The Department of Transportation (DoT) has been rattling their saber quite a bit lately, handing out fines to a number of carriers and revising rules to better protect passengers, mostly under the auspices of enforcement against “deceptive trade practices” in whichever way the DoT chooses to interpret that clause. The most recent big-name actions coming from the DoT included notable fines for failure to comply with reporting requirements and insufficient notification of passenger rights when flights are overbooked. Oh, and the recently implemented 3-hour tarrmac hold time rule.
That was a pretty busy first half of the year for the DoT but they are not done yet. This week they’ve unveiled a slew of proposed rules changes to the rules. Most of the proposed rules appear pretty solid though there are a few which are questionable at best. Tarmac delay rule enforcement would be increased from domestic carriers to all airlines operating planes of 30 or more seats in the United States, for example. But beyond that change there are three significant areas that could see dramatic revisions in policies as enforced by the airlines.
Denied Boarding Compensation
The idea of permitting airlines to overbook flights and hope to have the correct number of passengers by the time the door closes is one that has been in effect for nearly 50 years, originally prescribed by the Civil Aeronautics Board way back when they ran the show for airline policies. Even after deregulation and the dissolution of the CAB the voluntary/involuntary denied boarding policies have more or less thrived. Passengers have often been willing to accept bumps and the airlines would pay out compensation either under the voluntary rules or the forced comp scheme of IDB as set by the Feds.
Unfortunately, however, the IDB comp is often not keeping pace with the economy or the changing landscape of air travel. The dollar amounts are fixed rather than tied to an annual adjustment rate such as the CPI. Moreover, there are some holes in how the compensations offers are presented to customers at the gate. Generally there isn’t much time to fully educate these passengers of their rights and the airlines have been taking advantage of this rushed environment to convince passengers to take company credit vouchers rather than cash or check compensation that they may be entitled to. Similarly airlines will offer a “free round trip ticket” without sufficient details of the restrictions surrounding those tickets. The DoT is suggesting that the rules be changed on this front such that any offer made verbally include all the options and details, not just the one that is best for the airline with the alternate options buried in fine print.
If a carrier offers free or reduced rate air transportation as compensation to volunteers, the carrier must disclose all material restrictions on the use of that transportation before the passenger decides whether to give up his or her confirmed reserved space on that flight in exchange for the free or reduced rate transportation.
Additionally, the DoT is altering the definition of what “confirmed reserved space” means with regard to denied boarding compensation. Currently “zero fare tickets,” those from certificates, frequent flyer points or consolidator shops where the actual price is not stored in the PNR, would not be eligible for denied boarding compensation. The DoT suggests that this be changed such that zero fare tickets are included. Determining the value of those tickets for the purposes of compensating the customer my be difficult as there is no good way to translate the value of points to dollars. One proposal is to use comparably priced tickets from others on the flight. Another is to simply refund double the number of points redeemed for the travel, plus the cash component paid for taxes and fees. Either way, this change will be good news for protecting folks on the “free” flights, tickets which are generally anything but.
Of course, increasing the compensation requirements may induce the carriers to reduce their overbooking thresholds. They overbook because they generally get enough volunteers to accept a voucher – and only about 35% of those vouchers are redeemed – to the point that they can still make money handing out the chits. As loads increase such that the airlines are less able to accommodate passengers on a re-route in a timely manner it becomes much less convenient for the customer to the point that a $200 or $400 voucher is less likely to solve the problem if it also involves a delay of a couple days rather than a couple hours. Hopefully this new set of regulations helps on this front.
Full Fare Pricing
The DoT holds a unique position in its ability to control pricing advertising rules over airlines. Neither states nor the Federal Trade Commission have jurisdiction; it is just the DoT. And for quite some time now the DoT has had a policy that
…states that the Department considers any advertisement that states a price for air transportation that is not the total price to be paid by the consumer to be an unfair and deceptive practice in violation of 49 U.S.C. § 41712. However, the Department’s enforcement policy regarding this rule has permitted certain government-imposed charges to be stated separately from this total price. Under this policy, taxes and fees that are collected by a carrier on a per-person basis, are imposed by a government entity, and are not ad valorem in nature are allowed to be excluded from an advertised fare. The existence, nature, and amount of these additional taxes and fees must be clearly indicated where the airfare first appears in the ad, so that the consumer can easily calculate the total price to be paid. The Department has consistently prohibited sellers of air transportation from breaking out any other fee, including fuel surcharges, service fees, and taxes imposed on an ad valorem basis.
In other words, the airlines have to publish everything except the per-passenger taxes as a single number and they have to make it very easy for a customer to figure out what those extra taxes are. Unfortunately airlines are stretching the limits of what those fees are the DoT is now suggesting that the rule “include a requirement that all advertisers include all mandatory fees in the advertised price.”
One quirk of such a plan is that each airport has a different Passenger Facility Charge item that is added on to a fare on a per-person basis but specific to a routing. So flying from New York City to Chicago to Las Vegas would price differently than New York City to Houston to Chicago or on a non-stop flight from New York to Chicago. This is just one of many hurdles that would need to be overcome to enforce a true “full fare pricing” scheme.
The policy would also prohibit the advertising of “one way” fares where a round-trip purchase is required. This is a pet peeve of mine and I would be quite happy to see it go away.
Another hurdle to overcome is the fact that carriers are racing to unbundle costs that have traditionally been considered part of air travel including checked baggage or carry-on baggage, meals, seat assignments and other similar benefits.The DoT is investigating the likelihood that pricing engines can accurately support the ability to allow passengers to specify a search not just by dates and city pairs but by the amenities required such as the ability to check a bag and have a meal on the flight. The GDS networks that handle the majority of the fare pricing for customers are not quite to the position where they can support these queries but it will be interesting to see what happens as they come about. Of course, it might mean deciding 9 months in advance if you’re going to check a bag on a vacation next summer, but you’ll have some idea of what it will actually cost in the end, much more so than is possible today. All booking documents such as e-Ticket receipts would be required to show the full details of these pricing details so as to inform the customer of any future charges as far in advance as possible.
The DoT is proposing to ban all add-on sales offers that require customers to opt out of a service rather than to opt in. These services often include advance seat assignments, airport transfers, travel insurance, show tickets and similar ancillary offers. These are generally high margin sales for the agents and confusing to the customer to figure out how to unselect all the offers. Even an educated consumer can be easily tricked by these opt-out offers as a good friend of mine experienced on a recent trip to Panama City and Mexico City.
Airlines love codeshare service. By creating phantom flight numbers one airline can sell service from another with virtually zero responsibility to actually deliver on that service. Whether through the outsourcing of flight operations to smaller, regional carriers or in setting up long-haul partnerships to provide increased global coverage, codesharing is generally a fantastic thing for the airlines. As part of approving international codeshare service the DoT has generally inserted this clause in the deal:
…the carrier selling such transportation (i.e., the carrier shown on the ticket) accept responsibility for the entirety of the code-share journey for all obligations established in the contract of carriage with the passenger; and that the passenger liability of the operating carrier be unaffected
When all the airlines had generally similar policies this was easy as there weren’t enough discrepancies in policies for it to matter. But as each carrier carves more benefits into nuance and minutiae the ability to deliver those benefits consistently across the codeshare is diminishing rapidly.When one airline permits holders of a certain credit card to check bags for free but then sells those customers a codeshare flight operated by a partner which does not extend that same benefit then the spirit, if not the letter, of this clause is violated. The DoT hopes that the revised rule will address this issue and require truly seamless applicability of benefits.
Finally, the DoT is back to looking at how to prevent peanuts from showing up on airplanes in the name of protecting people who have severe peanut allergies. In short, the DoT suggests that, “Airline passengers with severe allergies to peanuts have a qualifying disability as defined in Part 382.” A “qualifying disability” in this sense requires action to address it on the part of the carriers. The DoT once previously tried to issue a ruling on this issue. In 1998 they proposed that accommodations be made when the airline was informed in advance. Congress quite quickly stepped in and threatened to pull funding should that guidance actually be enforced.
The DoT isn’t giving up on the issue, however, and they are coming back with proposals for other ways to make such a ban stick.
A lot of the things the DoT is trying to require here are actually moves that will ultimately benefit the traveling public. Sure, I’d love to see more DBC vouchers in my travel funds kit but I also understand that protecting the folks who don’t understand how they work, the folks who will be left stranded for days at an airport waiting to get home, do need some protection. Probably not a ton of huge impact with these changes, especially with the current crop of GDS interfaces unable to actually produce the truly full fare costs including the al a carte services, but the ideas are definitely good ones. Hopefully the rest of the technology catches up soon to make it happen.
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