Julian Knight: It's right to investigate airlines' levy on credit cards, but it'll cost us
Sunday 05 June 2011
The cost to the airline Monarch of ditching debit-card fees could be higher than you'd think.
The carrier has decided to break ranks with the industry and do away with the levy in favour of a one-off charge on credit-card users.
Monarch's move has been welcomed by consumer groups and comes as the Office of Fair Trading (OFT) investigates the levying of booking fees on debit and credit card payments by the airlines. These fees, so often charged by the airlines, as well as entertainment venues, are completely over the top. A card transaction that in reality costs no more than a matter of pence is passed on to the purchaser in multiples of pounds. The OFT's investigation of this routine fleecing is long overdue.
However, what many people haven't picked up on is the potentially massive hole any OFT action against these fees will create in the airline industry's profits if card fees are banned or reformed so that they represent the true cost of the transaction.
I have been doing some back-of-the-envelope figures on this. Say a budget airline, lets call it Rilleyair, charges a card fee of £6 per ticket and flies some 70 million passengers a year. Now being ultra conservative, let's presume that 50 per cent of tickets come with a £6 fee attached, that's around £200m of extra income.
Now considering that nearly every penny of these charges – particularly for debit cards – is pure profit, at a stroke Rilleyair will lose a massive revenue stream. And in order to replace this £200m in profit, it will have to somehow increase its revenues by a couple of billion a year at least.
Personally, I don't care for Rilleyair's profits, particularly when they are in part built on excessive card charges. However, where I may come to care is when the airlines – and not just Rilleyair, they're nearly all as bad as each other – look to repair this huge hole, which I estimate could be as high as £1bn, in their profits. As with the banks, we will see the "waterbed" effect in action – basically, when you push down on profits in one area it pops up somewhere else.
Of course, the OFT shouldn't concern itself with this in its investigation, it needs to look at the arguments for and against independently, but if consumer groups get what they want it probably won't be long before passengers are hit with yet another unfair charge.
Co-operative care homes
At long last BBC's Panorama has abandoned its idiotic habit of having its programmes fronted by celebs – Peter Andre reports on Fukushima looked for a while a dead cert. It has got back to proper journalism and its programme on the abuses in a privately run residential hospital made difficult watching and rightly sparked a national debate.
It came in the same week as the financial mess at care home group Southern Cross finally hit the front pages. According to some reports, private equity took over the group and sold the freeholds of its properties – a favourite tactic of private equity – then rented the homes back using money received from local authorities for placing elderly people with them. But Southern Cross management got their numbers badly wrong and the group can no longer afford to pay its rent.
The two stories, although very different, are nevertheless linked by the ingress of the private sector into caring and regardless of what happens at Southern Cross or the residential hospital, this will not stop, in fact it's going to become more apparent.
The demographics are such – population growth and ageing combined – that there is no way that the public sector will be able to care for all. Millions of us will need long-term care and this will be in the private sector. And as most things in life, the quality and choice in the care you receive will be directly related to how much it costs. This underlines once again how important it is to save for what may seem a distant future as early as possible, unless you want to be left to the vagaries of the local authority.
One idea that friends of mine have discussed is to form a co-operative care home for the future. Basically, put away money to buy a place and then manage it until it's time to become a resident, so carers become their employees – rather than some faceless private equity company. It will be expensive, and no doubt a major challenge to set up, but it's surely better than being at the whim of companies such as Southern Cross.
I'm not sure what Stephen Hunt's bosses made of him running up an £11,000 debt in order to get his hands on some prime Olympic Games tickets and then going onto the Today programme to brag about it, bearing in mind that he is an insolvency practitioner. Nevertheless, Mr Hunt is undaunted, saying he's happy in the red in order to witness the London 2012 Games in all its glory.
It could have been worse for him – or better depending on whether or not you're his credit card company – he actually ordered £36,000 worth of tickets. I am only jealous of his chutzpah. I put in for £600 worth of tickets, for what I thought were less popular events, and didn't get a single one.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Questions of Cash: What are my rights if my leak is caused by neighbours’ roofs?
Pension mortgages: 'The advice I was given was wrong and now I face losing my home'
Best savings rates are not all they might seem
The 10 Best money-saving sites
Mark Dampier: Maybe boom, maybe bust, but we'll probably just muddle along
- 1 Exclusive: Abusers using spyware apps to monitor partners reaches 'epidemic proportions'
- 2 Margaret Thatcher 'expressed fears of Asian rising' at Anglo-Irish summit in 1984
- 3 Top 10 travel destinations for 2015: From Haiti and Alaska to Namibia and Iceland
- 4 The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
- 5 The Unluckiest People of the Year 2014 (and one very unlucky giraffe)
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Rozanne Duncan: Ukip expels councillor for 'jaw-dropping' comments made in BBC TV interview
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Immigrants make UK racist, says Ukip councillor Trevor Shonk
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
iJobs Money & Business
Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...
Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...
Not specified: Selby Jennings: SVP Model Validation This top tiered investment...
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...
Day In a Page
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens