The Department of Transportation has issued a Notice of Proposed Rulemaking regarding the display of airline fees. Most coverage has simply rewritten the DOT press release, perhaps with a reaction comment.
Airlines and travel agencies (including online travel agencies) will be required to display passenger- and itinerary-specific fees. Airlines will have to provide those fees in a format usable by agencies.
I read through the entire underlying document, to find out what’s actually in it that the press summaries might not offer. It’s always the details that determine whether a proposed rule will benefit consumers or inhibit innovation that might make them better off. Here it looks like something of a mixed bag.
Overall this is a resurrection of the 2014 proposed rule, that was withdrawn in 2017. The Notice of Proposed Rulemaking notes that the Biden administration has withdrawn Executive Order (E.O.) 13771, Reducing Regulation and Controlling Regulatory Costs, on which that withdrawal was based.
What DOT Actually Plans To Require
Here’s what DOT is specifically planning to require:
- that airlines and ticket agents disclose (1) bag fees for a first and second checked bag; (2) fees for a carry-on bag; (3) “family seating fees for a young child traveling with an adult”; (4) change and cancellation fees and along with change and cancellation policies
- this disclosure will have to be provided any time a consumer searches for fares and schedules “on a website marketed to U.S. consumers where air transportation is advertised or sold.”
- and that disclosure has to be alongside fares in search results, not when a customer clicks through.
- on the last page of a purchase, prior to a consumer submitting a transaction, airlines and travel agency sites would have to disclose any 24 hour hold or cancel policy (or whether both are permitted).
- all of this applies to websites whether browsed on desktop or mobile device – but the current proposal does not cover bookings via mobile app.
- over the phone this fee information would have to be spoken by an agent every time they provide a schedule and price. If a consumer is shopping and considering multiple options, they’ll have to wait while the agent repeats the script for each and every one.
Every airline and site that displays schedules would have to provide the same information on every trip, customized to the traveler’s circumstance if they provide that information, regardless of whether that information is available for a given trip. A same-day roundtrip requires display of the same second checked bag fee information as a two week international journey. Some consumers will find this valuable, while others may discover it’s too much to wade through (overload) in an already complex process.
Consequences Of Proposed DOT Rule
Essentially the Department of Transportation is deciding for all passengers and all trips what information is important to consider, and setting that in stone. This will have several consequences, not all of which are going to be good for consumers, and many of which will actually benefit airlines.
- Longer phone hold times. Telephone hold times are long enough as it is. Listening to a customized fee-script for each itinerary you discuss with a phone agent is going to be painful for consumers. It’s also going to make each call take longer, which means more phone agents or longer hold times. You know which is more likely.
- Require online travel sites to sell ancillaries for airlines. DOT wants to require customers to be able to purchase seats within the booking path, to help ensure families can sit together. That means online travel agencies would have to sell seats and collect seat fees for all airlines whose flights they sell. That’s a requirement that booking sites offer additional revenue generation for airlines. This despite only 0.38% of DOT consumer complaints involving family seating issues, and often when families are separated it’s during irregular operations which won’t be addressed here.
- Impractical display Different seats have different prices, and that’s going to make display of “fees for children to be assigned seats next to an accompanying adult” difficult since even showing a seat map with prices wouldn’t satisfy the requirement if “[d]isplay of the fee by links or rollovers is not permitted.” Meeting display requirements may wind up making it harder to find other information that’s not part of this DOT mandate.
- Bans helpful consumer sites The rule would appear to require Expert Flyer, which does not sell airfare but does show schedules, to display fees. While Expert Flyer doesn’t sell tickets, the rule applies to sites which display schedules when requested by a consumer and doesn’t require that the site sells tickets in order to apply. And even though consumers using expert flyer are hardly alleged to be deceived. Indeed, the rule is explicit about covering sites like Expert Flyer,
The NPRM applies to …metasearch sites that do not sell airline tickets but display airline flight search options directly to consumers
It may give airlines a new tool to use to control distribution and shut down sites that empower customers. For instance DOT suggests airlines will be able to meet their fee obligations by providing data to computer reservation systems, although they aren’t required to do so under the current proposal, they would be allowed to provide it in some other format as well.
Sites that display schedules but that don’t subscribe to GDS systems, and therefore don’t have direct access to fees, would be in violation of DOT regulations. Trip.com sells Southwest tickets through a roundabout method. The same is true for Skiplagged which helps passengers find cheaper fares via throwaway ticketing. Airlines don’t like this, and would have a new way to enforce their fare structures with the backing of regulators.
An airline that doesn’t provide the data to a GDS might just refuse the data to Skiplagged arguing that it isn’t authorized to display schedules or fares. In fact DOT is explicit on this!
Carriers would not be required to distribute ancillary service fee information to any ticket agent to whom the carrier does not choose to distribute its fare, schedule, and availability information.
If fee information is required to sell tickets, and airlines only have to provide this to those they have an explicit sales agreement with and do not have to provide fees through GDS systems, then anyone selling a ticket in a compliant manner would have to have an explicit agreement with the airline.
- Prohibits ‘name your own price’ opaque sales model It would also effectively bar ‘name your own price’ or opaque selling practices, which have largely been abandoned based on full planes prior to the pandemic. Priceline would sell you an itinerary you’d commit to up front, without knowing the airline or schedule, often at a substantial discount. Airlines offered these flights because the opacity prevented consumers who were committed to specific airlines or times from taking advantage of the discounts, while picking up incremental business from the most price-sensitive consumers.
However if a site trying to sell this way were to provide specific fees for an itinerary, that would effectively disclose the airline. They’d likely even have to disclose fees based on elite status identified by the customer, revealing whether status eliminated those fees and making it easier to discern the carrier (and thus also get a better idea of the likely schedule in many cases).
- Leaves out some of the more confusing fees At the same time nothing in the rule would require disclosure of fees for oversize or overweight fees, which tend to be the most confusing, since policies vary by airline.
- Gives airlines leverage in battles with computer reservation systems Airlines are allowed to provide fee data directly to agents, bypassing computer reservation systems. For those systems to be useful they’ll need fee data, and an airline would have the option of charging for this. Current contracts could be silent on such fees, to the extent they weren’t otherwise required to be disclosed, and we could see a fresh round of battles between the two (bad for consumers who for awhile might see some airline choices removed from their favorite site, unbeknownst to them).
Ironically DOT says they do this to prevent stepping into the middle of the transportation marketplace and to avoid interfering with contracts between airlines and distribution companies.
- Fails to account for innovation and change. The original 2014 proposed rulemaking (about which I submitted a formal comment to the agency) talked about requiring fee information to be displayed as pop ups which was problematic even with the mobile technology at the time. The way consumers interact with airfare search – how they need information – changes. And what fees are most relevant changes, too, since legacy airline basic economy fares were largely a non-issue the last time that DOT looked at this.
Legal Basis Asserted By DOT Is Stronger For Some Parts Of This Proposed Rule Than Others
DOT claims that consumers don’t like fees and consumers complain about fees. They also claim some even say they’re confused about fees. And so “the Department believes that many consumers continue to be unsatisfied with the level of disclosures they receive regarding ancillary service fees.” They make a leap, though, to claim that such fees are “hidden and deceptive” which is nowhere supported in the rulemaking.
Indeed, airlines are already required to disclose fees on their website under a 2011 rule, and even note fees that may apply and include a link during the airfare shopping process. There’s no allegation that airlines fail to do this. This matters because the legal justification for the rule is the Department’s statutory authority to regulate “unfair and deceptive practices,” and that standard requires a “substantial injury” resulting from a practice “likely to mislead” a reasonable consumer.
DOT claims that substantial injury from consumers having to consult a different web page to learn about bag fee amounts because that takes “additional time.” Things are set up that way, of course, because that’s what DOT itself required. DOT claims “airlines and ticket agents continue to disclose bag fees in a static format in complex charts that are confusing to consumers and that are not readily available at the moment consumers need the information to comparison shop.” But that’s not really true. Take, for instance, United which offers flight-specific and elite status specific search results for bag fees.
DOT finally claims that consumers get confused about bag fees “in connection with complex itineraries, interline tickets, and even some code-share flights,” though some of this is the result of prior regulation by DOT and unlikely to be made easier for consumers under the rule.
Regulating baggage fees has made checking baggage more cumbersome to customers. Since a single bag fee must be charged for an entire journey, and airlines interlining bags have to pro-rate that fee, many airlines (like American Airlines) have simply stopped through-checking bags on separate tickets. That way a customer (1) has to collect their bags at their connecting point, and re-check them, in order (2) to force them to pay separate checked bag fees. That’s an unintended consequence of prior regulation of checked bags, and one this rule does not address.
At the same time failing to disclose change and cancellation fees does seem to be a genuinely unfair practice. I’ve written about how American Airlines sells refundable business flexible fares without clear disclosure of $500 refund fees. Online travel agencies often state that tickets are non-refundable even when selling refundable fares. These are unfair and deceptive practices of the kind that DOT seems on firm ground addressing, rather than merely tinkering with sales displays where they’ve decided for every consumer what is best.
Since the Airline Deregulation Act pre-empts state regulation, and the Supreme Court has held that common law claims against airlines, such as duties of good faith and fair dealing, are state-level claims pre-empted by that act, consumers must look to DOT to regulate industry practices even if common law approaches might be better in a given instance.
What Happens Next
What’s been released is a proposed rule. There will be a notice and comment period, and the administration is required to consider comments and respond in order to release any final rule.
We already know they’re considering going in some different directions than those fully fleshed out in the proposed rulemaking, for instance:
- DOT says they are “considering eliminating the requirement in 14 CFR 399.85(c) regarding disclosure of bag fee information on e-ticket confirmations as it may be of limited use” since consumers would get that disclosure up front. However this provides a written record consumers can rely on, in case airlines charge something different than what was disclosed at point of sale.
- They’re even considering requiring that elite bag fee waivers apply based on the status a consumer holds at the time of purchase, even if they no longer hold this status at the time of travel. In other words, consumers would see $0 checked bag fees at purchase and DOT would require airlines to honor this. That’s deeper into status benefits than we’ve seen DOT contemplate reaching before, and would effectively mean consumers could lock in their benefits by purchasing future travel prior to status expiration.
- The rulemaking also notes that the department is contemplating regulating airline sale ads, such as offering a percentage discount that applies only to the base fare without making the distinction clear.
Previously this effort got shelved, so it’s worth noting that there’s no guarantee a rule is promulgated though it seems likely it will.
Assuming a final rule is published, DOT is currently proposing a 6 month implementation period after that. We may not see this in action for a couple of years.
I expect that mood affiliation will drive much of this debate. Most people will base their opinion on this Department of Transportation proposal on either the party in power that’s proposing it (“my team” vs. “their team”) or on the basis of their feelings about airlines and airline fees generally (“I hate airline fees, and this sticks it to the airlines”). Don’t be one of those people. Airlines don’t necessarily lose from this, and consumers won’t clearly pay lower fees either, while some pro-consumer innovations may be shut down or just never happen.
Ultimately there’s some in here that may be good, and much that’s unworkable or overly prescriptive. Hopefully things get better, not worse, as DOT moves towards a final rule.
[…] The federal government released plans this week to regulate the way airlines disclose their fees. Airlines, of course, already disclose their fees the way the government has told them they have to. And new rules would have some pretty perverse consequences. […]