Airline 'tax' pays big premiums

By JAMES GARDINER

Air New Zealand is hitting its most loyal customers and the country's 1.8 million Fly Buys cardholders in the pocket, saving itself millions of dollars in the process.

The national airline has tried to deflect blame for new charges imposed on tickets on to its 82 per cent owner, the Government, as well as the Civil Aviation Authority and international terrorists.

But this week it admitted that a so-called terrorism tax it has added to domestic airfares is not a new tax at all - and nor is it doing anything to counter terrorism.

The attacks of September 11 have enabled the financially struggling airline to transfer millions of dollars of its liabilities onto holders of its own air points scheme as well as the Fly Buys programme, which is used by six of every 10 New Zealand households to gain points by shopping at participating retailers.

For the first time since the air points and Fly Buys schemes were set up more than five years ago, members are having to pay cash - at present $22.30 for every return flight - on top of using their points to get "free" flights.

So much misinformation surrounds the charge that even the airline staff and Fly Buys operator Loyalty NZ do not appear to know what is going on. Inquiries by the Herald have established:

* Most of the $22.30 ($18) is to cover additional premiums Air NZ has to pay to its insurer since the attacks, but the airline is pocketing 55 cents from each transaction.

* The other $4.30 is an existing levy that helps fund the CAA but that levy is not new and has not increased for years. Until November 1 it was built into the ticket price.

* The Government is making an extra $1 in GST on every transaction, equivalent to more than $6 million a year.

* The charge is due to increase to $27.90 in April, when the Government introduces the real "terrorism tax" of $5.60 return for large aircraft only, to pay for security screening.

By calling the charge of $22.30 per return flight a terrorism tax and describing it as a travel tax on its website, Air New Zealand has for the past four months given the impression that the money is going to the Government for new security measures.

In October Air New Zealand claimed it was "now no longer in a position to absorb the cost of the [CAA] levy. Approvals have been received to make the levy fully transparent".

Asked who gave the approvals, Air NZ spokeswoman Rosie Paul said it was the CAA, but authority spokesman Bill Sommer said that was not true.

Mrs Paul refused to say how much was being saved by making air points customers pay the CAA levy in cash and by the increase to overall ticket prices for other customers.

Nor would she say how much extra had been collected in extra insurance levies.

Air NZ previously had $US2 billion of war or terrorism cover. Its premium was based on $US1.25 per passenger per trip for that, which it built into airfares. It now has to pay $US3.10 for half that cover and the Government agreed to underwrite the other $US1 billion.

At present exchange rates, $US3.10 equals $7.55 but Air NZ converts that to $8.

* james_gardiner@nzherald.co.nz