New DOT Consumer Protection Rules Are Virtually Meaningless

New Department of Transportation ‘consumer protection’ rules went into effect on Tuesday, and they don’t amount to much — mostly codifying practices that are already in place, and imposing penalties for things airlines rarely do. A very small number of people will be better off, others will be worse off.

Kathleen Pender of the San Francisco Chronicle quotes my bottom line: the rules

“won’t change the travel experience for the vast majority of passengers,” says Gary Leff, co-founder of Milepoint.com

Major components of the new rules are:

  • Airlines will be required to disclose more of their fees clearly on their websites. I struggle to find many examples of airlines that don’t already do this. Besides, while transparency is appealing it’s not clear that greater information influences consumer behavior, travel is complicated already and it’s not always obvious what the right information or the right amount of information to give people actually is. That’s not an argument against disclosure, which happens already, just a suggestion that it’s hardly the panacea that’s often suggested.

  • Beginning next year, airlines will be required to offer either 24 hour courtesy holds or the ability to cancel a reservation without penalty for 24 hours after ticketing. That’s something that most US carriers offer already, and have offered for at least ten years. American’s website will let you hold an itinerary for 24 hours online. Other carriers like Continental have been experimenting with longer hold times for a modest fee. Book a ticket on Expedia, and with most carriers they will void your ticket within 24 hours — even though you haven’t booked directly through the airline. United has long offered 24 hour courtesy cancellations, both on paid and award tickets. Some of the smaller carriers do not offer this, and interestingly then this requirement imposes legacy airline practices on upstart discounters. Not always a good thing. On the whole this does little because it puts in place a rule that airlines do what they already do. At the margin it imposes costs on niche players. An odd thing to trumpet.

    • If your checked bag is lost (though not if it’s delayed), an airline will have to refund checked bag fees.

    • Scott McCartney explains the new involuntary denied boarding compensation rule.
      Passengers who are involuntarily denied boarding even though they have a ticket will get significantly more compensation from airlines under the new rules. If the airline can’t get you on another flight within two hours for domestic trips and four hours for international flights, you will now be entitled to cash compensation of four times the value of your ticket up to $1,300.

      …The compensation for bumped passengers is calculated off the fare for that particular flight, not your whole round-trip.

      Higher involuntary denied boarding compensation may well be appropriate, though I honestly have no idea what the ‘right’ amount is so would just assume leave that to airline-by-airline policies. But an important point is certainly that higher involuntary denied boarding expense means airlines may tend to overbook less. When passengers still no show, that means seats going out empty. Marginally lower load factors may mean marginally higher average ticket costs. There ain’t no such thing as a free lunch. And of course very, very few people are actually every involuntarily denied boarding, most denied boarding situations are negotiated in exchange for compensation.

    • The tarmac delay rule extends to international flights departing the US, whether operated by US or foreign airlines. Delays exceeding four hours incur penalties of $27,000 per passenger. The domestic three-hour rule has meant more flight cancellations. Whether that’s a good thing or a bad thing will be an opinion varying by passenger — some just want out of the plane, others just want to get to their destinations. Not always an easy thing to get rebooked, either, in an era of full flights. And for international flights which lack significant frequency, more cancellations may be devastating to passengers’ ability to get where they’re going. And of course it is very, very rare that such a long delay is actually the fault of the airline — which really does want to get passengers where they’re going, not sit on a tarmac. Weather may make it impossible, sometimes impossible even to return to a gate. Sometimes government security or customs employees may not be around to process passengers. Airports and governments are at least as responsible as airlines in these situations, and yet it’s the airlines that get fined. Again, not necessarily a good or a bad rule, there are tradeoffs, but certainly not unambiguous that passengers are better off as a result.

    All in all lots of sound and fury, some likely unintended consequences, but three and six months from now your travel experience is highly, highly likely to be exactly the same as it is now, despite bluster from the Department of Transportation.

  • About Gary Leff

    Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community Milepoint.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

    More articles by Gary Leff »

    Pingbacks

    Comments

    1. Count me in the camp for one wanting all fees displayed. I often find myself googling airline free baggage allowances etc, when not flying my usual carrier.
      Out of scope here but I also, much preferred when UA showed a full price in the fare search.
      Otherwise don’t have an opinion on other points. Kind of like “Not Applicable” most times.

    2. Gary,

      With respect to the IDB issue, I do believe the airline should pay out the nose. I contract with them to get me on a particular flight to my destination, although I realize I they don’t promise to get me there at a certain time. It’s one thing for a flight to be delayed or canceled, but there’s just something very wrong about a flight leaving me at the gate when I have a valid ticket and presented myself in the boarding area when I’m supposed to.

      Airlines offer VDB credits of some sort in an effort to solicit volunteers. If they don’t get any/enough takers, that’s when they have to resort to IDBs. If they’ve had to resort to them, passengers have said, “we really don’t have flexibility in our travel plans today. We *have* to get there.” And then the airline should pay significantly, because it causes significant disruptions in people’s plans. I mean, should the airlines be able to oversell on Thanksgiving Wednesday, say that flights are booked up until Friday, but here’s $400 for missing your turkey?

      That said, if IDBs are really so rare, then they can afford to pay out increased compensation, and it would have little impact on their booking models. If that’s the case, it won’t have an impact on fares.

      Checking the web real quick, the industry rate in 2009 was 1.19 IDBs per 10,000 passengers. Using the maximum of $1300 per IDB listed in your post, that means that the average passenger paid a whopping $0.15 per ticket in IDBs. That’s not going to impact booking models, nor have a material impact on my ticket fare. The airlines overbook in order to provide me a lower fare — I’m fine with that. In exchange, if I’m left behind, I’m left with nothing, or I can pay fifteen cents per ticket for a $1300 payout if I get IDB’d. I’m fine with those odds. (I’d have to take 8667 flights before I would be better off without having paid for the “insurance” for getting to my destination. That would be one round trip per week for 83 years.)

    3. Hopefully we will see increased VDB offers, or offers to fly you on a competitor but including VDB comp. On a few occasions lately I have experienced gate agents offering VDB comp which really didn’t appeal given it meant flying the following morning. United occasionally has 30+ oversells in the case of plane changes, so this could get expensive for them…

    4. The problem I have with most airlines VDB vouchers is that they will not give you a residual voucher. So for someone who frequently purchases one way tickets that really reduces the value of any voucher.

    5. So, for involuntary bumping of a passenger on a ‘FREE’ award ticket, is any compensation actually required?

    6. Answering m henner first: yes, the new rules require compensation, though only based on the lowest coach fare. More on that below.

      There’s a chance that higher IDB limits will put pressure on airlines to raise VBD compensation, and VDBs are far more common. On the whole, that’s probably a good thing, though I hear the “no free lunch” argument.

      They didn’t fix my biggest pet peeve with the IDB rules: the compensation isn’t just based on your one-way fare, it’s based on your REMAINING one-way fare. If you’re flying SFO-CLT-BOS and they get you to CLT, the compensation will be much less than if you were bumped at SFO, and there’s little transparency in how that’s calculated.

      As for award tickets: the “compensation based on lowest coach fare” decision rankles a bit — award tickets are usually refundable (with a fee), whereas lowest coach fares are usually non refundable. So award tickets are really a substitute for a higher fare bucket ticket. And premium awards with last-seat availability are more comparable to a B or Y fare. The DOT was told in response to the NPRM that it would be difficult to find comparable fares on which to base the compensation (do you know of any paid fares with last-seat availability and a $150 refund fee, comparable to a United Standard award?), and they should just set fixed cash compensation. The instead opted for the lowest compensation they could think of. Bad DOT. No biscuit.

    7. “The domestic three-hour rule has meant more flight cancellations.”

      Can you show us a study that actually shows this? Oh right, there aren’t any.

      And don’t just regurgitate raw data on flight cancellations, as if the DOT rule is the only reason flights are cencelled.

    Leave a Reply

    Your email address will not be published. Required fields are marked *