New airline rules yet to be enforced, even as DOT levies record fines

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.

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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 $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.

12 thoughts on “New airline rules yet to be enforced, even as DOT levies record fines

  1. I’m going to have to reverse myself.  Initially I thought the disclosure requirements were useless.  However, I have been chatting with various friends who rarely fly and it appears that they were ripe for a fleecing from the airlines in terms on one way tickets an and taxes.  Baggage frees and drinks weren’t an issue.

  2. While I’m all for more transparency in air fares, as I read this article I began to wonder if the government really wants to protect consumers or just wants the ability to levy more fines so they might line their pockets?

    It’s common knowledge companies that incur costs like this pass it on to their public in the form of fare hikes.  I don’t want to think this is the new form of taxation, “Let’s just slam the companies they buy from and get their money that way.”

  3. It’s obvious the airlines disrespect their customers by deceiving them.  I say “them” because I’m boycotting flying, too horrible an experience these days.  But if I ever have to get somewhere quickly and need to fly again, any help is welcome.  If the airlines would go back to treating their customers as guests instead of “the enemy” or “marks”, they wouldn’t have to worry about being fined.  Now if you could only do something about the TSA, so many of us might actually fly again an enjoy it!

  4. “Oh, LOOK,
    Martha . . . “they’ve got some shiny new rules that say the Airlines are
    gonna get fined and have to raise the price of our next trip.

    1. The more fines there are the more expensive air
    travel is gonna get . . . or did you think there was some fat-cat at the
    airlines who was gonna put down his Cuban cigar and Napoleon brandy,
    drag out his wallet and pay the fines for us?  “Taxing the big guys” is
    still taxing the little guy, but it’s indirect, invisible, and has added
    to not subtracted from profit margins.

    2. What about HOTELS . . . maybe some regulation on advertising a
    great price then adding some funky “Resort Fee” after I arrive.  I AM A
    BUSINESS TRAVELER, and I stay where it’s most convenient to get to my
    appointments.  ~  My worst was a few years back when HYATT Monterey had a
    trade show special for exhibitors at an event in their own convention
    center, then added a 16% “Resort Fee” onto the tab for all the people
    who were gonna be busy working their butts off and unable to use the
    fancy amenities.


    1. “The more fines there are the more expensive air travel is gonna get”

      Not necessarily.  If there is robust competition on a given route, then an airline cannot raise its price due to fines.  Consider.  If 5 airlines are charging $100 to fly from Point A to Point B, a fine on the first airline will have to be absorbed by the airline as it cannot raise it prices because too many people will fly the other 4 airlines.

  5. There is one flaw with the DOT’s new advertising rules, and that has to do with what happens on non-direct routes, since some government fees and taxes are assessed on a per-segment basis.  Flying Southwest out of Dallas Love Field is a good example, since you can’t fly too many places direct at the moment.  If you want to go DAL-Chicago Midway, with one stop in St. Louis or something, the fare + taxes + fees might be $89.  But if you take a two-stop, with stops in KC and St. Louis, it might be $95 because of the extra segment fees.  So what should Southwest be allowed to advertise online or in the paper?  I can all but guarantee if they advertise $89, and someone has to book the two stop and pay $95, they’re going to complain once again about the airlines being “deceptive” by advertising the lower fare with one stop.  I’ll stay away from the argument about rolling in the taxes and fees providing the government a convenient way to sneakily increase the tax – but given the administration’s own proposal to raise airline taxes to fund not aviation improvements, but to help “pay the national debt”, I think this is more a concern than some want to admit.

    Now if only they could do something about hotel re$ort fees (thanks, Raven, for the inspiration).  If you want to talk about deceptive practices, there’s your poster child right there.

  6. I’m having a hard time understanding how disclosing the taxes and fees they already charge is going to cost the airlines more money. When I price out tickets, I add all the costs together and THEN buy the best valued ticket. If the airline did the addition for me, it would save me a step, but it wouldn’t really make me buy a competitor’s ticket. There’s more to air travel than cost, too; the connections, travel times, wait times, reliability, and general comfort weigh heavily on my plans. So, disclosing the full cost of a ticket and allowing me to chose extras would be a solid and sound business move. So, how does it cost the airlines millions of dollars?

  7. Could the airlines please tell us how bottom-line pricing, affects their operating costs?  If they don’t have computers smart enough to manage their accounting, then they shouldn’t be in business!  I’ll acquiesce, that charges for luggage might be an additional expense, to the airline; even though it infuriates me.  However, Mr. Airline, just tell me the “expenses incurred” on an advertised flight plus taxes/fees, vs. a bottom-line (inclusive) figure.  Bet you can’t!

  8. The “fines” “levied” against the airlines is nothing more than one big fat lie perpetrated by the government’s PR misinformation machine. The DOT will issue a press release announcing some record fine levied against an airline. At the same time the airlines are negotiating with the DOT and ultimately either pays mere pennies on the dollar or in most cases the fines are suspended altogether. The public falsely believes that the DOT is actually protecting the public and the airlines get off scot free. 

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