A Look at the New DOT Rules That Foreign Airlines Hate

Last week, the Department of Transportation (DOT) rolled out a bunch of new rules the are supposed to make the passenger flying experience better. On many of these, it seems downright silly that the government is involved, but there are are a few kernels of good in there surrounded by a sea of . . . well, not much useful at all. In fact, I would say that unless you’re a foreign airline, there’s actually very little that’s bad in here in general, though some of the so-called “passenger rights advocates” are probably steaming about some of the things that were left out. (You can read the final rule here.)

Let’s go through the changes. All of these go into effect in mid-August with the exception of the advertising rules which don’t go live until October.

Tarmac Delay Rules and Customer Service Plans Go International
When I said that there wasn’t much bad in here, I was mostly referring to the position of domestic airlines. For foreign airlines, this is a nightmare, and in fact, many contend that it’s not legal. The DOT shrugs it off, but this is likely to go to court since the foreign airlines don’t believe the US has the right to impose these rules upon them. Assuming it stands, here’s what happens.

Going forward, the long ground delay rules will now apply to foreign carriers that have the right to pick up American DOT Channels He-Man, Overregulatespassengers on US soil. The only difference versus the rule as we know it today for US airlines? Foreign flights can sit on the ground for four hours before being penalized instead of the three in the current rule. Of course, most of the ones that have gone this long are usually related to customs and immigration problems. Coordination between the airlines and customs/immigration is now required as part of this rule.

Some of these rule changes really don’t matter at all. The ground delay rule, for example, will now also apply to all commercial airports in the US, but that doesn’t really matter. The problems are at the big airports where the rule was already in effect anyway. And airlines are now required to announce if passengers can get off the plane if they’re at the gate. Um, ok.

One thing that seemed to be a victory for passenger rights folks was the requirement that the long ground delay plan offered by the marketing airline would apply and not that of the operating airline. So if you bought a ticket on US Airways as a codeshare on Continental, then you’d now be subject to the US Airways policy. This, of course, is completely insane. Can you imagine if you have a passenger from every single Star Alliance airline codesharing on a United flight? There is no way that United could obey all of the different plans. So the DOT gave them an out and completely gutted the rule change. If the marketing airline says in the contract of carriage that the rule of the operating airline applies, then that’s just fine. So nothing will change here.

I do like the rule that requires update notifications on delays every 30 minutes. I mean, it’s a worthless rule since most airlines have a policy of updating more frequently than that anyway. If it’s not always obeyed now, this probably won’t change anything. You can’t make every single front line employee obey this very easily.

We also are now going to see foreign airlines being forced to adopt the customer service plans that US airlines already have. You know these (here’s Delta’s just in case). These are the rules that allow you to either cancel without a fee within 24 hour of purchase or hold it for 24 hours before purchase (now required only if booked more than a week in advance), they require prompt responses for complaints, etc. Now foreign airlines are going to have to develop these as well. I can’t wait to see how the DOT enforces this with some of these airlines. I do, however, like that these along with the contracts of carriage must be posted on the foreign airline websites.

One thing that the passenger rights people really wanted was a requirement to have this customer service plan put into the contract of carriage. The DOT denied that.

The Bag Fee Refund Rule Has No Teeth
We talked about the proposal to require airlines to refund bag fees if bags are lost or delayed here last week. Now the rule is out and it’s not nearly what it could have been. Bag fees now must be refunded only if your bag is lost. In other words, the rule suggests that you are paying the airline to deliver your bags, not deliver them on time. So if the bag is never delivered, you get your money back. That’s it.

Denied Boarding Compensation Goes Way Up
I wrote about this over on CNN this week, but in short, getting bumped gets more lucrative. Instead of getting 100 to 200 percent of your ticket value up to $800 you’ll now get from 200 to 400 percent of your ticket value up to $1300. You can see more about why this is good and bad over at CNN.

Full-Fare Advertising Now Required
One of the bigger changes is that advertisements now must include the full fare amount, including all government taxes and fees. Previously, airlines could advertise excluding some of the additional government charges as long as it was in the mice type at the bottom. Though requiring taxes to be included in fare ads is not something you see in many other industries, this one isn’t a bad rule. If it does actually apply to fare displays on websites, then it’s a good thing. There’s nothing I like less than seeing a fare in the booking process and then having a bunch of taxes and fees added on at the end.

Tightening Rules on Fees
One of the things that the DOT tried to do here is create some rules around how fees should be treated. Here’s a run down of what will change.

  • Ancillary services that are added in at the end before purchase must be “opt in” and not “opt out.” In other words, if you see that box asking if you want travel insurance, you have to physically click on it or it won’t be included automatically as is sometimes done today.
  • If bag fees change, then the change must be displayed on the homepage in some fashion for three months. In fact, there needs to be a permanent link on the homepage with a link to a page that shows all fees in general.
  • All bag allowances must be included on the e-ticket receipt for every airline including the fee structure for bags. And if you’re traveling on a codeshare, then it must be noted which airline policy applies to the entire journey. (It can’t be multiple policies.)
  • If a flight is canceled, the airline must refund fees unless the passenger is able to get that same service on a later flight. In other words, if you check a bag and are canceled, but your bags go on your rebooked flight, then no refund is needed. But if you paid for premium economy and then you get kicked back to economy on your new flight, that upgrade charge will be refunded.

Allegiant Loses the Flexible Fare Battle
You might remember Allegiant’s spirited defense of the right to be able to increase fares after a purchase is made if the passenger agrees in advance. I saw nothing wrong with that plan, but that’s not happening. Post-purchase fare increases are now banned.

DOT Doesn’t Get Involved in the GDS Battle
Yesterday, I wrote about the escalating battle between the airlines and the global distribution systems (GDSs). The DOT could have inserted itself into that battle by requiring that airlines disclose all their fee information in a standardized format to the GDSs, but it didn’t. It is not going to require airlines to disclose fees in that way to the GDSs.

Overall, many of these changes are minor and won’t have a big impact. There is some good in here too, but ultimately, I think it’s more for show than anything else. The DOT wants to look like it’s really working hard here to be on the side of the passenger. It looks like it is, but most of these changes are pretty weak at best . . . unless you’re a foreign airline.

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29 Responses to A Look at the New DOT Rules That Foreign Airlines Hate

  1. Bob K. says:

    Big loser here for domestics is defintely Allegiant.

    In addition to the ability to increase the fare post-purchase (which AFAIK they aren’t doing now, and therefore shouldn’t kill them), they’re going to get a lot less in ancillary fees & revenue. (I’m making the assumption here that “ancillary services” includes all other fees- bags, early boarding, etc etc.)

    If you’ve ever booked with Allegiant, you know that it takes the eye of an auditor and the stamina of a quarterhorse to check that you’ve opted-out of every possible fee (all of which are conveniently checked for you, hmmm…), and then some.

    Assuming the assumption above is correct, Allegiant can expect to take a significant hit in revenue from not being able to tap the “careless travel-booker” market as effectively, which probably has a significant overlap with the ultra-cheap leisure market it targets.

  2. I’m sort of curious what’ll happen with the “Coordination between the airlines and customs/immigration is now required as part of this rule.” piece. What happens if the airline makes a good faith effort and customs/immigration don’t hold up their share? Thats probably far more likely that people would like to admit..

    Although, I’m with Bob, Allegiant will need to figure out how much money they’ll end up losing as a result of this, although I would’ve liked the flexible fare from an interesting product standpoint..

    • CF says:

      Well, who knows about the coordination piece. If something happens, they’ll both blame each other. But they certainly should be talking. The way it’s worded, it puts the duty on the airlines to coordinate with the government, so you can probably assume that blame will far on the airlines if something happens.

    • Ron says:

      I was once on an international flight to JFK that diverted to EWR, sat on the ground for 3 hours without letting anyone off (they claimed they couldn’t get customs and immigration), then flew to JFK. How long is the “ground delay” then? Does the clock start when you hit the runway of the diversion airport (EWR)? Does it continue or stop when you take off to get to the destination (JFK)? Does it continue or reset upon touchdown at the destination?

      Do unscheduled fuel stops also count as ground delays? Is the effect cumulative, that is, does a 1-hour fuel stop reduce the amount of ground delay you’re allowed later? That particular flight, on top of the diversion, also had a fuel stop at SNN (long before customs preclearance in Ireland).

      I know that as a passenger, it doesn’t really matter to me whether I’m delayed on the ground or in the air, and whether I’m sitting on a runway at the destination or the diversion airport (except that in that particular case, getting off after the diversion to EWR would have been a lucky break, since my final destination was in New Jersey).

      • CF says:

        Let me see how many of these I can answer:

        I was once on an international flight to JFK that diverted to EWR, sat on the ground for 3 hours without letting anyone off (they claimed they couldn’t get customs and immigration), then flew to JFK. How long is the “ground delay” then? Does the clock start when you hit the runway of the diversion airport (EWR)? Does it continue or stop when you take off to get to the destination (JFK)? Does it continue or reset upon touchdown at the destination?

        On this one, the ground delay is when you touch the runway and then when you leave again in one place. If you were stuck on the ground at JFK for another three hours, it would have been two three hour ground delays.

        Do unscheduled fuel stops also count as ground delays? Is the effect cumulative, that is, does a 1-hour fuel stop reduce the amount of ground delay you’re allowed later?
        Since your fuel stop was outside the US, it wouldn’t have had any regulation on how long it sat there. And no, it’s not cumulative anyway.

        • Ron says:

          So anticipating a ground delay upon arrival, an airplane is better of circling in the air than landing and waiting. And in a long ground delay due to lack of gate space, a plane can escape the fines by taking a little spin in the air…

  3. Jonathan Kreiss-Tomkins says:

    I dunno if I agree with the “no big deal” take on these regs. A couple of them, minor as they may seem, address problems that have really rankled me, namely the ancillary services being opt-in not opt-out and required full-fare advertising. These are things that are fundamentally dishonest in their own little ways; airlines should never have been doing them all along. It’s just unfortunate that they have to be addressed by way of the heavy, somewhat maladroit hand of U.S. DOT.

    • Adam Goers says:

      I agree these are regulations dealing with serious issues. the corporate world likes to act as thought government puts out regulations just to prevent them from making money, and airlines are no different. The reality is government puts out regulations to make sure airlines are safe and that they aren’t making money on the backs of consumers. For example Allegiant if you can’t stay afloat without an opt-out button for all of your extras then you shouldn’t be in business.

    • CF says:

      Oh, I agree with you on the opt-in vs opt-out. I HATE opt-out. But it’s not a huge change when looking at the industry overall. I do agree that there are some good things in here.

  4. As a whole, I like these changes. They seem to be steps in the right direction!

  5. Like anything some of the rules will be good and some not. Having to opt-in to purchase something is better then having to opt-out.

    Not sure how showing all the taxes, etc in ads will work since you could be routed differently to get between point A and point B and different taxes would apply. If a print ads says UA SFO to PHL for $$$ how can they know the total price as you could be routed via IAD with a $4.50 PFC or via IAH with a $3.00 PFC. And if that rule also applies to international market it would never work since you could be routed via different counties with any airline and each country has their own taxes. That rule will have a problem.

    • CF says:

      Great question about taxes. I would assume that the lowest possible fare could be advertised. So if there’s a nonstop you can use those taxes. But I didn’t see that addressed in the rule itself.

  6. Tim N says:

    The new TARMAC rule is not longer just for medium and large hub airports, but all commercial airports?

  7. Dan says:

    You know what? I’m happy to see denied boarding compensation go up. I do know that the airline has the contractual right to bump me because of oversales, but if they do, they should pay dearly for it. Basically, they’re exercising the right to not perform on their contract with me, and I don’t think they should get off lightly. They have no problem taking $150 to change a ticket months in advance if my plans change, don’t they?

    But I don’t think this is going to impact fares much. First, the airlines do solicit volunteers, but they pay them with funny money — airline credits that don’t impact their balance sheet much, and may very well go unused.

    Second, if the airlines bump the lowest fares first, many of the tickets don’t have that much value. Oh, this begs the question: As carriers become more and more fee laden (ala BA and RyanAir, Allegiant, and Spirit) can they hide behind the fact that the “base fare” is very very low? If I purchase a ticket that is comprised of a $250 fare and $250 in fess, charges, and surcharges (BA’s actual wording on their site) what value comprises the basis for the DB-comp?

    Finally, yield management strategies keep getting better and better. For the example that you provided (rose bowl) the airlines have to know that with major events, they need to revert to an alternate overbooking strategy. If they don’t, shame on them, and they *should* pay out the whazoo for that.

    • CF says:

      It will likely increase fares to some extent, but I don’t know how much. Airlines use models to determine how much to overbook, and if the costs are higher, then they have to be more conservative about the process. So even though the number of people who actually get bumped involuntarily is small, the airlines have to consider the possibly for all flights, even if bumping wouldn’t have happened in the end.

      They are very good as special events – that Rose Bowl example was just a random example. But in the end, people aren’t completely predictable. The airlines are great at predicting, but they’ll never know the magic number so there will always be that variability to cause problems.

      On the amount of compensation, it’s on the paid fare and not fees, I believe. So that would help some of the ultra low cost guys.

    • Frank says:

      Written by Dan on April 26, 2011.
      Reply You know what? I’m happy to see denied boarding compensation go up. I do know that the airline has the contractual right to bump me because of oversales, but if they do, they should pay dearly for it. Basically, they’re exercising the right to not perform on their contract with me, and I don’t think they should get off lightly.

      Overbooking is a good thing. It guarantees flights go out full as possible. Many industries use a book it or lose it contract. Imagine the airlines using that method, you miss the flight, you’re ticket is worth nothing.

      • Dan says:

        Don’t get me wrong, I’m all for overbooking. There were years when have of my elite travel was paid for with VDB credits. Loved it!

        However, I *am* referring to the times when I choose not to volunteer, and in which case, the airline should be penalized for not performing on their contract. They have no qualms penalizing me when they’ve suffered no real damage (a change months out) but a change to my itinerary day of departure likely has significant consequences.

  8. JayB says:

    Assuming the world doesn’t end, May 21 (I guess that’s just the Rapture date) and everything else doesn’t end October 21 (the end of the end, I believe it is), I predict we will be writing regulations, commenting on their merits, looking at the GDSs, commenting on them, commenting on the comments, making sure the application applies equally to code-shares, foreign and domestic (excepting the District of Columbia, as it’s not a State) with proper disclosure, subject to change, guaranteed lowest fare, unless otherwise noted., forever……..!

    The airline industry…pricing, marketing, fare distribution, treatment of customers…is there any other industry quite like this one?

    But, I read on…!

  9. Bobber says:

    The UK UA site has already reverted to full fare advertising on the front page, which is a modest improvement, but it still shows fares minus fees when you search for specific flights.

  10. Ian L says:

    On the full-fare side of things, Frontier doesn’t advertise full fares but when you get to the actual flight booking page everything they show is full-fare. Which is nice.

    Southwest delays showing full fares until later in the process. But the benefit of this is that reward tickets are cheaper on their new point system than full-fare. So a $100 flight DEN-SAT gets billed as 89 x 60 points instead of 100 x 60. OTOH, you earn points on the not-quite-full fare vs. the full fare, so it balances out…unless you’re getting points through other means (credit card is a biggie).

    Just thinkin’…

  11. Jim says:

    I’m sure there is a legal way around the prohibition on flexible fares. Perhaps they could make you pay a higher fare and then give you a refund if gas drops below a certain level. That would put off a lot of customers, but it might be a good marketing tool.

  12. Fred says:

    An interesting idea…
    Since now there will be harsher penalties for overbooking, what if airlines started to sell seats that were not guaranteed? Sort of like standby but not necessarily for last minute changes? I could imagine an airline selling a ‘standby-like’ cheap ticket, which could guarantee that you would get to your destination sometime, but if the flight you were planning to take is overbooked, you would be put on the next flight without the normal compensation since you were never confirmed on the first one.
    Of course it would be complicated to implement and and there may be other rules against it, but $1300 is a lot for airlines to pay for compensation.

  13. tharanga says:

    Most of these seem reasonable.

    The compensation for involuntary bumps had gotten to be too low – so low that I thought some airlines were starting to fly through the volunteer call perfunctorily, so they could go straight to involuntary bumps. Those look bad on the customer service stats, but maybe they’d gotten cheap enough to alter the incentives.

    Totally agree on opting-in for extras, and on advertising with taxes and fees included. Gasoline and cigarettes have special taxes on them; the price I see at the store includes all that, so I don’t think aviation is being singled out here.

    I wouldn’t at all say the bag refund fee has no teeth – it’s downright indecent to not get a refund when they flat out lose your bag.

    Mainly though, I wanted to see the extra fees taxed. Going from all-inclusive pricing to a-la-carte pricing without taxing the fees is simply tax evasion. What’s to stop Spirit from charging a $1 fare and a $100 ‘seat fee’?

  14. Simon says:

    Opting in is certainly the way forward, perhaps a truer fare breakdown including every cent of the taxes, to allow greater comparability between airlines.

  15. Jim says:

    Maybe I’m confused, but aren’t airlines already required to provide compensation for lost bags?

  16. Pingback: Airlines and Their Love Affair with Fees | Happy Travel Spot

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