March 6 - Dear Secretary Chao

 

The Honorable Elaine L. Chao

Secretary

U.S. Department of Transportation

1200 New Jersey Ave, SE

Washington, DC 20590

 

Dear Secretary Chao,

I understand the rationale for an incoming staff review of the merits of a pending rulemaking related to ancillary fees and a request for information regarding the provision by airlines of complete fare and schedule information to online metasearch sites. Nevertheless, I hope this review takes weeks and not months, as there is substantial documentation, analyses and evidence for the need for consumer protections in this area.

In recent years airlines have fought every consumer protection proposal at the U.S. Department of Transportation (DOT), in federal court and in Congress. Since the legacy airlines secured their antitrust immunities for their joint ventures, and massively consolidated the industry, their near singular public-policy focus has been to seek to frustrate competition. For example, they are fighting a proposal to lift the cap on the passenger facility charge (PFC) so that airports are not able to make improvements that would attract new airline competitors. Likewise, they are underutilizing scarce slots Reagan National and LaGuardia to keep low-fare carriers out and scorching the earth to block foreign carrier entry to U.S markets. Finally, they want to crush travel distribution marketplace participants – especially the metasearch sites that keep airlines honest.

In the marketplace for travel distribution services airlines compete with metasearch sites and online and traditional travel agencies. When dominant airlines in the direct channel intentionally and discriminatorily withhold critical flight information, or refuse to provide transactable ancillary fee data, are they illegally using their dominant market positions in both the marketplace for commercial air transportation services and the marketplace for travel distribution services to harm indirect-channel competitors and potentially cause them to exit the market? A joint DOT–U.S. Department of Justice review of this issue is no doubt warranted.

Consumers need and have a right to complete and accurate flight information to prevent them from being misled and to ensure that comparison-shopping disciplines prices in the marketplace. In a consolidated industry consumers need increased protection as tacit coordination on strategy among a small group of competitors can make anti-competitive and anti-consumer behaviors easier to conduct. However, the airlines argue that the government should stay out of their business and treat them like every other industry. Unfortunately for the airlines that argument is an empty one, and for many reasons.

As you are aware Secretary Chao, there is a robust Public Interest section in the Airline Deregulation Act wherein the Secretary of Transportation shall consider certain matters as being in the public interest.

Here are just a few of them:

-- ensuring the availability of efficient and low-priced services;

-- maintaining a sound regulatory system that is responsive to the needs of the public;

-- preventing unfair, deceptive, predatory or anticompetitive practices;

-- avoiding unreasonable industry concentration, excessive market domination or monopoly powers that would allow airlines to unreasonably increase prices, reduce services or exclude competition; and

-- encouraging new entry and the continued strengthening of small air carriers to ensure a more competitive airline industry.


The airline industry is indeed different from most other industries in so much as it enjoys the benefits of the following:


-- federal preemption where the balkanization of state laws regarding rates, routes and services is avoided;

-- antitrust immunity that permits activities among horizontal competitors that would otherwise be illegal;

-- cabotage restriction where unlike other products and services in other industries U.S. airlines are protected from foreign carriers in domestic city-pair markets;

-- thousands of highly profitable monopoly routes resulting from radical industry consolidation; and

-- no right of private action where airline consumers face a unique plight as there is no financial remedy despite harm from unfair or deceptive practices and no legal discipline as found in other travel segments or other industries.

Air travelers have the least amount of consumer protection of any other consumer-facing industry. They exist in a consumer protection no man’s land. Every day that passes where consumers do not have access to complete and accurate flight information, they are financially harmed.

I trust that your review, which is sensible, moves along expeditiously.

Sincerely,

Kevin Mitchell

Chairman

Business Travel Coalition

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