DOT Taps the Brakes on Airline Fees

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When I read recent news reports about new DOT regulations requiring airlines to post their fares more transparently, it suddenly occurred to me that the industry is drifting inch-by-inch back toward the regulation it threw off during the 1970s. At the time, the theory was that airline regulation, then overseen by the CAB, was a great anchor on free enterprise and eliminating it would stimulate the industry.

The long-term results are a mixed bag at best. The end of fare regulation did stimulate competition, giving rise to a host of discount airlines that have come and gone and even prompting a couple of major airlines to try their own in-house, no-frills operations. But Delta's Song and United's Ted were miserable failures, suggesting in part that maybe fare regulation wasn't so bad after all or maybe the market can absorb only so much discounting.

DOT's new regulations don't go nearly that far, of course. And let's be honest. The regulation is more good politics in an election year than any great stride for the consumer, but it is nonetheless in response to angry customers fed up with the airlines' latest cash cow trick: tacking on hidden fees to a low advertised price. You know the drill. An airline offers a $199 fare to somewhere, but when all the hidden fees are thrown in—taxes, passenger facility fees, baggage and so on—it's more like $250. The core of the complaints relate more to unbundling than to add-ons like excise taxes and facility fees. A diligent search will reveal the taxes, but other fees are harder to find.

If you book online, as most of us do these days, the popular sites vary in their degree of transparency. I use Orbitz and its format is reasonably clear on the taxes and fees, although baggage fees aren't conspicuous. Travelocity and Expedia small-print the fees, but you can find them if you look. The airlines are unhappy with this new regulation because they claim fare add-ons aren't uniform and can't be predicted. They point out that retail merchants don't have to add taxes and fees to their advertised prices, so the airlines are being treated unfairly. But what they're really saying is to hell with the customer, we think it's our right to engage in bait and switch. One airline industry group said the new rule is an infringement on their free speech. Please.

The second aspect of DOT's new regulation is that customers will have the right to cancel or change a fare within 24 hours without being charged a fee. I applaud this one, because more than once I have made a mistake on a trip date and realized it the next day. Under the current rules, the change fee kicks in instantly and the airline whacks you for up to $150. I remember when it used to be $25, and that wasn't that long ago.

Again, the airlines don't like this because it's an easy way for them to tap the customer's wallet at little or no cost to them. One airline spokesman complained that this will cost the airline because as a discounter, it gets most of its bookings within a week of the scheduled flight. So? Raise the fares to account for it. That's a fairer, more transparent deal for the customer.

I doubt if we're headed back to days of regulated fares and the route and airport oversight of the 1960s, although that system had a certain merit. In the end, less regulation is better than more regulation. But when less is too little, the airlines have shown they are more than willing to abuse their customers to make a few bucks. I'm more than happy to have DOT step in and tap the brakes on that trend.

Comments (10)

I hate government regulations and think most of the bureaucrats should be encouraged to find productive work for some other employer. That said, the airlines are getting a bit overboard on the fare bait and switch tactics. Besides the unbundled fees, they are changing the basic rules enough to make it difficult for occasional travelers to understand what they are buying with their fares.

I recently discovered that on top of the fees the airlines are now charging different fares for different seats. After nearly paying for a ticket I discovered the only seat I could get for the fare I chose was a middle of the row seat in the middle of the plane. I could have a much nicer seat, but I would have to pay twice as much fare to get it.

I suppose travelers should get used to this and airlines should be free to make life miserable for their customers as much as they want. After all the government already makes air travel miserable with the TSA.

I don't like government interference in free enterprise tactics that customers voluntarily choose and I don't like any company that uses tactics to confuse and manipulate their customers rather than cherishing and pampering them. This is a lose/lose situation that is certain to leave me unhappy no matter how it comes out.

Posted by: PAUL MULWITZ | January 16, 2012 3:39 AM    Report this comment

While sucking more money from traveler's pockets is no doubt ONE of the reasons that the airlines have been adding all sorts of fees and increasing the fees that they charged in the past, there's another hidden agenda that hasn't seen much exposure in the press. This is the fact that the "ticket tax" the airlines pay to the FAA in lieu of the fuel taxes the rest of us pay don't include most if not all of the added fees. IOW, all the while they scream to the FAA that GA isn't paying their "fair share" they've been cutting their FAA fees in an underhanded way. It wouldn't surprise me to find in the not too distant future that for the average airline passenger, the total fee's charged per flight exceed the ticket prices.

Posted by: LANCE FISHER | January 16, 2012 9:42 AM    Report this comment

The worst example of this kind of abuse I've ever experienced was with "Spirit" airlines (PDX-LAS). Amazingly low fare...oh, but did you want to actually reserve a seat? --> extra charge ...oh, did you plan to bring a carry-on bag? --> $30 more each way (forget about checking a "real" suitcase unless you want to spend another $60...) Somehow I was roped into "reservation insurance" ... $30 each way, then all the other fees they blame on the airport, FAA...The final price was well north of TWICE what I expected to pay.

Posted by: ANTHONY NASR | January 16, 2012 1:53 PM    Report this comment

The fractional company I fly for airlines crews to the aircraft they are assigned to fly. I have said this before that this is the worst part of my job. The company pays for the airline ticket but does not reimburse crewmembers for fees for checked bags, extra legroom seats, etc. This must drive other business travelers and company travel managers nuts also. Until the airlines quit this "commodity" pricing game and actually charge what it costs to operate their aircraft nothing will change. Maybe making changes to the bankuptcy laws would help this issue, but I am not holding my breath on that either.
I am not shedding any tears over the new DOT pricing requirements. The airlines brought this on themselves.

Posted by: matthew wagner | January 16, 2012 3:33 PM    Report this comment

"The long-term results are a mixed bag at best."

On what planet are they mixed? As a consumer, even with all the BS fees, I generally pay less on the routes I fly (major, coast-coast and transatlantic) than I did over 20 years ago. I can pay for more legroom and travel in comfort and after adjusting for inflation the fare is a basement bargain compared to what it was then. There are flights available all over the place, on routes that wouldn't even have been approved under regulation.

Yes, it's been tough on the once hyper-profitable airlines, and sometimes airlines fail. That's what competition is supposed to do - deliver most of the benefit to the consumer.

As for the current trend of bait-and-switch, it won't last long: airlines will segment themselves into those who can charge a premium to customers who don't have time for it, and those whose customers will take the time to learn the rules, to get the advertised fares. Some of the problem has to do with the way the travel web sites are set up: they're poor at letting you pre-select "no middle seat," "no seat pitch under x inches," "at least 2 free checked bags" and so on.

Change is confusing for everyone; but bad behavior has no long-term future in the commercial world, whether DoT steps in or not.

Posted by: Thomas Boyle | January 17, 2012 9:08 AM    Report this comment

How about planet Earth?

Deregulation brought lower fares, but also caused the airlines to abandon smaller markets so you couldn't fly to as many places as you could before. Massive over expansion and fuel cost spikes caused the airlines to develop a trend they still follow today: Flying around seats at below cost.

Deregulation also brought the hub-and-spoke system whose block arrivals and departures forced ATC to build out its system for peak volume, thus all the massive runway capacity then (and now) was either overtaxed or underused. Hub-and-spoke wasn't done in favor of the passenger, it was done in favor or airlines trying to make the most bucks. Or to just survive by, as Bob Crandall used to say, being clutched at the throat by the dumbest competitor.

Deregulation brought lower fares and more competitors and you can fly to lots of places, but only those places where the airlines could make money. So we ended up with the Essential Air Service government subsidies. In any case, where you are today is you pay less money for much worse service and you can't fly as many places. Worse service being the seat pitch of a Roman slave ship, among others.

Bottom line: The results were mixed. Some good, some bad. That's not an argument for re-regulation, but the free market you might imagine always providing better products and services sometimes doesn't.

There are many who believe the air transport system of 1975 was better than that of 2012. I can see the point.

Posted by: Paul Bertorelli | January 17, 2012 11:04 AM    Report this comment

Oh, I almost forgot this one. Before de-regulation, the starting pilots for what then passed as regionals could earn a living wage. They can't now, primarily because the regionals are probably over expanded into what profitable routes exist and they continue to compete by selling seats at or below cost.

Posted by: Paul Bertorelli | January 17, 2012 11:14 AM    Report this comment

Before airlines were deregulated they were a mature industry. With deregulation the industry had to completely reinvent itself, did anyone involved not see the trainwreck coming from that? Huge rigidly structured corporations, masses of employees, generous union contracts, billions of dollars invested and a totally regulated environment suddenly turned to chaos. Sure there was some time to plan, but how could they plan for a completely unfamiliar and unknown new world? What is surprising is how long it is taking to sort out and how poorly the airlines have managed to adapt.

As to the toture by a thousand fees, the airlines have to be purposely trying to enrage and alienate those damned annoying customers.

Posted by: Richard Montague | January 18, 2012 8:44 AM    Report this comment

"What is surprising is how long it is taking to sort out and how poorly the airlines have managed to adapt."

Stated that way, this is surprising. More than 30 years now and if anything, the public perception of airlines seems to decline each year.

What has also changed during the same period is U.S. management style, which is now ruled by short-term, bottom-line MBA thinking. There was less of that during the 1970s.

Someone wrote me an e-mail and said I missed the point entirely. What we're seeing, he said, is the evolution toward an unmanned cockpit and the fully autonomous airliner.

Be a while before I'd be willing to get on one of those.

Posted by: Paul Bertorelli | January 18, 2012 10:24 AM    Report this comment

Wistfully thinking back...Pan Am Flight 1...round the world...New York to New York...747 First Class...first stop LAX........

Posted by: Edd Weninger | January 19, 2012 5:18 PM    Report this comment

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