Air NZ 'headline prices' fictitious, says Commission

Fictitious "headline prices" that do not include extra charges and levies could become common advertising practice if Air New Zealand is allowed to get away with it, the Commerce Commission has told the Auckland District Court.

The commission said Air New Zealand misled customers when it advertised cheap airfares without properly showing extra fees, surcharges and add-ons.

The airline is facing 20 sample charges of breaching the Fair Trading Act, after the commission says it broke the law in 355 newspaper advertisements, which ran between October 2001 and June 2004.

Commission lawyer Todd Simmonds, in his closing submissions, urged Judge Stan Thorburn to find that false representations could not be "qualified, corrected or cured by small or fine print".

To decide otherwise would "license the practice".

"The danger is that there is no end to the logic of how far this practice can be taken," Simmonds said.

Air New Zealand could not only separately disclose its insurance premiums and fuel surcharge, but other operating costs such as its wage bill for pilots, maintenance costs or catering bill.

If this kind of separation was allowed, just so long as the costs were disclosed elsewhere in an advertisement "then businesses can deliberately, and will with impunity, adopt that practice and quote attractive headline prices which are essentially fictitious".

This was hardly fair trading, Simmonds said.

Earlier in the day, Air New Zealand lawyer Nathan Gedye questioned University of Otago marketing professor Sarah Todd about her knowledge of consumer behaviour.

She said the advertising in question was designed to encourage "impulse travel". In the past, people had spent a lot of time planning their travel, but recently travel had become much more common and many people "now undertake it with little or no planning".

It was simplistic to categorise, as Air New Zealand's witnesses had, air travel as a "high involvement" decision, because this depended on the person buying.

The airline is trying to show the court that consumers take time to research travel, so were not misled by advertised headline fares. It also says people are aware of the extra charges and fees, so they should come as no surprise.

The commission claims the advertisements were false, because no ticket was ever available at the "headline price" given prominence in the newspaper advertisements.

Air New Zealand's legal team is due to start its closing submissions in the case later today. Any decision is likely to be reserved.

If convicted, Air New Zealand is liable for a fine of up to $100,000 for most of the charges and a further $200,000 for the 126 charges relating to advertisements that ran after July 2003, when the maximum fines were raised.