Airlines Tell DOT They Want Consumer Protections Eliminated – There’s Little Reason for Alarm

Scott McCartney‘s “Middle Seat” column in the Wall Street Journal this week is on regulations that airlines would like to see repealed.

The Department of Transportation has virtually become consumers’ lone avenue of redress since the ability to sue airlines has been severely curtailed by the courts. When it comes to frequent flyer programs the DOT acknowledges it improperly ignores complaints.

The DOT though has asked what rules it ought to get rid of. Clearly some do make sense to jettison. For instance I think it’s time to eliminate 49 CFR 209 and 230, Inspection and Maintenance Standards
for Steam Locomotives
. Airlines “want the ability to use debit cards or electronic transfers” rather than having to use cash or check to pay involuntarily denied boarding compensation. That should be considered.

Airlines Want to Eliminate the 24 Hour Refund Rule

The Department of Transportation requires airlines to offer either 24 hour holds or refunds for tickets purchased directly from them at least a week prior to travel. Delta, American, and United all offer more generous refund policies than required. Under previous management American even offered 24 hour holds before the DOT began requiring it as one way to satisfy the rule.

Moreover prior to the rule online travel agencies could void most tickets purchased within 24 hours (there were a few exception airlines like AirTran where they couldn’t). That’s why I used to buy my tickets from OTAs rather than direct from airlines.

So it’s unclear how much it would matter if DOT complied with airline requests to eliminate the 24 hour rule.

What’s offensive though is that they also want the DOT to eliminate the rule which requires them to honor mistake fares. DOT already announced two and a half years ago that they were going to stop enforcing their own rule despite it remaining on the books.

However taken together this would mean that consumers are stuck with any airfare they purchase even if they realize immediately that they made a mistake, but that airlines could unilaterally cancel purchased tickets (and take more than 24 hours to do it) simply by announcing they’d made a mistake.

It’s precisely that disproportionality that the DOT is meant to address, and it’s the fulfillment of that role that helped the Supreme Court get to a place in Northwest v. Ginsberg to say the Airline Deregulation Act meant that consumers could go to the DOT and not offer state court claims.

We Should Revisit the Tarmac Delay Rule

McCartney writes, “If the airlines get what they want, the government would weaken the tarmac delay rule, which imposes hefty fines for stranding passengers on planes for long periods.”

About a year and a half ago I was on a Southwest flight from Oklahoma City to Houston Hobby that diverted to Corpus Christi due to thunderstorms. Southwest had a line up of diverted aircraft on the ground there, and the pilot announced the plan was to cycle each aircraft to the gate one at a time to unload passengers. We were the third or fourth plane in line and after two hours the first plane still hadn’t been pushed back.

As we approached three hours ground crew pushed up air stairs and let us off, something they could have done at the outset — but without the tarmac delay rule I might still be sitting on that plane. All’s well that ended well thanks to trip delay coverage from my credit card. I rented a car and drove home from Corpus Christi rather than waiting to fly to Houston hoping to make the last connection to Austin.

Most of the time though fines are levied against airlines for incidents that are the fault of the airport or the government itself (lack of security or immigration staff). And I’ve been on flights out of New York that are delayed far longer than three hours because of the de facto requirement to return to a gate and let passengers off (even when no one wants to get off).

It makes sense to revisit the regulation based on experience, even if it may not make sense to eliminate it entirely.

Suggesting Rules Be Eliminated Doesn’t Mean Rules Will Be Eliminated

Reaction to the Journal piece amongst many readers has been alarm. However of course when the DOT asks what rules should be eliminated airlines will respond with their Christmas list.

Mere suggestion doesn’t put elimination into a Notice of Proposed Rulemaking — which would then allow for public comment and DOT consideration. And much of what goes into a Notice of Proposed Rulemaking never makes it into a final rule promulgated by the agency.

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 InsideFlyer.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 »

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Comments

  1. The “Tarmac Rule” was dumb regulation and should be eliminated. Sure, in some cases it may marginally help customers, but in more cases, it hurts them — it prevents the airline from getting passengers to their destinations as quickly as possible. There’s absolutely nothing wrong with the DOT investigating — and punishing — absurd incidents where airlines screw up and needlessly trap pax on a plane, but that’s no reason to have the inflexible Tarmac Rule.

    I personally would much rather see the DOT focus on consumer protections when an airline cancels a flight and takes no reasonable steps to get you to your destination within 24 hours. This mostly affects less sophisticated air travelers who book on ultra low cost carriers — many of which have cancellation rates approaching 5 percent. Given current regulatory trends, though, I’m not optimistic these travelers will gain such protections, and will have to find out for themselves the potential downside of flying on airlines that value cost over reliability.

    I also see nothing wrong with repealing regulations that require airlines to honor mistake fares. No other business is required to honor mistake pricing, and there’s no logical reason to force airlines to do so. It’s simply not fair — even if I, potentially, can enjoy a windfall benefit from it. On the other hand, it would seem very fair to require airlines to honor all fares after a reasonable waiting period. I would suggest 3 business days as fair.

  2. One thing to keep in mind here is we’ve got an administration that is extremely anti-regulation. I’d argue it’s much more likely that the airlines will get their wish list fulfilled, even if the moves would be very anti-consumer, because the administration has shown such behavior repeatedly (the changes at the CFPB is just one obvious exmaple).

  3. Airlines is playing a game, and it’s not what their intentions are.

    There is a lot of good regulations that can be mandated for example Eliminating Fuel Surcharges, Honor Mistake Fares, put some pressure on Reward programs and list goes on. This is in addition to what already there.

    But instead of DOT enforcing new rules, they are spending their efforts fighting Airlines who wants to remove old once, hence new possible regulations never looked at.

  4. “I also see nothing wrong with repealing regulations that require airlines to honor mistake fares. No other business is required to honor mistake pricing, and there’s no logical reason to force airlines to do so.”

    @iahphx–Many businesses are forced to adhere to advertised prices! That is wat our consumer proection laws are designed to do: prevent bait-and-switch tactics. Otherwise, practically any business can and will (as proven time and time again in courts) resort to bait-and-switch, claiming the advertised price was a mistake.

  5. “No other business is required to honor mistake pricing…”

    Untrue at 2 levels. 2 examples (1 general as anecdote, 1 specific at a state level).

    First, if a store sells me an item at $1 that they meant to charge $10 for, once it’s done its’ done. The store cannot either come to my house and repossess the item, pull money form my bank account, or charge my credit card again. I’d argue that once you’ve purchased the mistake price fare and made plans then you are in a very similar boat to a retail store that sold you something that you left with.

    Second, many states have laws requiring stores to honor advertised prices. Specifically, California has a well known code that states, in part, that no one can “…charge an amount greater than the price, or to compute an amount greater than a true extension of a price per unit, that is then advertised, posted, marked, displayed, or quoted for that commodity…” (California Business and Professions Code 12024.2). The code (including other provisions) in whole covers most instances, meaning if you advertise it on the shelf or in the paper you have to honor it until corrected.

    Making this a fully one-sided situation, where consumers lose price protection but airlines get unlimited mistake protection (and maybe give up the 24-hour rule) is very bad for consumers at all levels.

  6. For instance I think it’s time to eliminate 49 CFR 209 and 230, Inspection and Maintenance Standards for Steam Locomotives.

    Are you proposing that the remaining steam trains operating in the US not be subject to maintenance standards? If so, why not remove the same requirement for airlines?

    So it’s unclear how much it would matter if DOT complied with airline requests to eliminate the 24 hour rule.

    I fail to see what you’re basing this statement on – is it the fact that airlines offer a bit more flexibility than the rule strictly requires? Because a request to remove the rule cannot be seen as anything other than an intention to not abide by the requirements of the rule in the future.

  7. I kind of hope the DOT eliminates the tarmac rule and then passengers are forced to stay in an aircraft for 8 hours and it blows up in everyone’s face (Trump + airlines)

  8. @Vet&Banker — Name me a single instance outside of the airline industry where an online seller was required to deliver a product that was purchased at a mistake price. Rescission is always allowed.

    Look, everyone, including me, loves a bargain. But if you were running an online business — much less one with tens of thousands of constantly changing prices — would you want to be required to honor every pricing mistake? And in the internet age, where a pricing mistake can instantly be broadcast to hundreds of thousands of greedy buyers, would you want to have to honor the mistake for that horde?

    I find it a very valuable skill to be able to put aside one’s own personal gain when trying to determine appropriate public policy. Try it sometime.

  9. I agree with Iahphx, airlines should not have to honor mistake fares, provided that the airline has to honor the fare if they do not retract it within a reasonable period of time. However, I think the 3 day period lahphx mentioned is too long. I think 24 hours is more reasonable.

    Moreover, there should be some protections against airlines changing normal airline fares within the “mistake window”. For example, if I see a roundtrip JFK-LAS ticket for $200 when other airlines are selling for $350, I am assuming it is not a mistake, because often there are $200 fares between those destinations all the time. However, it is $2, then it is clearly a mistake. I do not think the 24 hour window should apply to the $200 ticket but should apply to the $2 fare. Not sure how one would police that.

  10. Who’s to say the airline could just pick my $400 domestic fare for a flight 6 months from now and say “Oops, that was a mistake fare” the day before I fly and either cancel my ticket or force me to pay the full fare differential at the gate?

    Believe me this will happen.

  11. @KeninDFW — Gary would do a 12-part series on this type of event, and the coverage in the rest of the media would be similarly blistering. And there’s still access to the judiciary if an airline tried to pull off such a thing.

    Honestly, though, the problems you will have with airlines typically involve confusion and, sometimes, stupidity (which tends to be an endemic human trait). Outright thievery by airlines is extremely rare.

  12. @iahphx “Outright thievery by airlines is extremely rare.”

    I’d argue that the never ending devaluations to airline loyalty programs and the monthly airline points “sales” are as close to thievery (or at least attempted thievery) as you’ll get.

    The airlines give the impression that their miles & points will give you the earth while, in a lot of cases, they’re worth about as much as Enron stock option.

  13. @KeninDFW — Air New Zealand cancelled our flights to Auckland just 8 days before I was to depart claiming it was cheaper than they meant to advertise. Stated publicly it was 10% of the number they meant to price it. Total lie because now on Facebook app I’m getting slammed everyday with Air New Zealand ads at prices just a bit higher than the ones we booked but includes ALL the way on to Sydney.

    My cynical guess: they oversold and needed to offload some passengers on my particular day. A call, an email, and a submitted complaint all had zero response from them on the $400 cancellation fee I think they owe me to cancel that late in the game.

  14. Iahphx said: “I personally would much rather see the DOT focus on consumer protections when an airline cancels a flight and takes no reasonable steps to get you to your destination within 24 hours.” I total agree with this. And I do not think that weather should be an acceptable excuse. WTH, there is ALWAYS a weather event somewhere in the USA or the world.

    Mistake Fare: If it is a mistake fare with no 24 hour grace period (I vaguely remember running into some non-domestic fares like that) and non-refundable, then the terms should be bilateral. That is, such a ticket is per se considered a non-mistake fare.

    Tarmac Rule: Although I belong to the economic religion that is against regulations, I think the tarmac rules are a really good idea. It was not so long ago when really really ….really long tarmac delays were common.

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