Before the House Committee on Transportation and Infrastructure
Regarding Airline Passenger Bill of Rights Act
March 10, 1999
Mr. Chairman and Members of the Committee, my name is Kevin Mitchell. I am Chairman of the Business Travel Coalition (BTC). BTC’s mission is to lower business travel costs by supporting initiatives to increase airline industry competition levels. BTC accepts no direct or indirect funding from any airline. BTC represents the interests of major corporations as well as the Commercial Travelers Association and its 21,000 members.
Over the past year, several well-publicized incidents have dramatically highlighted the need for the nation’s airlines to improve their approach to customer service. The failure of the industry to address a rising tide of consumer complaints has led to an erosion of confidence in airline management and the introduction of so-called passenger “bill of rights” legislation in both the U.S. House and Senate.
Many observers believe that this current confidence crisis has been caused by two years of airline stonewalling of overall competition concerns of government, consumer group and business leaders. Astonishingly, I have been told that a few airlines believe this Committee doesn’t possess the resolve to move passenger rights legislation forward. Most airlines, however, realize that they can ignore this Committee’s concerns only at their own peril.
In fact, HR 700 addresses few problems that, at the end of the day, could not be solved through increased competition in a truly open and free market. To understand this point, one need only examine Southwest Airlines’ passenger-centered business model that premises growth upon meeting customer needs.
In the final analysis, there appear to be three potential approaches to passenger rights problems that concern this Committee. However, only one would solve the problem quickly, and without damaging side effects.
Potential Solution # 1: Increased Competition Levels. Most economists agree some markets do not work well and some markets do not work at all. Unfortunately, airline industry competition levels cannot be boosted quickly enough to solve these problems any time soon. It took more than a decade to create the so-called Fortress Hubs and attendant excessive industry concentration. It is likely to take at least five years of determined effort to rebuild competition to adequate levels. BTC does not support waiting.
Potential Solution # 2: New Legislation. The Airline Deregulation Act of 1978 further codified that states yield consumer protection authority to the federal government. Thus, it seems that this Committee has both the right and obligation to take action when consumers’ basic rights are at risk, and when neither the marketplace or the industry can resolve serious problems.
Nevertheless, no matter how packaged, current proposed passenger rights legislation represents government intervention in the marketplace. We believe such public policy solutions could increase business travel costs, stifle innovation and raise safety issues. For instance, commingling financial penalties with airline operations and decisions relating to the time passengers await takeoff could lead to a reduction of current safety margins.
Likewise, passenger rights legislation establishes a precedent for further government actions. Imagine, for example, future bills that might require Southwest Airlines to issue advance seat assignments. While perhaps appealing to some, such an action would destroy a central operational principle of one of the most admired business models in the entire history of commerce. BTC does not support a legislative solution.
Potential Solution # 3: Industry Sponsored Reforms. Like other industries that have faced the ominous threat of government intervention, airlines should view this legislation as a major warning and move decisively to address Congressional concerns. The industry needs to take immediate steps to head off this and further Congressional action, which will surely follow, if the industry’s problems are not corrected in the near term.
BTC suggests Congress consider holding legislative solutions in abeyance. As an alternative to legislation, BTC proposes that Congressional Transportation leaders request a substantial package of airline industry-designed reforms. In the spirit of good faith, and with concern for the long-term efficacy of open markets free of government meddling, BTC asks Congress to at least consider what the airline industry might propose before taking the precedent-setting step of government intervention.
Reforms could include, but not necessarily be limited to:
1.) acknowledging Congressional concerns in a public and meaningful way;
2.) detailing immediate airline policy actions in response to the most serious issues that proposed legislation seeks to address;
3.) announcing a formally structured intra-airline function to identify consumer protection best practices; and
4.) committing to a process for industry self-policing and reporting of consumer protection practices.
Mr. Chairman, industry self-reform, while requiring significant airline leadership and cooperation, and trust by government, is the least onerous and most beneficial solution. If we can solve this current crisis to the Committee’s and the Senate’s satisfaction without legislation, BTC believes that aviation public policy will be heading strongly in the right direction.
Last week, BTC endorsed your bill, HR 1000, for its potential for opening up High-Density airports to new competition and investing in industry infrastructure. I would add, that this Committee could make an immense contribution to the legacy of Deregulation by considering the full opening of domestic markets through airline foreign ownership and Cabotage law reform.
Mr. Chairman, and Members of the Committee, thank you for the opportunity to present a customer’s perspective on these serious issues before you today.