The cheap fares that some airlines advertise — $29 to here or $59 to there — may look more expensive later this month. The government is forcing airlines to be more upfront about what your flight will really cost.
The Transportation Department, as part of a new set of consumer-protection rules, is requiring airlines in two weeks to:
•Make sure that advertised fares include all government taxes and other fees that now are hidden behind asterisks or stuck in footnotes, but which can add 30% to 50% to a ticket price.
•Include any fees for checking bags when you book and pay for a ticket online. The goal is to prevent passengers who are checking bags from being surprised by the fees and having to pay them at the airport.
•Give customers 24 hours to change their reservations without having to pay rebooking fees. This would save passengers money in case they make a mistake.
At present, passengers often don’t see the full cost of a ticket until the last steps of booking and paying for it online. Customers sometimes can’t pay the baggage fee ahead of time, when buying through travel agents or shopping sites such as Expedia or Travelocity.
In addition to providing greater ease and transparency, the Transportation Department says, the new rules will let consumers more easily compare prices between airlines — some of which have built their business on advertising low fares.
The rules, Transportation Secretary Ray LaHood says, “will help ensure that air travelers receive the respect they deserve before, during and after their flight.”
Many fliers — and even travel agents who work daily with fares and all the various fees — say some regulation is needed on ticket prices with all the separate fees that airlines now charge.
“Everybody is frustrated with the entire process,” says Olga Ramudo, president of Express Travel in Miami. “What is happening now is that they can’t make decisions based on the total cost of their airline ticket.”
But many airlines object to the new rules. They argue that by telling them how to advertise, the DOT is violating their free speech. They complain that they’ll lose customers. And they warn that providing more fare information could result in less transparency on what a flight will cost.
Allegiant, Spirit and Southwest airlines have asked the U.S. Court of Appeals for the D.C. Circuit to void the full-fare advertising rule. Southwest fears the rule will cost it $30 million because of losing customers and revising its frequent-flier program.
“Contrary to (the government’s) claims, the full-fare advertising rule will have the effect of confusing customers and suppressing ticket sales,” Southwest says in a court filing.
Allegiant and Spirit say letting passengers make free changes in their tickets for 24 hours would have “devastating consequences” for them because 90% of their tickets are sold in the week before a flight.
But nobody expects a delay to the full-fare rule. A three-judge panel refused in September to block the rule while the case is argued.
For the consumer
The new rules are the latest in a string of consumer-oriented regulations imposed on airlines by President Obama and his Republican secretary of Transportation, LaHood.
In the last three years, the Transportation Department has told airlines they can’t hold planes on tarmacs indefinitely and that they must return them to terminals or face huge fines. It’s required airlines to reimburse passengers with more money if they’re involuntarily bumped from flights and if their bags are lost.
The department also ordered the airlines to post their baggage fees clearly on their websites. But the new rule goes further by forcing them to disclose baggage fees when tickets are booked. The rule is designed to prevent passengers from having to wait until they get to the airport to pay the fees, which can hit $25 or more for just the first bag.
Even sophisticated frequent business travelers see some sense in the new rules, even though many of them avoid paying baggage fees because they’re members of elite frequent-flier programs or have company travel managers or agents book their flights.
“I don’t like any surprises when I get to the airport,” says Clarissa Cervantes, a research associate in Beverly Hills who flew nearly 100,000 miles last year, mostly for business.
“I think the overall issue is trust,” says Navy Capt. Stephen Maronick, who works in personnel services in Guam and who avoids luggage fees as a million-mile flier with United and Continental. “The airlines are supposedly in a customer-service business, yet their practices are more akin to snake-oil salesmen and payday loan purveyors.”
Paul Ruden, senior vice president for legal and industry affairs for the American Society of Travel Agents, says $25 to $50 baggage fees alone make it hard for customers to shop.
“It’s not a trifling thing,” Ruden says. “If you’re a family of four, it really becomes potentially prohibitive if you don’t know what you’re doing.”
The other side
The airlines say it’s unfair to make them include government taxes and fees upfront as part of ticket prices.
Steve Lott, a spokesman for Airlines for America, says customers are used to buying everything from groceries to electronics with the taxes added on at the cash register.
And, they say, the fare disclosure rule may result in less price specificity. Because government fees vary depending on how many stops a flight makes, airlines probably will have to advertise fares in ranges.
For example, a Southwest passenger from Houston to Las Vegas has four choices of flights: a non-stop, stopping in El Paso, changing planes in Albuquerque or stopping in San Antonio and changing planes in Phoenix. But what has been advertised as a $192 fare under current rules would become a range of $201 to $212, making it harder to advertise and sell.
“For most of Southwest’s markets, it will similarly be impossible to advertise a single accurate price to cover all possible itineraries between the passenger’s origin and destination cities,” Southwest says in its court filing.
Tickets include a 7.5% excise tax for the Federal Aviation Administration, passenger facility charges up to $4.50 a trip segment and a security fee for the Transportation Security Administration of $2.50 a segment. A flight from Peoria, Ill., through Chicago to Raleigh, N.C., for $238 in airfare hits $300 with taxes and fees.
Airlines contend that forcing them to reveal the $300 total cost upfront prevents them from exposing to consumers the government’s sizable share of a ticket’s price.
“We think that’s wrong,” says David Berg, general counsel for Airlines for America. “It’s a limitation on our speech, both commercial and political.”
The industry also says the rule isn’t needed because customers rarely complain about advertising for ticket prices. The Transportation Department averages 7.7 complaints per 100 million passengers, compared with a one-in-a-million chance of getting hit by lightning, according to a legal argument the airlines filed in the case.
But government regulators and consumer advocates say the full-fare rule is needed to combat the splintering of prices.
“You can’t confuse consumers about the actual price they are going to pay,” says Robert Rivkin, the Transportation Department’s general counsel.
Arthur Sackler, executive director of the advocacy group Open Allies for Airfare Transparency, a coalition of consumer groups, says, “It’s important to be able to compare that all-in price on an apples-to-apples basis.”
Information on changes
The new set of rules includes one that requires the airlines to give passengers prompt notification about flight cancellations, diversions or delays of more than 30 minutes. Another prevents the airlines from raising the price of a ticket after it’s been bought.
The airlines fear that the government isn’t done regulating them. The Transportation Department is expected to propose in August a rule requiring the disclosure and payment of more fees — such as those for early boarding, special seat assignments and meals — be bundled into a ticket’s price.
“What has happened recently in the industry is we are seeing many more fees broken out in the price of air transportation,” says Rivkin, the general counsel at the Transportation Department. “There are some airlines that have gone to extremes.”
That next proposal could also allow travel agents and third-party sites such as Expedia and Travelocity to sell the extra services to customers rather than direct them to the airlines and their websites to purchase them.
“If these proposed rules are really consumer protection rules, it’s difficult to see how allowing the carriers to hide the ball — which is what’s happening — is the right outcome,” says Brent Thompson, Expedia’s vice president for government and corporate affairs.
But forcing airlines to provide pricing that way may be going too far, some legal analysts say. The airlines note that they already must post prices for services on their websites.
“I think they’re a long way from ever being able to implement that,” says Kenneth Quinn, an aviation lawyer with Pillsbury Winthrop Shaw Pittman in Washington, D.C.
“There is going to be a lot of resistance to those rules.”
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