The Department of Transportation has had a lot of potential rules for how air travel should work on its docket. And it made a big announcement which doesn’t amount to very much. Fortunately.
Two years ago the Department of Transportation closed the public comment period on proposed airfare pricing transparency rules.
- The DOT was looking for ways to require all booking sites to display a single uniform set of information about fees (and couldn’t customize this to individual consumers, based on the type of trip they were taking, and whether or not they had elite status). That would have ended innovation from companies like Google who are working to customize travel information and bring relevant advice to consumers.
- It would have also created real problems for opaque booking sites, ending businesses like Hotwire as we know it.
- The original version of the proposal even suggested ‘popups’ for fees, completely ignoring how consumers are buying more and more travel via mobile (which doesn’t really do popups).
- They were also proposing that any site displaying airline schedules disclose when airlines weren’t included in the display (free advertising for Southwest), to alter how airline fee data is provided to online travel agencies and through computer reservation systems, and to change the rules around mistake fares (they’ve gutted those protections pending a new rule). There were other suggested actions as well.
So what did the Department of Transportation actually do? Effective January 2018 they will:
- Require airlines to report their on-time performance inclusive of that of their regional carriers. So Delta’s on-time performance will be affected by regional airlines. Here the big work, it seems to me, needs to simply be adjusting the forms airlines are required to use — as it stands form 41 data doesn’t really make it possible to identify the regional carrier and the major airline(s) they’re flying for. In addition, more airlines (such as Allegiant) will have to report on-time data.
- Require refunds of baggage fees when bags are substantially delayed. This is the most helpful, though limited, step that DOT is taking. Which underscores how minor these new rules really are. And they haven’t even decided yet what constitutes a substantial delay so implementation of this one could take longer.
Of course they could have actually done something helpful to consumers such as revising their rule about one checked bag fee having to apply to an entire customer’s journey, so when customers are flying more than one airline the carriers must split the fee which is why airlines are so often now unwilling to through-check bags on separate tickets forcing passengers to go to baggage claim, wait for bags, re-check them and re-clear security. But that’s not even on the DOT agenda.
DOT is also changing the denominator airlines have to report on from bags lost or delayed per passenger carried to per bags accepted. The goal is to normalize across airlines based on the number of bags they check.
- Require disclosure of ‘display bias’ in airfares, so sites with a relationship to an airline or better financial incentives from one airline will have to disclose if they’re biasing their flight search to that airline.
- Require reporting of how often they mishandle wheelchairs which no doubt is very important to people who travel with wheelchairs.
They haven’t given up on fee disclosure issues yet, they’re just not doing anything about it yet. The challenge which I identified in the regulatory comment I submitted is that you really want online travel agencies competing and innovating to replace the guidance that was lost from a real travel agent when online travel booking went online. And there’s early stages where that’s happening.
You want guidance for the average consumer like, “should I take this connection through a particular city in winter?” But if you require all sites to display the exact same information the exact same way you shut down innovation.
And if you require consumers to sift through information that isn’t relevant to them you make the purchase process more confusing, not less confusing.
This area of regulation contains the greatest risk of creating far more consumer harm than good, so I’m glad that DOT hasn’t yet taken action here — although they’re threatening to. Of course airline fees are already on airline websites, and I’ve yet to find an airline consumer who doesn’t know about checked bag fees (indeed, it’s precisely awareness of these fees that make them so unpopular.)
Up next from DOT: Rules for travel agents that would require them to offer refunds within 24 hours of purchase, the way airlines generally do and to require “all companies that market air transportation” to be subject to the same consumer protection rules. Of course, the devil here is in what constitutes marketing of air transportation, and may even include search displays (like Expert Flyer!) and not just sales.
So how many taxpayer dollars were spent on this? This seems like regulation for the sake of regulation. I guess we can’t trust the free market to deal with these mundane commercial matters.
We might as well cut to the chase and have the DOT develop their own website for booking airfare the “right” way. Using DOT’s logic, customers will flock to it and put the other booking sites out of business. (sarcasm)
@Pat I think the argument is more of a behavioral economics thing, consumers don’t know what’s best for them but regulators are enlightened.
@ Gary – the thing is, that the majority of consumers agitate for exactly this kind of regulation. Those of us who have worked in the industry may have more expertise, but when a customer pays $35 for a checked bag and then don’t receive it at the other end, they have every expectation to receive a refund. My experience with the airlines that they have, in the past, refused to provide it without lots of phone calls and run around.
If the airlines would stop moaning about regulation, and institute more customer friendly policies on their very own, the complaints would be reduced. Until then, the DOT is will continue to respond to customer complaints because, as unusual as it seems these days, their responsibility is primarily to us.
(I am reminded of the President’s comment yesterday to one Presidential candidate, to stop whining about losing before he’s lost, and go out and actually get some votes).
The problem is that DOT has to “show”, a.k.a pretend, that they have done something, given that they are funded by public money. Yet all the professional politicians at DOT can’t make any material pro-consumer changes because that will upset their corporate overloads who pump in large amounts of lobbying money.
This won’t go anywhere, I will be very surprised if anything remotely useful to consumers will come out of DOT.
Government is how we organize our civilization. The strong antipathy to government in the US comes from destroyers of civilization, often wealthy pirates who want to lord wealth over everyone else while living in guarded communities and using the police as their own private army and summary execution squad. But they don’t have enough votes to do this without duping a large percentage of know-nothings to vote against their own economic interests, using red-meat racial and social issues to attract them like shiny objects to baboons, and promising no-taxes while they actually shift the tax burden entirely onto them while shipping their jobs overseas. This is why they teach in the other nation’s schools that the American redneck is the stupidest creature on the planet, and the greedy American right is the greatest threat to world civilization. All hopes lying in the scam finally blowing up in their face, possibly next month.
@Greg — thanks for the manifesto.
But, really, it’s all a question of how much money we want to spend on government to tell us what’s best for us. There’s no real question that overall societal wealth is maximized by a government strategy of “minimum essential” — doing the minimum necessary to meet its citizens’ basic needs. Anything above that — things done for “fairness” and “equity” — involve transactional cost. There is no large government in the world that operates efficiently. They can’t — just like communism can’t produce greater societal wealth than a free market economy. So you can use government to transfer money from wealthy people to less wealthy people, but that’s going to reduce the size of the overall pot — and an entire class of government bureaucrats are going to skim a portion of the wealth transfer to put in their own pockets.
It just depends on what you want. But I think most people would agree that “regulation for the sake of regulation” — which is what the DOT is doing today — is the worst kind of regulation.
@Joe — I agree with you that it’s good business judgment for an airline to refund a baggage fee if they don’t actually deliver the bag to you upon arrival.
Should the law require such a refund? I don’t think it’s particularly harmful — unlike regulations related to the booking process than could limit innovation — but is it necessary regulation? Like should the government require delivery services to refund their fees if a package gets delayed? Beats me.
There are so many other issues that I think the DOT should address.
1) Airlines advertise prices that you can’t book when you get to the payment screen
2) Airlines that show award availability that isn’t available
3) Airlines that advertise “First” class seats, but really sell you an economy seat that upgrades to first.
4) Airlines that provide little support for delays and cancellations. Rarely do customers get much for delays, and yet most tickets are so inflexible that a change or cancellation costs almost as much the original ticket.
@iahphx — If airlines were banned from lobbying Congress and the DOT we would be spending less money on government and get regulation with real teeth, addressing both your concerns about cost of government that this incremental improvement is you typify as “regulation for the sake of regulation”.
While I would highly welcome such a regulation banning airlines from lobbying, many wouldn’t. So we end up with this broken system where it’s expensive and extremely time consuming to codify common-sense things such as refunding a fee for a service that was not provided.
Airlines in 2015 spent $25 million in declared lobbying, plus probably just as much in “soft” lobbying. Those numbers are absurd, and we pay for them in our airline tickets. Source: https://www.opensecrets.org/industries/lobbying.php?cycle=2016&ind=T1100
Finally, without the DOT issuing “regulations for the sake of regulation”, we would not be offered anything for being bumped, we would be repeatedly trapped on the tarmac, airlines ask for additional payment after we bought a ticket (because fuel, labor, or whatever got to be more expensive), we would not be able to cancel a ticket if we realize within 24 hours that we made a mistake (such as picking the wrong date), we would have no clue whether schedules are real or built in a way that flights never arrive on-time, etc. These were all practices that were prevalent at one point or another.
Notwithstanding Gary’s repetitive and constant criticism, baby steps are far better than no steps.
@iahphx – I mostly agree with your analysis. But the answer to your questions – “Should the law require such a refund?” and “is it necessary” – is that it’s only necessary of the airline can’t self-regulate and fundamentally do the right thing, which seems to be the case. I can’t imagine the DOT made up this rule if no one complained that they were being fleeced – and to charge you to put your bag on a flight WITH you, and not have it arrive WITH you, is basically a failure to provide the service paid for. Or, in less charitable language, a con.
In the case of the airlines, the contract of carriage is entirely in their own favor. They don’t need to provide you anything but a seat from A to B (regardless of the arrival date or time), or a refund if they can’t give it to you. When you have boarded a flight, however, and paid for the checked bag, there is an implicit guarantee that it is coming with you and arriving with you. Otherwise it would be called “freight”, and you would send it UPS.
@Pat— It’s pretty well known in economics that free markets can’t exist without a certain type of regulation that makes them thick, safe, and uncongested. Alvin Roth won a Nobel prize on this, and a summary can be read at https://hbr.org/2007/10/the-art-of-designing-markets
PS – remember the argument (repeated a lot on this blog) that consumers would suffer endless cancellations if the airlines were forced to limit their tarmac time? Does anyone today, based on actual outcomes, REALLY think that regulation was a mistake or detrimental to the consumer?
The airlines in the United States are profitable, and fares a low. These are good things. But the reality is that the airline industry has never been deregulated; it has, in fact, been poorly regulated. Both the government and the airlines are to blame for that.
But do I trust the airlines to do the right thing by their customers without a stick being waved at them? Have they ever?
> Of course they could have actually done something helpful to consumers such as revising their rule about one checked bag fee having to apply to an entire customer’s journey.
There is no such DOT rule. The rule is that the checked bag fee for the return needs to be the same. They can’t charge you $25 on the outbound and hit you with $150 on the return; the two fees need to be identical, but they can be whatever the airline wants (e.g. $25 if flying one airline or $50 if connecting to a different airline) See https://www.law.cornell.edu/cfr/text/14/399.87
The airlines’ decision not to allow through-check bags on separate tickets has nothing to do with a (nonexistent) DOT rule: it’s yet another money-grabbing move by the airlines that want you to buy a single, more expensive, ticket as opposed to you buying two tickets on cheaper and non-combinable fares.
Ironically, only a new DOT rule would reintroduce this benefit. Which makes your criticism ridiculous.
Has anyone seen how the government regulates lawyers? CPAs ? CFPs They don’t that is because these groups took it upon themselves to self regulate and kick people out of the profession without the government telling them how to do it.
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Then there is the tarmac rule for the airline that the DOT did with a $1,000,000s of fines because the airlines did not take it upon themselves to regulate and become consumer friendly.
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Now there are going to be regulations on bag fees because the same airline does not know how to SELF REGULATE!
Can not teach an old dog new tricks!
@Terry — If you are correct and the airline industry spends $25 million on lobbying (I’ve never read the number), that does not seem like a lot of money to me give the enormous size of the industry (AA alone has $40 BILLION in revenue), the regulatory issues they face and the general animosity of the public to their industry. I mean, when Alaska can’t even get the Justice Department to approve its merger with Virgin America, it makes me think they need to spend MORE money on lobbying!
@iahphx — the hypocrisy and contradiction in your comments is poisonous. Go troll somewhere else.