New rule: No more price increases after you buy a ticket

Editor’s note: This is part nine in a series about the Transportation Department’s sweeping new airline passenger protection rules. You can read the entire document here (.DOC). Please take a moment to comment on these proposed rules at Regulationroom.org. The future of air travel depends on it.

Here’s a new government rule that might surprise you: It would prohibit post-purchase price increases in air transportation or air tours by carriers and ticket agents.

If you said, “They can do that”? then you’re not alone. That was my initial reaction.

But yes, they can.

It’s allowed under federal law — specifically, 14 CFR 253.7, which states,

A passenger shall not be bound by any terms restricting refunds of the ticket price, imposing monetary penalties on passengers, or permitting the carrier to raise the price, unless the passenger receives conspicuous written notice of the salient features of those terms on or with the ticket.

And that loophole has led to problems, according to the Transportation Department.

The Department has found that some sellers of air transportation are abusing this rule by burying provisions purporting to permit them to raise the price in the contract of carriage or conditions of travel and merely providing the consumer a hyperlink to the contract of carriage or conditions of travel. The consumer is unaware of the potential for such increase until well after the purchase is made.

Unbelievable.

What’s the solution?

The government is proposing a new rule that would forbid post-purchase price increases of this nature. The seller of air transportation would be prohibited from raising the price after the consumer completes the purchase, according to the department. Considering many travel purchases are made long in advance, with the implied promise that the price is “final,” the DOT thinks this rule is long overdue.

[I]t is patently unfair for a carrier or tour operator to advertise and sell air transportation at a particular price long before travel, with the caveat that they reserve the right to change the advertised price at any time before travel, and in any amount. The Department feels it is time to ban the practice of post-purchase price increases.

To which I say: What took you so long?

I mean, seriously. I can’t believe you’re even debating this?

No, they’re serious. And, if you can believe, it, they’re even considering the following “alternatives” as possible rules.

One alternative the Department is considering would be to allow post-purchase price increases, but only as long as the seller of air transportation conspicuously discloses to the consumer the potential for such an increase and the maximum amount of the increase, and the consumer affirmatively agrees to the potential for such an increase prior to purchasing the ticket.

Another alternative would be to allow post-purchase price increases, with full and adequate disclosure, that the consumer agrees to in advance of purchasing a ticket, but to prohibit price increases within thirty or sixty days of the first flight in a consumer’s itinerary.

Bad ideas, both.

The regulatory analysis (PDF) agrees that it’s time to lay down the law on this. A February review of airline sites indicated that all reported increases in checked baggage fees were accompanied by effective dates for the change specified in terms of when tickets were purchased. However,

It is possible that the current DOT guidance may not continue to be effective for enforcing the current prohibition on post-purchase price increases. Codifying this policy would also reduce the amount of resources and effort required for the Department to determine if entities are complying with its provisions.

This proposed rule, while necessary, may have unintended consequences. If applied to tours that include a cruise component, it would stop cruise lines from retroactively adding fuel surcharges if energy prices rise. I would say that’s a good unintended consequence for consumers.

Is it asking too much for a company to honor a price? I don’t think so.

The Rulemaking Series

I’ve written this series of posts in order to help you understand the Transportation Department’s proposed rules and offer the most informed feedback during its commenting period. Please take a moment to read them and then tell the government what you think at Regulationroom.org.

• Part 1: New tarmac delay contingency plans — what’s in it for you?

• Part 2: Government will require airlines to offer “complete picture” of ground delays

• Part 3: New rules would require airlines to meet “minimum” customer service standards

• Part 4: Government to airlines: Put it in the contract!

• Part 5: New requirements would force international airlines to monitor and respond to passenger complaints

• Part 6: Everything you need to know about the new denied boarding compensation rules

• Part 7: The truth about the government’s new “full fare” disclosure rule

• Part 8: Transportation Department wants airlines to reveal all fees and an airfare — or two

• Part 9: New rule: No more price increases after you buy a ticket

• Part 10: Airlines must “promptly” notify passengers of flight delays under proposed rule

• Part 11: No more lawsuit limits for passengers under proposed government rules

• Part 12: The hard facts about the peanuts-on-a-plane rule everyone’s talking about

If you have any feedback on this series, please send me an . And thanks for reading.

(Photo: Roo Reynolds/Flickr Creative Commons)

  • Roberto

    As an economist, I’ve never much bought into the cruise operators’ position that they need to be able to increase their fuel surcharge in case fuel prices rise between the time of purchase and the time of travel. This type of risk exposure on the part of the cruise operator is precisely why futures contracts were invented.

    Cruise operators need to quote a final price at the time of purchase, and then do whatever hedging is required behind the scenes to allow them to honor their quoted price and still make their profit. Customers shouldn’t have to pay a mystery surcharge at a later date.

  • shruti

    I’m curious to know if this would apply to resort fees–it’s been oft-debated on this site, but I think a mandatory fee boils down to a rate increase, but under a different name. What do you think, Chris? Will this legislation affect that?

  • Christopher Elliott

    @shruti — yes, it could.

  • Arizona Road Warrior

    @ Roberto – I agree with you that cruise lines should quote a final price at the time of purchase. However, it seems like this regulation is only for the airlines.

  • Arizona Road Warrior

    If the DOT decides to give the airlines an out by allowing them to increase fares after the purchase by a certain amount or by disclosure, how about giving the consumers the rights to a full refund? I think that if the airlines can increase fares after the purchase then the consumers should be able to cancel their reservations and get a full refund. I think that it will stop this BS from the airlines.

    Also, this new regulation should cover cruises regardless if you purchase your airline tickets from the cruise line. It seems like this proposed regulation covers cruises if you purchase a cruise with airfare. However, when I purchase a land tour, a cruise, etc. I don’t purchase the airfare from the tour operator, cruise operator, etc. We usually arrive three to five days before the start of the tour, cruise, etc. in the case of airline problems as well as to spend time on our own. Also, we usually stay a few days after the tour, cruise, etc. is over. Another big reason is that I will cash in miles so that we can fly first class.

    stay a few days later;

  • Steve

    Requiring airlines (or any business, for that matter) to honor the purchase price of a ticket and prohibiting them from increasing it after the purchase has been made seems to me to be indisputably the right thing to do. Like Chris, I can’t believe it’s even up for debate.

    Imagine if you went shopping, bought an item for $100, then when you got your credit card statement found out that a week later the store decided $100 wasn’t enough, so they charged you an extra $20 – and there was nothing you could do about it. How insane would that be?

  • belvie1

    Do you think this new rule would apply to mistake fares? I’ve booked plenty of flights that were ridiculously under-priced and never had a problem. But, I have heard of other instances where carriers have not honored the mistake fare and asked for additional money or canceled the ticket.

  • Carver

    Has anyone had this happen to them, a rate increase after the ticket is purchased? Baggage fees are different because they are avoidable

    @belvie1

    I doubt if this would apply to so called fat finger fares.

  • SirWired

    I believe the intent of this provision is to “lock-in” airfares for tour packages. Very often, air-inclusive tour packages will not “fix” the air price until final payment (instead of at booking.) The air tickets are not purchased until final payment, so the price can be far higher than what was originally quoted.

    I don’t think I’ve ever seen an airline try post-purchase price increases, but it is par for the course in the tour industry…

  • Carver

    @Sir Wired

    I don’t know. The language talks aboutp post-purchase. If the airlines tickets haven’t been purchased, then this doesn’t seem like it would apply. But it does specificy tour operators.

  • MeanMeosh

    Shruti (and Chris) – I’m not sure I agree that this would apply to hotel resort fees? It seems to address only travel providers that are selling air tickets. Maybe it would apply to those “air + hotel” packages that agencies like Travelocity like to sell? I’d be curious to know how that works (though it would be nice if the government laid down the law on resort fees, and required hotels to include those in the initial price display). I do think the two loopholes that permit sellers to pass along retroactive fare increases need to be stricken. If I read those items correctly, they essentially give airlines carte blanche to pull such shenanigans simply by slipping a neat little one-liner in their contracts of carriage.

  • David Z

    I doubt if this would apply to so called fat finger fares.

    And no doubt people want this ruling to apply to them as well, citing how stores are able to honor mistaken prices for tangible items.

  • EvilEmpryss

    My first reaction to the idea of the airline raising my price after the purchase was indignation, but then I got to thinking about it…. It’s not the same as buying an item and going home with it only to find you were charged more later. Unless you travel the day of the ticket purchase, you haven’t actually used the service you’re buying. I know I’m guilty of watching the fares to try to secure the lowest possible ticket price and giggling when I see the ticket prices rise the day after I made my purchase. But before you condemn the airlines for post-purchase, pre-flight ticket increases, consider this:

    How many of us expect the airline to give us a refund in the difference in price if the cost of the ticket goes *down*?

    It seems unfair that if the cost of doing business drops, the business takes a hit (having to give back money it reasonably believed was revenue), but if the cost goes up, it’s still the business that takes the hit. You just can’t say that forcing the airline to give refunds is fair while also saying that they can’t reasonably cover their losses. Imposing regulations against this sounds like incentive for the airlines to make their pricing system so opaque that no one would ever know if they deserved a refund, not to mention adding or increasing all those stupid fees that already aren’t included in their base ticket price. If customers are going to expect refunds of the difference in ticket costs when prices drop, they should expect the opposite when prices rise. Maybe the compromise would be a cap on the amount that is refunded or increased and a pre-flight deadline for the charge (say two weeks pre-flight)? That, and tieing the increase to actual operation increases that can be tracked and audited to insure that the airlines aren’t just finding one more way to nickel-and-dime the consumer to death might work.

  • Steve

    EvilEmpryss – you’re right that it’s not *exactly* the same as purchasing an item and then being charged more for it, but I’d argue that it’s close enough. Just because you haven’t used the service yet doesn’t mean that reneging on the agreed-upon purchase price does not harm you. Say you’re deciding on which flight to take, and airline A and B offer flights that are pretty much identical in terms of convenience, amenities, etc. Airline A is charging $300, while airline B is charging $350. You book with airline A. Two weeks later, you get an email saying they’ve raised the price of that flight to $375. Now airline B is charging $400, so even if you can get a refund from airline A and book elsewhere, you still will pay more than you initially planned no matter what.

  • Rick Damiani

    @EvilEmpryss

    I don’t know that I’ve ever heard of an airline offering a refund because ticket prices went down. Keeping people from taking advantage of drops in ticket prices is one of the things change fees do. i.e. they won’t give you the difference and they won’t let you cancel and re-book to get the difference either.