I’ve been following this one closely, but I haven’t written about it yet. The Department of Transportation (DOT) is trying to require additional reporting requirements for fees. As you may know, DOT requires airlines to report limited financial data publicly, even if the companies are private. As part of that, some limited fee info has to be broken out, like change fees and bag fees. But now the DOT wants to require much broader reporting that will include everything from blankets to drinks, all broken out separately.
Does the government have any business requiring such detailed disclosure? What really is the purpose of it? Chime in below.
21 comments on “Topic of the Week: Should Additional Fee Disclosure be Required by DOT?”
Hi Crank, Too bad you didn’t get to this earlier (proposed 7/15/11 end of comments 9/13/11) while any insights gained might have done some good. While I’m a big believer in price transparency (free market and all that) and for all I know all prices are easily and clearly available (not my personal experience), the intent of these proposed regulations seems to be better QoS (quality of service) metrics, financial stability reporting and “impact of the increasing use of these fees on the Airport and Airways Trust Fund”. The latter may be very important depending on how payments are calculated. Perhaps you could offer some insight as to how carriers/passengers are charged and how the different fees impact these charges.
Tom,
That sounds like BNET territory, but I second that one. If the airlines are using fees to skirt taxes, that can make it a government issue.
Airlines aren’t using fees to skirt taxes – the feds have set the rules and they can decide what if any changes need to be made to those rules. They don’t need exact numbers for every fee unless they’re trying to hit a revenue target. That doesn’t seem like a good way to decide how to tax these things in my mind.
If it helps the government more in accounting the fees and maybe charging taxes on them, then fine. From a passenger standpoint it would matter much though.
What I would like to see at American carriers is the fuel surcharge separated a la British Airways. That way customers see how much of the cost is fuel and understand that airlines aren’t actually gouging them all the time.
Fuel taxes are shown on a ticket as a Q charge by some airlines or coded YQ and/or YR by others. So you can see how much you are paying if you see a complete fare breakdown of what you are paying which you are entitled to. If you have a paper ticket just look at it, if you have an eticket your travel agent or the airline can print a copy for you to see.
No one should act like they don’t know, it all there for you to see if you ask. The problem is not everyone knows what they are looking at since so much of the airline industry uses 1-2-3 letter codes to mean different things.
I think airlines are charging for a lot of things knowing they keep the money. I go buy a blanket in the store and will be charged a tax since I live in a state with sales tax.
Airlines know about what they can charge before people will just stop buying that extra item (blanket, food, drinks, etc). So they know if they had to collect a tax on top of their price people might say no to the purchase, and if they just include it in the same price they charge now, that means less money for them.
Maybe the Feds should start saying why are you charging a $40 fare and collecting $200 in taxes and fees on it.
I’m a big fan of disclosure, unless it involves meaningless trivia. If airlines keep track of these items internally, is it that much of an extra burden to report it to the DOT and /or disclose it to passengers?
I think regulation should have three characteristics; simplicity, meaningfulness and transparency. Keeping regulation simple makes it easier to comply with and easier to enforce. Regulate the things that matter, not every little crossed “t” or dotted “i.” And disclose what should be disclosed in a simple and straightforward manner. If a regullation doesn’t meet those three criteria, it should be questioned.
Keeping regulation simple meaningful and transparent also makes it less expensive. Companies and the government shouldn’t need a small army of lawyers and accountants to comply with or enforce regulation. On the other hand, I often wonder if all this complexity isn’t simply a make work program disguised as something important. In any event, there’s no free lunch. We end up paying the bill one way or another.
There is some burden, as what mentioned in a comment below, but really it’s commercially sensitive data. There is no reporting requirement to break out revenues in such detail for public companies in general, so why should the airlines have to break it all out? That’s what I don’t get. I’m not sure why the feds need this broken down so intricately. Who cares? If they want a lump sum for fees, then that’s a different story. I can see that since fare revenue is taxed while fees are not. But the full detail seems unnecessary.
I agree with you. that’s what I meant when I wrote about “meaningless trivia” above. Commercially sensitive data should be off limits unless there’s a meaningful public interest served by its disclosure.
As fares alone become more and more irrelevant as a comprehensive measure of PRASM, DOT is understandably interested in standardized reporting of the growing number and amount of fees that make up the rest of the “take” and out of pocket cost of air travel.
Without question, passengers should know what they are paying for. Adding charges for items that were bundled into airfares while increasing fares is nothing more than increasing profits unless specific fees are itemized. If I offer my services to a client, I am obliged to explain what services my fees cover. Simple!
Just to be clear, this has nothing to do with the passenger. Fee disclosure requirements are already out there. This is simply about reporting all the fee revenue in great detail after the fact.
I’m all for transparency, details, details. The airlines should break down ALL the fees and surcharges and report them. I’m sure the airlines’ bean counters keep track of every penny coming and and going out.
Don’t forget that while financial data reporting may be limited in nature, the longtime quarterly reporting by airlines of advertising, food, maintenance and other expenses, plus extensive block hour and fleet data, is unprecedented in any industry.
And the other side to those who support more fee disclosure is would they be willing to pay higher ticket prices for it – which is what will happen. In ATA’s filing it noted that one airline would spend $2 million just to satisfy the DOT requirement for airport lounge revenue reporting data, since no system exists.
I’d love to know how that airline came up with such a figure, and how much cost and effort was put in calculating it :-)
Since I worked on analyzing this issue (American Aviation Institute) I can tell you that the $2 million was for an airline to create software to track this in the specific detail the government wants, plus cost to reprogram your web site, plus the cost to train those in all cities where they have an airport lounge that they now have to track specific visitors by class type. Multiply that by ~10 workers each lounges at 100-150 lounges, and you get the picture.
Honestly, I’ve found that within the past year or so, airlines have been quite good at disclosing fees. On the airline websites that I’ve looked at recently, only Southwest doesn’t include mandatory fees, and all others do when you select the ticket. And for anything that really is optional (despite how much people complain about it, such as checked bags), they are easy to find assuming you have a few hundred brain cells.
If the DOT wants disclosure in a certain way, they can ask for it, but I think the system currently works well enough with the more general false advertising laws and the like.
As I understand it, federal law gives DOT the authority to ask for just about any data it wants from the airlines. This per authority remaining under the Deregulation Act of 1978.
Now, DOT says in its Notice of Proposed Rulemaking, it “…wants to make airline pricing more transparent to consumers and airline analysts.” This is a DOT initiative and responds, it says, to recommendations of the Government Accountability Office. [You know, just about everyone of GAO’s requested studies makes a recommendation: “More Data Needed.”
So, here’s DOT acting. Some people agree; some don’t. Example, the travel agents’ ASTA says OK; the travel agents’ ARTA says no.
Of course, the airlines themselves always argue against just about every DOT proposal for more data: it’s too costly, too much work, won’t work, unnecessary, and of course, our customers don’t care anyway!
Great! Go to it DOT, I say. Now, if the airlines want to go to Congress and ask for the end to all DOT economic regulation, are willing to accept the end to federal preemption over State regulation, and are willing to forego all ailine antitrust immunity, maybe I’d go along with that, too.
Here is my question. Why?
If I make. . . .oh lets say beer. Who cares how much the glass, bottle cap, taxes, carboard, etc. costs?? Will that really change your mind on purchasing the item??
If the airline can get me from point A to point B in the most convienent, cost effective way, with decent customer service then guess what: They get my buisness. I could care less what the spend on barf bags or tires or tonic water.
The purpose of extra, mostly useless, bookkeeping? a) to give the government more control so they can hire more government employees and b) to furnish more opportunities for legal action. Think of those poor lawyers who need to pay their mortgages, they need work.