More thoughts on SQ’s new credit card surcharges

[Update: SIA has reversed its decision and will not be levying credit card surcharges]

So, yesterday was fun. SQ announced its plans to levy credit card surcharges on certain types of tickets. I voiced my strong disagreement. The article was picked up on various platforms. The site got overloaded and went down for a while (methinks another server upgrade is in order). Man, who needs to feud with influencers?

There are some who took exception to the use of the word “disgrace” in my original article, believing it was an overreaction to what they saw as a small, limited impact fee. I’ll get to that in a minute, but there’s one point I think necessary to highlight: when I wrote the original article, SQ’s website was ambiguous about the surcharge, saying that it would apply to “certain fares”.

It was not until later in the day that SQ updated its site to clarify that only economy lite fares would be subject to the surcharge.

I have to admit that when I first wrote the article I was using the working assumption that all fares would be subject to this 1.3% surcharge, as was the case in Australia, for example. That would indeed be disgraceful, given that surcharges are hardly the market practice in Singapore (unless of course you’re benchmarking yourself to a budget airline…)

But given that we now know the surcharge only applies to the cheapest economy fares, does my conclusion change? I thought about it long and hard, and my answer is no. I still think it’s wrong for SQ to impose this fee, and here’s why.

But it’s only 1.3%…

Let’s ignore for a minute that a credit card surcharge goes against the terms of service of Visa and Mastercard. Let’s also ignore that levying a credit card surcharge is conceptually the same as asking customers to pay a “cashier surcharge” in a grocery store to cover what should rightfully be the firm’s cost of doing business.

There are some who believe the whole hoo hah is much ado about nothing. Mark from The Shutterwhale is of the opinion that a 1.3% fee is “insignificant”, given that the base fare for economy lite is low,  the fee paid will range between $1.79 and $13.36 and there are multiple ways of avoiding it.

Now, I have nothing but respect for Mark, but I disagree with him here. Mark is taking a utilitarian point of view, arguing that the fee, in the grand scheme of things, “isn’t a lot to pay since you’re already saving quite a bit on your tickets” (do have a read of his full article, the last thing I want is to take him out of context). I see this as a matter of principle more than anything else. In my mind, there’s a very big difference between discriminating in product and discriminating in payment. 

When SQ announced its fare bucket changes, I didn’t like that they took away free seat selection for economy lite passengers. However, I could still understand the general concept that customers who buy a more expensive ticket (economy standard, flexi) should enjoy certain incremental benefits (even if those benefits arose by virtue of removing the benefits of others rather than adding anything).

What I don’t understand is why someone who buys a cheaper ticket should be subject to an additional fee when paying for said ticket. The product you buy shouldn’t have any effect on the value of your payment medium. So I’m buying a cheaper economy fare. Why should my mode of payment be worth 1.3% less than someone who buys a more expensive one? I mean, how is that any different from going to a restaurant, ordering the cheaper steak and finding out later that those ordering the cheaper steak need to pay a credit card surcharge?

Therefore, to those who say “it’s only 1.3%, don’t get your pantaloons in a twist,” I’d just as soon flip that argument and say “yes, it’s only 1.3%. So why pass that on to the customer?” Let’s be honest and call this for what it is- a cynical attempt to get customers to pay for what should rightfully be the firm’s cost of doing business, done by a company which knows it can get away with it.

Where does it end?

As expected, the interweb is abuzz with very angry people blaming everything from corporate greed to “the 70%” (yes, that actually happened).

Perhaps it hurts the brand a bit, but I honestly don’t think that this, in and of itself, will cause customers to desert SQ in droves. But then again, that’s exactly what I said about charging for seat selection.

The question then is- where does this unbundling stop? Voices out of Airline House suggest that that SQ is exploring all avenues to “optimize revenue” and “rebase cost”. What comes next? Baggage charges? Buy on board? Logically, there must come some discrete tipping point where even the most die hard of SQ loyalists make the switch to other airlines. I don’t know where that is, but SQ seems eager to test the boundaries.