TRAVEL INDUSTRY AND CONSUMER GROUPS ASK U.S. DOT TO ISSUE ANCILLARY FEE RULE RIGHT AWAY
A Radically Consolidated Airline Industry Has Made Consumer Protections Ever More Urgent
Consumers need to be able to see, compare and buy ancillary services
September 29, 2014, Washington, DC – Business Travel Coalition (BTC) today filed comments on behalf of some 300 corporate, university and government travel departments, travel management companies, industry associations, consumer groups, airport authorities and foundations in the U.S. Department of Transportation (DOT) docket concerning a passenger protection Notice of Proposed Rulemaking (NPRM). The BTC filing, which included travel industry and consumer group letters to DOT Secretary Anthony Foxx as well as an industry-wide survey on government ancillary fee policy, can be downloaded at http://btcnews.co/1mHyupm.
EXCERPTS OF THE FILING FOLLOW.
DOT’s role and responsibility to police airlines’ anti-consumer policies and practices has become orders of magnitude more important in recent years. As the U.S. airline industry has consolidated to just 3 mega network carriers, those airlines have to worry far less about customers’ needs and concerns. Airlines know that the customer has dramatically fewer airline choices than in past years.
Importantly, because of the federal preemption doctrine in the Airline Deregulation Act of 1978, consumers have no private right of action at the state or federal levels if harmed by airlines. Furthermore, state consumer protection statues do not apply to airline passengers and the Federal Trade Commission has no authority in this industry.
Airlines have been increasingly able – without competitive repercussions – to ignore the demand for ancillary fee data even from their largest, most sophisticated corporate, university and government customers.
In eschewing true price transparency, airlines increasingly mask the all-in price of air travel, with two major adverse effects. First, lack of price transparency prevents consumers from efficient comparison-shopping of air travel offerings across multiple airlines – a hallmark of U.S. airline industry deregulation. A second consequence of the deterioration in price disclosure is that ancillary fees go largely undisciplined by market forces.
BTC has analyzed the DOT NPRM and has concluded that the long awaited rule on the transparency / transactability of ancillary fees, which is one of many proposals within the NPRM, is at significant risk of being delayed deep into 2015, or even halted indefinitely. The concern is that DOT is likely to receive an avalanche of comments, analyses and studies during this NPRM process that will take it considerable time to work through. BTC and consumer groups are encouraging DOT to move forward promptly with the ancillary fee rule and to take the time necessary to consider the newly raised complex and controversial possible rules on other topics.
After waiting 6 years for ancillary fee information, travel industry participants want true comparison-shopping for consumers restored as soon as possible. A recently concluded BTC survey of 343 corporate, university and government travel managers, travel management company executives and other industry professionals found that:
• 331, or 96.5 percent of survey participants think airlines should proactively provide ancillary fee information to channels where they sell their base fares;
• 325, or 94.75 percent of participants believe that because the marketplace after 6 years has not fixed this problem, DOT should issue a rule requiring airlines to provide this information to channels where they sell their base fares; and
• 304, or 90.48 percent believe DOT should require ancillary fee information to be shared by airlines in a format that allows the purchase of such services in the same transaction as the ticket purchase.
Consumers should be able to see, compare and buy basic ancillary services through all of the distribution channels that airlines have opted to use. BTC thus favors the critically important DOT proposal that an airline be required to provide ancillary fee data to ticket agents who are authorized to sell travel services on behalf of an airline. However, the rule should require airlines to make all of the basic ancillary services that they offer transactable at the time of ticket purchase through the distribution channels airlines choose to use.
Without transactability, prices for ancillary services would change and specific seats, for example, might no longer be available when a customer attempts to purchase them, undermining the principle of transparency. As a result, there is a strong potential for bait-and-switch pricing when travelers are offered low prices during the search process, then charged higher ones when they try to complete the transaction on an airline website.
We urge DOT to deal with the ancillary fee rule right away and not permit this, the most important part of the rulemaking, to be delayed by the long period of time likely to be required to analyze the great number of other complex and controversial proposals within the NPRM.
At http://btc.travel, please find an NPRM Media Center that includes foundational documents, commentary, statements and analyses and press stories