May 3 - U.S. Congress to Intervene on Behalf of Aggrieved Airline Consumers

 

Is There Rationale To Justify Government Action On Passenger Rights?

Business Travel Coalition (BTC) today applauded the scheduling of hearings in the U.S. House and Senate to examine the plight of U.S. commercial aviation consumers. Since the major U.S. network airlines massively consolidated the domestic industry, consumers have faced daily indignities and financial harm as those airlines have leveraged their new-found market, economic and political powers to undermine consumers in a variety of ways including seeking to block sorely needed competition from foreign carriers including Etihad Airways, Emirates Airlines or Qatar Airways (Gulf Carriers).

Much of the airline industry was deregulated, so is there rationale that would support Congressional intervention? Materials from the statement of purpose in the Airline Deregulation Act of 1978 (ADA) and from the U.S. Department of Justice (DOJ) complaint of August 2013 with respect to the American Airlines-US (AA/US) Airways merger would appear to provide strong rationale for such intervention.

In subsection (3) of the ADA a purpose was the availability of “adequate... services by air carriers.” Subsection (7) has as a goal the avoidance of excessive market domination that could lead carriers to reduce service. Today’s market domination has greatly accelerated the conversion from customer-centered to badly customer-disjointed cultures at the three major U.S. network carriers. It is most certainly clear to Congress that not in a million years would the cultures at the Gulf Carriers have allowed such atrocious treatment of a guest like Dr. David Dao aboard United Airlines Flight 3411

Excerpts from the ADA (49 USC Section 1301)

"(3) The availability of a variety of adequate, economic, efficient, and low-price services by air carriers without unjust discriminations, undue preferences or advantages, or unfair or deceptive practices, the need to improve relations among, and coordinate transportation by, air carriers, and the need to encourage fair wages and equitable working conditions.

"(7) The prevention of unfair, deceptive, predatory, or anticompetitive practices in air transportation, and the avoidance of—

"(A) unreasonable industry concentration, excessive market domination, and monopoly power; and

"(B) other conditions; that would tend to allow one or more air carriers unreasonably to increase prices, reduce services, or exclude competition in air transportation.

With regard to the DOJ complaint, in many ways it was a vivid critique of how the airline industry had measured up against the purposes of the ADA. The excerpts below from the DOJ complaint highlight that in fact the large carriers have reduced service “in tandem” and refer to a reduction in “amenities." 

Excerpts From DOJ Complaint In The Challenge To The AA/US Merger

p.3

P.3[1]

…Since 1978, the nation has relied on competition among airlines to promote affordability, innovation, and service and quality improvements. In recent years, however, the major airlines have, in tandem, raised fares, imposed new and higher fees, and reduced service. Competition has diminished and consumers have paid a heavy price.

PP.3–4

3. This merger will leave three very similar legacy airlines—Delta, United, and the new American—that past experience shows increasingly prefer tacit coordination over full-throated competition. By further reducing the number of legacy airlines and aligning the economic incentives of those that remain, the merger of US Airways and American would make it easier for the remaining airlines to cooperate, rather than compete, on price and service.

P.14

35. Increasing consolidation among large airlines has hurt passengers. The major airlines have copied each other in raising fares, imposing new fees on travelers, reducing or eliminating service on a number of city pairs, and downgrading amenities.

[1] All references to page numbers are to the numbered page of the complaint.  The numbers in front of each passage quoted are the numbered paragraphs of the complaint.

“Airlines say that if consumers don't like something they can vote with their wallets. When 11 airlines controlled 80% of domestic seat capacity that was a plausible argument. Now that it's down to 4 airlines, many consumers’ votes have been taken away - especially in small and mid-sized communities,” stated BTC founder Kevin Mitchell. “As most economists agree, some markets work well, some not so well and some not at all. From a consumer's point of view, the marketplace for commercial airline services is somewhere between the latter two as evidenced by the 10 examples of unfair and deceptive airline practices that BTC recently drew up at http://btcnews.co/1YbkC53,” added Mitchell.

 

 

 



 

©2001 to 2017 Business Travel Coalition, Inc..