Back in August, you might recall, the Transportation Department adopted a set of tough new consumer-protection rules to help airline passengers. In January, it added even more.
But while industry observers were trying to figure out how the new regulations would alter air travel, almost no one noticed other developments that could significantly affect your next flight.
The department’s Office of Aviation Enforcement and Proceedings, which handles and reports on air travel problems and complaints, quietly celebrated a record year. In 2011, the DOT issued 45 fines for violations of aviation consumer rules and assessed $3.2 million in penalties, more than in any other year in the agency’s history. In the previous year, the department issued 27 fines and $1.8 million in penalties.
Remarkably, none of those penalties were based on the new rules, which, among other things, double compensation for “bumped” passengers and require airlines and ticket agents to wrap all mandatory taxes and fees into their quoted fares. In fact, the DOT hasn’t punished any airlines for running afoul of the new consumer-protection regulations, according to the department.
At least not yet.
“We immediately issued warnings to carriers who weren’t in compliance with these rules when they took effect,” says Justin Nisly, a DOT spokesman. “We’re aggressively investigating potential violations.”
Let’s take a minute to let that sink in.
After a lengthy rulemaking process, the government gave itself a brand-new set of tools for protecting air travelers. Those include giving airline passengers the right to hold an airline reservation for 24 hours without payment and requiring air carriers to notify passengers of flight delays longer than 30 minutes. If you think of it in landscaping terms, it’s as if the DOT had bought a shiny new electric lawn mower but kept using its trusty old push mower instead.
And you might say that the DOT has been doing a lot of landscaping lately. This month, it slapped Australian carrier Qantas Airways with a $40,000 fine for advertising fares on numerous Web sites without mentioning that additional taxes and fees will apply, in violation of an earlier rule requiring such disclosure. It also fined a travel site called Flights24.com $30,000 for similar infractions. Airlines on the DOT’s naughty list include AirTran, Alitalia, Allegiant, Asiana, Finnair, Icelandair, LOT Polish Airlines and Spirit. The most serious fines were brought against discount airlines Spirit and Allegiant — $100,000 each — for mishandling disability complaints and violating price advertising rules, respectively.
The government has threatened to use its new powers, to be sure. It is monitoring about 100 travel Web sites belonging to U.S. and international airlines and has sent warnings to companies that aren’t complying with the rules.
The airline industry is worried about what might happen once the DOT’s unofficial grace period ends. It’s particularly concerned about the agency’s full-fare-advertising rule, which requires airlines and ticket agents to show a ticket price that includes all mandatory fees and taxes.
“The rule needs to be overturned,” says Steve Lott, a spokesman for Airlines for America, an airline trade group. “It provides no benefit to customers.”
Passenger advocates don’t see it that way. They say that the new rule mandates clear, easy-to-understand pricing that helps air travelers calculate the entire cost of a trip, which is an obvious benefit.
Although the industry’s stated reason for wanting to erase the advertising rule is that it “hides” taxes, another is that each new regulation brings with it the possibility of more fines. Darryl Jenkins, the chairman of the American Aviation Institute, referred to the DOT as a “rulemaking machine” in a recent editorial in the trade publication Aviation Daily and said that the agency is more destructive to the airline industry’s viability than anything he’s ever seen.
The AAI maintains that the new regulations and resulting enforcement actions will add $5 billion to the cost of air travel a year, or about $17 per round-trip ticket.
“The advertising rule alone will cost airlines $907 million,” says Michael Miller, an AAI vice president. “Other rules enacted at the same time will cost more than $200 million in lost revenue, which means that airlines have to make it up with higher ticket prices.”
It’s difficult to tell whether that’s happening, or whether it will. Airfares are trending higher, but the most recent official numbers from the government’s Bureau of Transportation Statistics are for the third quarter of 2011, before the new pricing rule went into effect.
I have no reason to doubt the AAI’s research, which suggests that the new rules will be costly to the airline industry. That is bound to happen when part of your business model is based on deception, which is to say, making your fares appear to be lower than they are. The regulations might lead to higher prices, although a more likely scenario is that air carriers will keep their prices low while finding new fees to charge passengers, such as higher luggage surcharges and fees for seat assignments and priority boarding.
Maybe it’s this cat-and-mouse game with consumers that drives complaints, which lead to more regulations and more fines.
If there’s one thing the airline industry, regulators and consumer advocates can probably agree on, it’s that the DOT will set yet another record for fines in 2012. Once the agency’s enforcement staff sinks its collective teeth into the latest set of rules, the sky’s the limit, as they say in the airline business.
Depending on your perspective, the new regulations will make your next flight either more expensive or better. Or maybe both.