Positive Legacy of U.S. Airline Industry Deregulation at Risk
January 13th, 2012

Protracted Delay in Restoring Comparison Shopping of Air Travel Offerings Financially Harms Consumers

Business Travel Coalition is deeply concerned about the U.S. Department of Transportation’s just-updated rulemaking calendar, which delays by four months the publication of an airline consumer-protection Notice of Proposed Rulemaking (NPRM). This NPRM, now scheduled for publication on August 10, 2012, will address the availability of unbundled optional services (e.g., checked bags) and associated fees to agency and corporate sales channels, thereby facilitating efficient comparison-shopping for consumers.

With a variety of public comment, as well as DOT and White House review periods, absent a concerted DOT effort to expedite this rulemaking proceeding, it could be deep into 2013 before a final rule could be published. That assumes the process proceeds without further interruption or delay.

Regrettably, consumers will now continue to pay supra premium prices — billions of dollars in fees — for optional services because the inability to efficiently compare the total cost of air travel (base airfares and fees) on an apples-to-apples basis across multiple airlines guarantees that these prices will go undisciplined by the marketplace. In an economy with millions upon millions of families unable to pay their basic bills, this protracted financial exploitation by some airlines amounts to nothing less than a national disgrace.

The disciplining of airline pricing by consumers — enabled by highly efficient processes for comparison-shopping of air travel options — represents the single most important achievement of U.S. airline industry deregulation. Complete, accurate and unbiased presentations of air travel pricing — often made possible by DOT interventions — has for more than three decades intensified competition and democratized air travel for families for whom air travel had been financially out of reach, and only the province of the affluent.

Ancillary fees are presently hidden as consumers are blocked from evaluating optional services and fees in electronic side-by-side comparisons of all-in prices. Airlines refuse to provide ancillary fee data because there is apparently great profit in consumer confusion and undisciplined ancillary fees. What’s more, since 2008 — when unbundling greatly accelerated — even comparing base airfares has largely become a pointless exercise. Today, base airfares are distorted, as some airfares are all-inclusive while others are unbundled to varying and sometimes bewildering degrees with all manner of confusing ancillary fee schedules.

Because of November 2012 national elections, a four-month postponement of this NPRM unmistakably places the entire rulemaking process at risk of further delay or failure. A potentially new DOT Secretary in 2013 might choose, for example, to place a review-freeze on all pending rulemakings or to delay implementation of finalized rules. This would provide an opportunity for those airlines opposed to better consumer disclosure to pursue a well-financed, fresh-kill strategy aimed at permanently avoiding full ancillary fee disclosure at the expense of consumers.

BTC emphasizes that airlines currently have the wherewithal to eliminate prolonged consumer financial harm from hidden fees. At minimal cost, airlines could immediately provide ancillary fee data to consumers through an already developed, fully tested and ready-to-go Airline Tariff Publishing Company process. However, airlines to date refuse to do so, making the rulemaking essential.

Given the order-of magnitude of consumer harm, delay in the NPRM process and recalcitrance of airlines, BTC has three recommendations:

First, DOT Secretary Ray LaHood should immediately take steps to expedite the rulemaking process within the Department and also seek to reduce the White House Office of Management and Budget (OMB) review time.

Second, the U.S. Congress should direct DOT, through FAA reauthorization legislation, to require airlines to promptly provide optional services and ancillary fee data in an electronic and transactable format to all channels where individual airlines offer their base airfares for sale.

Third, travel managers at multinational corporations with substantial business travel activities in the U.S and the travel management companies that serve them should insist that their respective industry associations strongly represent their interests in this debate in London, Brussels, Washington and other important capitals.

Safe travels,
Kevin Mitchell
Chairman
Business Travel Coalition