Airline Mischaracterization of Fuel Surcharges: American Airlines

On June 26, 2012, Edelman booked a ticket by telephone with an American Airlines telephone representative. (Itinerary: CDG-BOS-JFK-SCL-JFK-BOS-LHR-CDG in business class.) After confirming the desired flights, discussion proceeded as follows:

Edelman: Could you review the fare and tax?
Agent: Certainly. OK, I'm showing that the fare in US dollars is 4828, and 708.20 taxes.
(view expanded transcript) full recording - download (22:57 minutes)

With affirmative permission from AA ("this call may be recorded"), Edelman recorded the call. The excerpted recording is available above.

Contrary to the agent's statement, the majority of the $708.20 consists of carrier-imposed fees, not "taxes." (We reach that conclusion by cross-checking the itinerary with a near-identical itinerary quoted via the ITA Matrix site, which itemizes applicable taxes and carrier-imposed surcharges.)

Note that this ticket includes only a single 216 mile segment on British Airways – countering any suggestion that AA's mischaracterizing of carrier-imposed surcharges is limited to travel wholly or substantially on BA.

Nor is this the first instance in which AA representatives have overstated the amount of "tax" on a paid booking. In April 2011, Edelman contacted an AA telephone representative to book paid business class travel BOS-LHR-CPH-LHR-DEL-MUM-BAH-LHR-CPH-LHR-BOS-ORD-SEA. The agent orally quoted "tax" of $792.10. The e-ticket confirmation and receipt was in accord, listing "tax" of that amount. See Edelman's December 31, 2011 complaint to AA General Counsel Gary Kennedy, Attachment 1. In fact, as best we can tell, the majority of this amount is carrier-imposed surcharge, not any actual tax. (In response to Edelman's inquiry, AA representatives indicated that there was $502 of fuel surcharge in this ticket, albeit there mischaracterized by an AA representative as "fuel tax collection" as discussed in the subsequent section AA Affirmatively Misrepresenting Its Practices In Response to Customer Inquiries.)

Added March 30, 2013: In the course of Edelman's purchase of other transatlantic travel on February 21-22, 2013, multiple American telephone representatives made false statements of "tax", and an airport representative provided a written statement making a similar false statement. After putting an itinerary on hold, Edelman called telephone reservations to request adjustments, then received a modified fare quote orally:

Edelman: Could you confirm the fare versus the tax for me, just jot it down here?
Agent: All right Mr. Edelman, thanks again for holding. Your taxes were $575.10. Your fare was $728.
(view expanded transcript)

Note the high "tax," purportedly 44% of the total ticket price. But contrary to the agent's statement, the majority of the $575 consists of carrier-imposed fees, not "taxes." (To confirm, we cross-checked with ITA Matrix.) Surprised at the high "tax," Edelman spoke with a second American Airlines telephone representative. After making other small adjustments to the reservation (at Edelman's request), that representative twice provided substantially the same false statement of "tax."

Edelman: What's the fare and what's the tax?
Agent: Yes, it is 496 pounds is the base fare, the tax is... oh, in American dollars, that's $767, and it's, uh, $554.50 of taxes. Let me double-check.
Edelman: OK, that adds up.
Agent: Uh huh, that's correct sir, that's $554.50 of taxes.
(view expanded transcript)

A printout, provided to Edelman at an airport ticketing desk, reports 'taxes' of 352.92 GBP, approximtely matching the $550+ previously reported by American telephone representatives. The majority of this 'tax', 213/352 GBP, is actually carrier-imposed surcharge.

Because Edelman sought to pay in part with vouchers, he traveled to an airport location to provide the vouchers and purchase the ticket. At the airport, Edelman requested a printout showing the total amount he paid, inclusive of vouchers. Airport staff provided the document shown at right. Note its report of "taxes" of GBP 359.92 (top red box) (approximately matching the $554-$575 quoted by American telephone representatives). But the document reveals that the largest "tax" is "YR" (second red box) -- a code which travel industry experts recognize as a carrier-imposed surcharge rather than a genuine "tax."

On February 10, 2012, Edelman purchased a first class Circle Pacific ticket from the AA Around The World Desk for Edelman's colleague D__ M__. The agent quoted the fare and "tax." Mindful of the prospect of carrier-imposed surcharges mischaracterized as tax, Edelman specifically asked the agent "Are those genuine taxes, or fees?" The agent replied: "Taxes." Via a subsequent written inquiry to AA Customer Relations, Edelman learned that the amount characterized as "tax" actually included $364 of "fuel surcharge."

To obtain further documentation of AA Around The World Desk staff mischaracterizing carrier-imposed surcharges as tax, on March 21, 2012 Edelman requested a new ticket following the same itinerary Mr. M__ booked. On March 22 Edelman called back (as instructed) to receive a fare quote. (Circle fares require next-day fare quotes.) The March 22 agent reported: "The base fare is 15204 even, the taxes are 669.03." Based on Edelman's correspondence with AA Customer Relations as to the pricing of Mr. M__'s ticket, we are confident that the quoted $669.03 of "taxes" included a fuel surcharge of more than $350. (full call recording - download - 1:22 minutes)

Edelman's January 14, 2012 complaint to DOT flagged the problem of AA mischaracterizing as "tax" certain carrier-imposed surcharges AA collects for award travel on BA. In our experience, AA telephone representatives consistently mischaracterized these fees as "tax" (including in Edelman's personal bookings of March 17, 2011 ("tax" of $311.50 per passenger on a ticket for JFK-LHR-SIN with the second segment on BA) and May 30, 2011 ("tax" of $383.50 on BRU-LHR-DXB). The contemporaneous AA receipts in each instance list these amounts as "tax" (not "tax and carrier-imposed surcharge" or the like). See December 31, 2011 letter, attachment 1. Edelman recalls AA representatives in each instance using the single word "tax" in the course of quoting each of these fares.

In a letter of December 31, 2011, Edelman brought these historic award bookings to the attention of AA General Counsel Gary Kennedy and requested a refund for the amounts wrongfully charged. In his letter of January 11, 2012, Mr. Kennedy claimed that AA never made such misrepresentations prior to consumers' purchase; he argued that any misrepresentations occurred only after purchase (e.g. in passenger receipts) and therefore could not influence customers' decisions to book. See February 4, 2013 complaint, attachment 4. Mr. Kennedy's claim was inconsistent with Edelman's personal experience. To rebut his claim, Edelman made a series of recorded test calls. In each call, AA telephone representatives falsely quoted "tax" that was actually a carrier-imposed surcharge:

Agent: All right, round trip in first class. It's going to be a total of 125 thousand miles and it's giving me taxes of $938.80.
(view expanded transcript) full recording - download (3:56 minutes)

Agent: Okay, so we are looking at 62,500 miles one way, taxes $347.70.
(view expanded transcript) full recording - download (2:36 minutes)

Agent: You're looking at $347.70 in taxes, which credit card did you want to use?
(view expanded transcript) full recording - download (3:46 minutes)

Agent: And I do have a mile saver. It is sixty two and a half [thousand] each way, so total miles would be 125,000, and you do have, you know, paying some tax on this, it is $1156.20.
(view expanded transcript) full recording - download (3:26 minutes)

Agent: I have one seat on British Airways flight 214 on Sunday, tenth of February out of Boston at 9:10 in the evening, get into London at 8:25am on Monday morning. It's 62,500 miles and the taxes are $438.20.
(view expanded transcript) full recording - download (4:13 minutes)

In each test call, agents falsely quoted "tax" that was actually a carrier-imposed surcharge. For example, in the January 19, 2013 test call, AA seeks to collect a fuel surcharge of $414 in each direction (for BOS-LHR travel in business class or first class). Thus, $828 of the $1156.20 is not genuine "tax" but carrier-imposed surcharge – fully 71.6% of the specified "tax."

I purchased the ticket quoted in the February 8 call. When I later needed to cancel this ticket, an American telephone representative indicated that the "taxes" would be refunded to my original form of payment -- yet again misrepresenting as "tax" charges that are actually carrier-imposed surcharges.

AA places within the box labeled 'taxes & fees' certain charges that are actually carrier-imposed surcharges.

AA.COM mischaracterizes carrier-imposed surcharges as "tax" on certain itineraries. For an example, the screenshot at right (prepared June 26, 2012) quotes supposed "taxes & fees" of $327.80 on a one-way coach itinerary CDG-BOS-MIA-SDQ. But as best we can tell, there is no genuine government or airport tax of that amount. Rather, we believe approximately half of the $327.80 consists of carrier-imposed fees. (We reach that conclusion by cross-checking with an identical itinerary quoted via ITA Matrix, which itemizes applicable taxes and carrier-imposed surcharges.)

AA might argue that the amount at issue is characterized not solely as "tax" but rather as "taxes & fees." But DOT regulations instruct that carriers need to use the term "carrier-imposed surcharges", not just "surcharges" or "fees", if they seek to combine carrier-imposed charges with taxes. Furthermore, the "Price and Tax Information" link takes a user to a price details page where AA specifically promises that "international ... fares include ... base fare and carrier-imposed surcharges." Having specifically promised to include all carrier-imposed surcharges in the base fare, AA erred in moving some to this separate "taxes & fees" section.

Notably, this problem affects itineraries with travel entirely on AA and with no travel on any other carrier.

The screenshot is also notable because of an arithmetic error. See discussion below.

AA advertises around-the-world air travel via rtw.oneworld.com. This tool systematically mischaracterizes carrier-imposed surcharges as "tax." These amounts can be substantial – regularly more than $1000 on a single ticket, and we believe in some instances more than $2000.

We have quoted a variety of around-the-world tickets using this tool. For example, on January 21, 2013, we quoted a coach ticket JFK-LHR-DXB-LHR-ARN-LHR-SIN-HKG-NRT-HKG-YVR with the first segment on AA. Taxes were quoted at $1222.16 USD. See first screenshot below. Clicking the "Proceed" button yielded the lengthy itinerary and fare quote shown in the second screenshot below, reiterating the $1,222.16 quote of "Taxes." There, the word "Taxes" appeared as a hyperlink. Clicking this link yielded the itemization in the third screenshot. The top three lines of that itemization report "Tax description unavailable (YRVB)" of $200, "Airline Fuel Surcharge" of $559, and "Multiple Surcharges" of $213 -- the second and third labels potentially alerting a consumer that these are not actually "taxes" (despite prior statements), but then the bottom "total" line reiterates the (false) claim that are all in fact "taxes".

As best we can tell, there are no actual government taxes totaling the $1222.16 "tax" charged on this itinerary. Rather, we believe the majority of the $1,222.16 "tax" (specifically, the $200, $559, and $213 characterized as "tax description unavailable" and "surcharge") is actually carrier-imposed surcharges. Thus, 79.5% of the $1,222.16 "tax" is not actually tax but rather carrier-imposed surcharge unlawfully disguised as "tax".

Crucially, the initial disclosures (as shown in the first and second screenshots) mischaracterize the amounts at issue as "taxes", not "taxes and surcharges" or the like. Moreover, every user using this booking tool must see the first two screens; in contrast, the information in the third is shown only if users specifically click the "Taxes" hyperlink to view details. Thus, even though the third describes the surcharges within a page entitled "taxes and surcharges information" (potentially admitting that some of the charge are not taxes), most users are unlikely to see this screen. Moreover, the "and surcharges" label appears only in HTML title, not in page text – insufficiently prominent to cure the false statements made previously. Indeed, at the same time that the "taxes and surcharges" label appears at the top of the page (indicating that some of the listed charges are "surcharges" rather than taxes), the wording "TaxBreakdownPopUp" appears immediately below (in the popup's URL bar), again falsely indicating that everything in the listing is a "tax." Even more galling, the top line item “tax description unavailable” indicates that the $200 there at issue is a “tax” when in fact it is a carrier-imposed surcharge – compounding and furthering the misrepresentation. Finally, even on the most favorable view, the statements in the third screenshot still fall short of applicable DOT rules: Note the absence of the crucial words "carrier-imposed" as well as the failure to include statements substantiating the surcharge amounts ("On average our passengers paid…" or similar). These omissions are in sharp contrast to the requirements of the DOT's Additional Guidance on Airfare/Air Tour Price Advertisements.

Via online discussion forums, we have been in touch with multiple customers who have conveyed, in specificity, their experience of AA telephone representatives mischaracterizing carrier-imposed surcharges as "tax" in the course of providing reaccommodation after flight cancellation. They have experienced these problems on both paid and award tickets.

There have recently been multiple significant cancellations in the AA network (including ORD-DEL, JFK-BUD, and JFK-BRU) and in the OneWorld alliance (including as MAD-JNB). In each instance, a natural alternative routing includes transportation in whole or in part on British Airways.

We do not know whether AA would be within its rights to require that a customer pays a carrier-imposed surcharge when a customer is rebooked on British Airways as a result of a flight cancellation. But we are confident that AA may not mischaracterize British Airways surcharges as "tax" in the course of a rebooking or a proposed rebooking. In contrast, multiple affected passengers report that AA representatives have in fact used the word "tax" in insisting that passengers pay these fees.

Because multiple independent customers have told us of inaccurate statements by AA telephone agents in this regard, and because AA telephone agents have mischaracterized fuel surcharge as "tax" in multiple other contexts (including as detailed in this article), we find the customers' reports credible.

AA staff affirmatively misrepresent the carrier's practices vis-à-vis carrier-imposed surcharges in response to customer inquiries. These misrepresentations have the inevitable and intended effect of deterring consumers from uncovering and pursuing valid claims against AA.

We began investigation of AA surcharge collection by contacting AA Customer Relations. In an electronic inquiry through AA.COM, Edelman noted unexpectedly large tax on several recent tickets. An AA customer service representative replied with an itemization of "fuel tax collection by British Airways" on the specified itineraries. Of course there was never any "fuel tax" in that amount; instead, the AA representative gave this false designation to a carrier-imposed surcharge. The natural effect of this misrepresentation was to deter a customer from further investigating a violation by AA.

Edelman's colleague Shawn Cole recently redeemed AA miles for award travel in part on British Airways. Aware of the issue flagged in this complaint based on his personal discussions with Edelman, Mr. Cole objected when the AA telephone agent characterized a large charge as "tax." Specifically, Mr. Cole recalls making roughly the following statement to the agent: "You should clarify to customers that only a portion of those charges are a tax, while most of them are discretionary charges that BA/AA elects to collect from its members. I imagine you have weekly meetings during which you speak with your supervisors about customer feedback, you might warn them that this may be putting AA at risk of a lawsuit." Mr. Cole is confident that he was polite and nonconfrontational in this remark. Mr. Cole reports that the agent replied roughly "I can't talk to you with this attitude" and disconnected his call without assisting him further.

Even routine discussions with AA telephone representatives include misrepresentations of carrier surcharge as "tax" in response to customer inquiries. For example, in the section False Statements in Telephone Bookings of Circle Tickets above, Edelman noted a large "tax" quote on a circle ticket. Edelman asked the agent "Are those genuine taxes, or fees?" and the agent replied: "Taxes." Of the consumers we interviewed who had suffered cancellations and reaccomodation on BA, at least one had spoken with a supervisor, and affected consumers report that AA representatives and supervisors universally used the word "tax" in characterizing the fees at issue.

Other American Airlines Price Advertising Violations: omitting required fees from first fare quote; fare quotes not available for purchase; arithmetic errors

Omitting required fees from first fare quote. Edelman's February 4, 2013 complaint also flags an additional violation by American Airlines: failing to disclose all applicable fees in the first fare quote. Specifically, an AA telephone representative quoted an award ticket by telephone and put the reservation on hold -- but when Edelman called back to purchase the ticket, he was told of an additional $50 fee. AA refused to refund that fee even when Edelman quoted and cited DOT policy that "[T]he first price quote presented must be the full price, including all taxes, fees and all carrier surcharges" (emphasis added).

Enticing consumers with fares not available for purchase. In January 2012, Edelman filed a complaint with DOT as to American Airlines falsely presenting prices that are not actually available, neither on a one-way basis nor on a round-trip basis. Specifically, Edelman showed AA.COM presenting transatlantic "Departure Fare" quotes as low as $41, while return fares would be much higher ($458 or more) (plus taxes of approximately $200). Edelman argued that AA’s representation of a "$41" fare BOS-LHR was simply not accurate: and AA did not actually offer travel BOS-LHR for $41 on a one-way basis or a round-trip basis.

AA.COM quotes a 'fare' and 'taxes & fees' that do not actually sum to the listed 'total'

The DOT's February 21, 2012 Additional Guidance on Airfare / Air Tour Price Advertisements criticized these American Airlines advertising practices. The DOT reported: "[W]e observed that one carrier was offering outbound each-way fares to European points that appeared to be deceptively low in comparison to the return flight fares." After giving an example, strikingly similar to Edelman's complaint, the DOT concluded "The only reasonable explanation for such variations is that the carrier intended to bait the passenger with an unrealistically low outbound fare and to induce passengers to buy the roundtrip ticket at a substantially higher price than any reasonable person would expect at the beginning of the search process. We view such tactics as being unfair and deceptive and amounting to an unfair method of competition."

Arithmetic errors. In June 26, 2012 testing, we noticed a glaring arithmetic error on AA.COM: AA.COM quotes a "Fare" of $3296.72 and "Taxes & Fees" of $327.80 – numbers which actually sum to $3624.52, but instead AA.COM quotes a supposed total of $3460.02. We do not know which amount would actually be charged if a customer elected to purchase this itinerary. But we can see no proper reason for AA to present a supposed itemization where the listed charges do not match the quoted total.

Edelman complaint to DOT - February 4, 2013 - re American Airlines

In January 2012, Edelman sent a complaint to the Department of Transportation as to some of these American Airlines practices (as he knew them at that time). The DOT has not yet acted on that complaint. That said, the DOT's Additional Guidance on Airfare / Air Tour Price Advertisements confirms the impropriety of many of the practices he flagged.

I ask that the Department of Transportation:

(1) Exercise its authority under 49 USC 41712 to open an investigation of British Airways for having engaged in, and continuing to engage in, the unfair or deceptive practices described above;

(2) Order British Airways to refund to ticket purchasers all monies represented to ticket purchasers as "taxes" or government-imposed fees, but not actually remitted to governments, and all "fuel surcharges" impermissible under the law or regulation applicable as of the date of purchase of the corresponding tickets;

(3) Impose appropriate civil penalties on British Airways;

(4) Refer this matter to appropriate US and foreign tax collection agencies for investigation of possible tax fraud or other violations of tax law in non-payment to governments of monies collected as "taxes" or government-imposed fees; and

(5) Issue any guidance or revised regulations needed to clarify to other airlines and ticket agents, and to preclude any future claim of ambiguity, that these practices are unfair and deceptive in violation of 49 USC 41712.