Watchdog deals blow to Air NZ

Air New Zealand's plan for an industry code for airfare advertising has been dealt a blow by the Commerce Commission, which says it would not do enough to protect consumers.

As the airline prepares to defend charges that it broke the Fair Trading Act by running misleading advertisements, it has been trying to get rivals to agree on industry self-regulation of advertising.

Air New Zealand called other airlines and members of the wider travel industry to a meeting at its Auckland headquarters on March 18 in an attempt to reach a consensus.

The meeting was attended by a Commerce Commission staffer.

Many in the industry argue third-party charges - such as airport levies or security charges - should not be included in headline charges.

But those at the meeting told the airline it must at least include its own fuel surcharge in its advertised ticket price.

It seems that unless airlines include all their operating expenses in advertised fares, no industry code is likely to be approved by the commission.

In a May 9 letter to Air New Zealand general counsel John Blair, commission fair trading director Deborah Battell said: "There is no justification for separating out from the headline price costs that are simply operating costs of the airline."

Battell also said Air New Zealand's suggested code " ... uses language that is so broad that airlines could arguably comply with the code without ensuring that consumers are not liable to be misled".

Air New Zealand later circulated Battell's letter within the industry for comment and it was passed on to the Business Herald last week.

Pacific Blue told the meeting it was ready to immediately move to all-inclusive pricing. It said it wanted no part of an Air New Zealand-backed voluntary code.

The code would have seen airlines agreeing to lay out the exact total of extra charges on fares, printing the number prominently and next to the headline fare, so customers would only have to add two numbers.

Debate over what should be included in an advertised airfare has festered for several years but took on added urgency after Pacific Blue joined the transtasman market.

Airlines argue that they should not be asked to include all the fees, taxes and charges levied by third parties, including airports and government agencies.

Air New Zealand has been charged with 20 counts of breaching the Fair Trading Act, by not telling customers the true price of travel.

In one charge, the commission says an advertised $89 fare between Auckland and Wellington actually cost $100.15.

When it appears in the Auckland District Court next week the airline is expected to argue that its advertising was not misleading - since customers know the advertised headline prices are not the final amount they will pay.