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posted: 6/8/2014 6:12 AM

Who will pay for new passenger protection rules?

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  • Passenger advocates hope that after a 90-day comment period, the proposed regulation will bring positive changes to the way Americans fly. Airlines, however, claim that the story will have a darker ending, leading to an overregulated aviation industry in which customers pay more to fly.

      Passenger advocates hope that after a 90-day comment period, the proposed regulation will bring positive changes to the way Americans fly. Airlines, however, claim that the story will have a darker ending, leading to an overregulated aviation industry in which customers pay more to fly.
    File photo

 
By Christopher Elliott, The Washington Post

At 36,361 words, the document laying out the latest proposed Transportation Department passenger protection rule is an epic, a few pages longer than Franz Kafka's novella "The Metamorphosis."

Passenger advocates hope that after a 90-day comment period, the proposed regulation will bring positive changes to the way Americans fly. Airlines, however, claim that the story will have a darker ending, leading to an overregulated aviation industry in which customers pay more to fly.

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The proposal, which you can view and comment on at Regulations.gov (search for DOT-OST-2014-0056), would require airlines to show certain basic fees up front, at the time a fare is displayed. It would also add new reporting requirements for smaller airlines and require online travel agencies to adopt consumer protection policies. Taken together, these requirements represent an incremental, and long overdue, upgrade in the air travel experience.

But this assumes that the DOT will embrace the planned rules, and that Congress won't interfere.

If you think that the airline industry hates the new rules, you're almost right. In a brief statement, Airlines for America (A4A), an industry trade group, denounced the DOT actions as overreaching and warned of "negative consequences."

"The government does not prescriptively tell other industries -- hotels, computer makers, rental car companies -- how they should sell their products, and we believe consumers are best served when the companies they do business with are able to tailor products and services to their customers," it said, adding that the rules, if enacted, would probably "further increase airline expense, and force airlines to pass on the additional costs to customers in the form of higher fares or reduced levels of air service."

I asked an A4A representative how these rules might increase the cost of a ticket and was told that the industry group was still studying the proposal.

Passenger advocates are pleased with the proposed regulations. "DOT's actions reinforce the agency's unique role as the only forum -- state or federal, judicial or regulatory -- where consumer protections exist for airline consumers," says Kevin Mitchell, who runs the Business Travel Coalition, a group that represents corporate travelers. Mitchell notes that the proposal is particularly necessary in light of an effort in Congress to turn back the DOT's previous rule, which created the so-called "full-fare" advertising rule for airline tickets, requiring airlines to quote a ticket price that includes mandatory taxes and fees.

But how, exactly, would these new rules help passengers -- or hurt airlines?

At the heart of the proposal is a requirement that airlines and ticket agents reveal fees for certain services associated with airline tickets at all points of sale. The DOT defines these as a first and second checked bag, a carry-on item, and advance seat assignment.

Why are the rules necessary? The Transportation Department says that fees for additional services are often difficult to determine when searching for airfares. As a result, many travelers can't understand the true cost of travel before purchasing a ticket.

Actually, that's a nice way of putting it. Airlines have made billions by systematically redefining what's included in the cost of an airline ticket. Quietly stripping the ability to check a bag, reserve a seat and even carry a bag on board from the base fare allows air carriers to claim that their tickets have never been more affordable while they still earn a tidy profit. Last year, for example, domestic airlines collected $3.3 billion in baggage fees.

Forcing airlines and ticket agents to disclose these fees for a particular passenger on a specific flight at the time a fare is displayed would effectively end what many consumer advocates claim is an airline business model based on deception. Air travelers would know exactly how much they'd pay for each service at the time they pull up a fare quote. An airline ticket would effectively become an airline ticket again, in the traditional and historic sense of the word.

It's one reason airlines are likely to fight this proposal at the rule-making stage, and if that doesn't work, then in Congress: In an industry now dominated by three legacy airlines, where competition is slowly being squeezed out of the system, a perfectly legal bait-and-switch can make the difference between a loss and a profit, observers say.

The DOT also has suggested several less controversial rules. Under one, airlines such as Allegiant Air and Spirit would be required to report information to the department about their on-time performance, oversales and mishandled baggage rates. Those carriers are currently exempt because of their size. Under another, large airlines would have to separately report those same statistics for their domestic code-share regional partners, or the smaller airlines with which they work. An A4A spokeswoman says that her organization supports these proposed rules.

There's less likely to be agreement on a list of smaller but nonetheless noteworthy rule changes. For example, the DOT wants to compel large travel agencies to adopt minimum customer service standards, which would include responding promptly to complaints and offering prompt refunds.

The government also wants to ban the preferential ranking of certain carriers' flights over others without disclosing the bias, which leaves air travelers with the impression that they're seeing the best available fare options. Travelers often assume that they're being allowed to compare all airlines and that search results on websites such as Expedia, Orbitz or Kayak are impartial. These rules are likely to face opposition from the major online travel agencies, although the benefits to customers would be difficult to deny.

"The biggest winners here will be the passengers, who are tired of ugly surprises, and the airlines that have the fewest hidden costs," says Michal Ann Strahilevitz, a marketing professor at Golden Gate University in San Francisco. In other words, carriers such as Southwest or JetBlue, which offer more inclusive prices, will get a lift if and when these rules go into effect. And the rest might have to come up with new fees to cover their losses.

But a lot can happen between now and Aug. 21, when comments are due. Only sustained support for air travelers in the form of public comments will reassure the DOT that these rules are necessary, and that the metamorphosis will improve the air travel experience.

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