Freedom Air fined for misleading ads

By CHRIS DANIELS

Air New Zealand subsidiary Freedom Air has been ordered to pay $10,000 for misleading customers, revealing wider Commerce Commission scrutiny of airline advertising.

At the heart of the consumer watchdog's probe is the contentious practice of separating out charges, such as insurance premiums and official levies, from advertised prices.

Both Qantas and Air New Zealand exclude these charges - which can add up to 16 per cent in some fares - preferring to direct consumers to fine print for the true cost.

Air New Zealand said yesterday that it had handed over details of pricing to the commission, but described the process as an "information-gathering exercise", not an investigation.

Qantas also said it had had discussions with the commission.

Freedom Air has admitted in the Auckland District Court eight charges of breaching the Fair Trading Act, after failing to properly disclose the true cost of air travel in its newspaper and website advertising.

While pleading guilty to the charges, Freedom general manager Wayne Dodge said the breaches were inadvertent and the airline should have been notified, not prosecuted.

Airlines began the practice of separating out insurance and Civil Aviation levies after September 11.

The commission was "close to finalising investigations into other airline companies for similar breaches," said Fair Trading director Deborah Battell.

Freedom Air had said that it was "obliged" or "required" to collect an insurance levy.

This was not true, because the levy was not imposed by any regulatory body and was a normal operating cost for all airlines, said the commission.

Air New Zealand and Qantas both put an asterisk on their websites next to advertised fares, which alerts consumers to smaller print beneath.

This describes up to $9.80 of extra charges and fees that are not included in its headline fares.

Origin Pacific, which services many of the smaller, provincial centres, includes all extra charges in the ticket prices.

Air New Zealand spokesman Mark Champion said the airline "had been in discussions" with the Commerce Commission about inclusive pricing.

He said the airline would like to work with the commission on the issue.

"We are just still waiting to hear back from them on whether they want to take this approach," he said.

Champion referred to the way the Australian Competition and Consumer Commission had worked alongside airlines across the Tasman.

He agreed that the separation of airline charges would not be allowed by Australian regulators.