seair out on transparency; you can't even get any price information at all before you enter your full data. Cebu Pacific offers an P888 fare to Caticlan and P288 back, plus P1,570 for "fuel and insurance" each way, plus P15 aviation security fee on the trip back, plus 12-percent VAT, adding up to P4,851 for the round trip. Asian Spirit offers P1,099 fare each way, plus P250 insurance and P1,020 surcharge each way, plus P15 aviation security fee on the trip back, for a total of P4,753 (VAT built in). Philippine Airlines offers a fare of P588 each way, plus a lump-sum P3,810 "taxes," for a total of P4,986. I guess we can assume the "taxes" here really include the fuel surcharge and insurance costs, but somehow, the impression is conveyed that this portion is beyond PAL's hands.
Questions
All these lead us to ask: Shouldn't our regulators (the Civil Aeronautics Board in this case) require all advertised fares to be all-inclusive and transparent, like what the US Department of Transportation and other governments now require of their airlines? Shouldn't the CAB fully disclose to the consuming public the exact nature and computation of fuel surcharges, insurance and security costs and other fees that they permit airlines to charge from us? And in the same way that "no return-no exchange" is now prohibited among common merchants, shouldn't "nonrefundable/nonrebookable/nonreroutable" clauses in airline fares be tightly restricted as well, if not outright prohibited? I always thought regulators exist to protect, first and foremost, the interests of the general public. Shouldn't the CAB be doing the same?
Comments welcome at chabito@ateneo.edu.
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