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Are Airlines Being Unfairly Targeted For Regulations?

June 9, 2010 By: George Dooley

Price transparency requirements proposed by the Department of Transportation (DOT) in its new consumer-friendly notice of proposed rulemaking (NPRM) is smart policy in the view of Kevin Mitchell, chairman of the Business Travel Coalition (BTC). The transparency rule could, in fact, become the model for other industries.

“The dollars involved in buying airline tickets are often significantly larger than other consumer purchases and the feeling that travelers are being misled by airlines on pricing is growing in intensity,” Mitchell said in his analysis of the proposed DOT rules. He underscores the need for agents, consumers and corporate travel managers to have accurate pricing information.

“Passengers need to be armed with better information as a means of enhancing competition and offsetting, to at least some degree, the loss of competition resulting from mergers and alliances,” Mitchell argues. The new DOT rules offer a variety of consumer protections against tarmac delays, fraudulent price advertising and advising travelers of fees and ticketing changes.

“Heightened Congressional, regulatory, media and industry concerns are going to drive policy changes— perhaps the debate about the NPRM should be framed around which changes are essential and which ones go too far,” Mitchell said, noting that some analysts believe the airlines are being unfairly targeted for regulation.

Mitchell says that the DOT’s NPRM is generating significant debate in public policy circles and within the travel industry. “Many observers claim the airline industry is being unfairly targeted and held to a higher standard for consumer protections than other industries,” he added.

Nevertheless, Mitchell believes there is a strong rationale for government intervention. “The federal government is inclined to provide detailed consumer protections in commercial air transportation because unlike nearly all other industries consumers have no rights under state laws to seek redress for abysmal treatment because of federal preemption— a doctrine the airlines fight hammer—and-tongs to defend and expand” Mitchell says.  “Moreover, under federal law (49 USC Section 41712) consumers do not have a right to sue for bad service. In the NPRM, DOT recognizes the uniquely vulnerable position of air travelers. Likewise, the issue of the 'all in' price has become an enormous concern to corporate travel managers. The idea that we could be heading toward a RyanAir model of $5 'fares' and everything else is an add-on destroys the ability of travel managers to do realistic apples-to-apples comparisons and manage their programs, including benchmarking performance with peer companies.

“Importantly, as the airline sector becomes more concentrated, and choice is diminished, the need for better consumer information grows so that passengers are better informed about remaining competitive options,” Mitchell continued. “The very fact that there is airline push-back against sharing fee data with global distribution systems and travel agencies should serve as a red flag to consumer advocates and DOT. It is an insufficient answer that airlines will make the data available somewhere when consumers might not choose, for any number of good reasons, to use the channel that the airlines might want them to use.”

“Passengers have a legitimate reason for seeking neutral data sources and a concentrated airline sector should not be empowered to impair the data flow to such neutral sources,” Mitchell added. “The NPRM should not have been necessary. But like the 3-hour tarmac rule, the airline industry does not have a vision or strategy for putting customer interests first, including building collaborative bridges with consumer groups and other stakeholders.”


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