Air New Zealand ‘drip pricing’ investigated

Air New Zealand is being investigated by the Commerce Commission over alleged "drip pricing" tactics that have got its Australian counterparts in hot water.  

Customers who book with the airline using the web or a mobile phone are shown a headline airfare, then have other charges added as they click through the process. 

One of these is a domestic travel insurance charge, typically $10 for a one-way domestic flight, which is added on an "opt-out" basis, meaning it will be added to the airfare unless customers choose otherwise. 

Wellington lawyer Michael Wigley has criticised the insurance charge, which he has labelled as "drip pricing", where companies advertise a low initial price then add other fees later in the purchase process.

Drip pricing is in the spotlight across the Tasman with the Australian Competition and Consumer Commission taking legal action against Virgin Australia and Jetstar over added booking fees.

Air New Zealand has been in trouble for drip pricing before: in 2006 it was fined $600,000 after the Commerce Commission prosecuted it for misleading customers about the real price of its airfares.

Wigley said requiring customers to opt out of the travel insurance meant some people would accidentally buy insurance they did not want or need. 

"The whole idea of drip pricing is people inadvertently end up paying for things." 

Wigley raised the issue after realising he had unknowingly paid for travel insurance on a number of domestic flights, but he has had mixed messages from the airline about whether he can get a refund.

He was told by An Air New Zealand lawyer that the company refunded any inadvertent purchases of insurance unless there had been a claim on the policy.

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However, following an online inquiry to the customer services team he was told that any insurance issued outside of the 14 day cool off period is not refundable.

Wigley said that while $10 may not be a huge amount per passenger, it could add up to quite a lot of revenue for Air New Zealand if many people mistakenly purchased it.

"The Commerce Commission should be looking at this and digging out internal documents. There may be management papers that talk about this."

Commerce Commission spokeswoman Victoria Rogers confirmed the commission was investigating and said it could not comment further at this stage.

"We are aware of this and yes we are looking into it," she said.

Air New Zealand spokeswoman Imogen Dennis said the airline's view was that its offer of travel insurance was fair and complied with all laws.

She said it offered customers the ability to opt out of taking up insurance on three separate occasions during the process of booking a domestic fare, or four times if the customer goes through the seat select process.

"A small number of customers do contact us having inadvertently purchased travel insurance, or decided they no longer wish to be insured and we happily refund the insurance paid, providing it is within two weeks of purchase," Dennis said. 

"Obviously if the customer has already commenced travel or made an insurance claim, they have already taken the benefit of the insurance and will not be entitled to a refund," she said.

Consumer New Zealand chief executive Sue Chetwin said drip pricing was a big concern for her organisation, which had submitted to Parliament on the issue in the past.

She said add-on charges were common in the airline industry and Jetstar was "not good and maybe marginally worse than Air New Zealand on ticket pricing".

Chetwin said the airline industry was not the only one that added extra charges on to initially cheap ticket prices.

"With Ticketek you virtually never pay the price advertised because you pay all sorts of other fees," she said.

 - BusinessDay.co.nz

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