The DOT’s Latest Proposed Rulemaking is Surprisingly Not Terrible

Government Regulation

Those in the airline industry have been waiting for the Department of Transportation’s (DOT) latest proposed rulemaking with a mix of fear and dread. After all, the DOT has, of late, spewed forth garbage rules that are costly and not actually helpful. But, as I discussed yesterday, when the DOT put out its latest proposal, something strange happened… it wasn’t all that bad. In fact, there’s even a lot to like in here. I can’t believe I’m saying that. We already talked about the fee disclosure issue yesterday, so today let’s focus on the rest. First up is my favorite issue – improving airline reporting metrics.

DOT Good Fare Rules

Make More Airlines Report Their Performance Information, And Make the Data WAY More Useful
This is the best change of the bunch without question. Today, DOT requires airlines to report their on time performance, their mishandled bags rates, etc. But DOT doesn’t actually mandate this for all airlines, and the way it’s presented isn’t always useful. Now, there are three changes being proposed which would make it much better.

  1. More Airlines Will Have to Report – Today, there’s an arbitrary number out there saying that airlines with more than 1 percent of total domestic revenue have to report. That means smaller airlines don’t have to do it and that leaves an incomplete picture. The proposal now is to lower the threshold to 0.5 percent of revenue, and that would cover 98 percent of traffic in the US. They’re debating exactly how to expand it, so the metric could vary, but the idea is to make all the players report except for the tiniest of tiny.
  2. Airlines Will Have To Report Codeshare Partners – One of the biggest problems with the data today is that it is all reported by operating airline. For example, half of United’s flights are on regional partners, but those wouldn’t fall under United’s reporting today. And with regional airlines flying for many partners, you can’t really understand which airline to book if you’d concerned about on time performance. That makes United’s, and everyone else’s, data pretty worthless. Now the rule would require on time performance mishandled bags, and oversales to to be reported by marketing carrier. This is only for domestic, so international codeshares aren’t an issue, but it’s a huge improvement. I would still hope they would carve out things that aren’t a true regional relationship, In other words, I don’t want American to report Alaska’s stuff even though they codeshare. That just muddies the water.
  3. Change Baggage Reporting Rules – Right now, lost bags are reported as a fraction of total boardings, but what good is that? What I really care about is how many bags are lost as a fraction of the total bags checked. That is also being proposed here.

Make Sure Metasearch Sites and Global Distribution Systems Can’t Screw You Around
This is a simple definition change, but it makes sense. Many of the rules that are out there refer to “ticket agents” but that term was formed before the day of the aggregator dawned. Metasearch sites like Kayak, Routehappy, or Hipmunk aren’t technically ticket agents and neither are Global Distribution Systems (GDS) like Sabre and Apollo because they aren’t doing the ticketing. But they’re still displaying flights and fares and acting very similarly. So now, DOT is proposing that they specifically be included under the definition so that they can’t get around the same disclosure rules that apply to online or offline travel agents. That seems like a good idea to me.

Make Large Ticket Agents Abide By Airline Customer Service Rules
Most tickets bought through agencies (online and offline) are from big agencies like Amex or Expedia. So DOT is saying that any company with more than $100 million in revenue annually that sells tickets will have to behave like an airline. They must hold tickets or allow them to be canceled within 24 hours of purchase and they have to disclose that policy. They need to provide prompt refunds, within a week on credit cards. They have to disclose penalties after ticketing, and they have to disclose changes to itineraries in a timely manner. And yes, they have to respond to consumer complaints.

This is the kind of thing we do every day in our business at Cranky Concierge, and it’s sad to think that larger companies don’t do things this basic. But they should certainly be required to do it if the airlines are as well.

Prevent Bias in Fare Display
When you do a search on a website, do you think a lot about what order the results are delivered in? Probably not. Sure, you can change a sort, but you generally assume it’s initially given to you sorted by price, schedule, or a mix of both. But did you know that there could be bias in those results that has nothing to do with what’s good for the customer?

GDSs have been notorious for using bias as a contract negotiation tool. When American and Sabre got into a fight, Sabre first pushed American’s results down the list and then removed them entirely. Travelers looking for the best flights had no idea. Now, this would be made illegal. At the very least, it would require the site to disclose if a bias is being implemented. And if there is a bias disclosed, then the sites would have to make clear if they’re getting incentive payments that would influence it. There’s a separate bit here that would also require ticket agents to disclose if there’s an airline flying a route that’s not being shown – go ahead and call that the “Southwest” rule.

This all makes sense to me. If people are trusting websites to give them good information, they should at least know if there’s something shady going on behind the scenes. Though admittedly that last point is tough. It’s hard to keep track of which airlines are flying which routes, especially in the ultra low cost space where it can change so often and they don’t publicly file the schedules.

Dealing with the Post-Purchase Price Increase Problem
Awhile back, DOT made it so that airlines couldn’t increase prices after a ticket was purchased. That created a murky situation, so they’re trying to clean this up now. In relation to fees, baggage fees can’t increase post-purchase but that’s it. That means seat assignment fees can change, and so can other random fee. That’s fine.

And they deal with mistake fares, which I think is pretty interesting. DOT defends the policy of requiring airlines to honor mistake fares, but also calls out “bad actors” who are buying mistake fares in “bad faith.” I found that pretty interesting. Not sure how they’ll deal with it though.


That’s about it for this round. What do you think?

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34 comments on “The DOT’s Latest Proposed Rulemaking is Surprisingly Not Terrible

  1. For “Mistake Fares”, I would implement a rule something like this:
    If a posted fare was at least 50% of the posted price of the cheapest ticket in the same cabin (notice I said cabin and not fare class; most consumers have no idea what fare class they are buying when purchasing, nor should they have to) on that flight any time in the last year, then the fare should be honored. (The mistake fare would not “reset” the lowest-fare threshold, but an airline would be subject to a certain maximum number of declared “mistakes” over a rolling 12-month period.) For fares that fall under the threshold, they should give the consumer the option of either cancelling or purchasing the ticket at a cost not to exceed that of the cheapest ticket sold with the same fare restrictions for that flight any time in the last year.

    This prevents the airline from taking it completely in the shorts for something that’s clearly a stupid mistake, but also protects consumers from having travel plans from being pulled out from under them if they come to rely on the fare. You don’t want consumers getting a ticket canceled on them, and then being stuck buying a last-minute fare when they could have purchased an advance-purchase ticket back when they bought the mistake fare.

    1. The problem I see with that is it would be difficult, if not impossible, for a consumer to know if a fare met your hypothetical threshold without some serious research. You might jump on a $169 round-trip fare from DFW to LAX, but if the lowest price offered in the previous 12 months was $349, technically the airline would still have the right to claim the fare was a mistake and not honor it. If such a sale were to pop up, I wouldn’t automatically flag $169 as an obvious mistake. You’d have to comb through a bunch of data to figure out what the trigger point is, though, which I think makes any kind of a threshold like that unworkable. Personally, I think a better solution might be to put a limit on how much time the airlines have to declare a fare a mistake. I don’t think airlines should be allowed weeks, as with what KE tried to pull a couple of years ago. Maybe somewhere between 24 and 72 hours would be a fair compromise.

      The larger issue I have with the DOT’s proposal is how they define “good faith” and “bad actors”. Do you define that as anyone who posts mistake fares on FlyerTalk? Those that read or comment the post? People who purchase more than X number of mistake fares over a rolling time period? If a friend calls me and tells me AA is selling $300 tickets to London and I buy one, and my friend got that off of FlyerTalk, am I now a “bad actor” in DOT parlance? If buying a $109 coach fare to India where the normal fare is $1,090 acting in bad faith, how about where taxes and surcharges make the total something like $487, similar to the BA fiasco a few years ago? Seems like way too much of a slippery slope to me.

  2. The government has always had to force airlines to treat customers honestly and fairly. If the airlines would have always done what the DOT propose, they would not be at or near the top of the list of hated industries. They will argue the DOT is interfering in the free market. The airlines believe deception, misleading, hiding, cheating, fraud and lying are proper behaviour in a free market. There’s a whole list of other rules the DOT needs to add. Such as one-way fares can’t be more than round trip fares, Fares to and from hubs can’t be more than through a hub.There needs to be far more disclosure regarding the regional airlines operating the plane.

    1. Well said. Implementing hard-and-fast rules is difficult-to-impossible to do perfectly, but they DOT would not feel the need to write such rules if the airlines and ticket sellers would act reasonably to begin with.

    2. Don, why don’t you just advocate for the resurrection of the CAB?

      The airlines should be allowed to price how they’d like, Why does it matter if one-way fares are higher than round trip fares, or if fares to and from hubs are more than through hubs? A bottle of water is more expensive if you buy it from a gas station one by one, instead of buying a whole case. How is this any different?

      How much more disclosure about regional airlines operating a plane would you like? Every time I buy a ticket it is quite clear who is operating the plane.

      1. Hi Nick. Your analogy of buying in bulk does not compare to my hub pricing point. The airline charges more for less. Example; I just priced a RT ticket from MSP N/S to Paris in August. Fare was $1938. The RT fare from Kansas City to Paris connecting in MSP to the same flights from MSP is $1730. Those originating in MSP pay more for less. The seat mile cost from Kansas City-Paris is considerably more than MSP-Paris. Four planes, not two, more fuel, more labor etc. Same is true with one way versus RT. Otherwise, I have no issue with airline pricing. Governments enforce pricing restrictions on all kinds of products and services to protect consumers from monoplies or other reasons in the public interest.
        Regarding Regionals. My ticket receipt from Kansas city to MSP this Saturday says Delta on it 50 times. It says Compass once in rather small print. My complaint is Delta, UA and AA do not disclose the contractual relationship that exists between DL etc. and the regionals. That Delta has no control over the actual operation of the flight. That regional carriers are sub-contractors with their own mangement, employees and procedures. I suggest you read this http://bizgovsoc2.wordpress.com/2012/04/09/the-cost-of-safety-ethics-and-the-airline-industry/

        1. Don, you’re right my buying in bulk example wasn’t very good or really valid.

          But economically a price is what someone is willing to pay for it. Minneapolis-Paris is a different market than Kansas City-(Hub)-Paris. In one case it is a non-stop flight which customers value more, so airlines can and should charge more for it, because it is a rarer or unique product. In the other, the product is much less unique, I found eight marketing carriers on the Kansas City-(Hub)-Paris route for a recent search.

          As for the safety of regionals and the disclosure of the contract information, what would you suggest? Requiring the full contract to be posted seems a bit extreme. (If you don’t think it is, please send me a copy of your mortgage or rental contract. The crash of 2008 has shown that I have a valid interest in this contract, as there are systematic risks that may be present in it.)

          The operating airline and FAA are ultimately responsible for safety. Yes, flying regional airlines statistically less safe than flying majors, but flying in a regional airliner still much much safer than you or I driving just about anywhere. I’d also guess that the regional airlines of 2000-2009 are safer than the majors of 1970-1979 were. Its likely if these regional flights weren’t flown, there would be many more people driving, and they’d be less safe, because they have less qualified operators, operating the vehicle.

          Safety and risk is all about comparisons. I had surgery under general anesthetic earlier this year, and a dentist friend of mine noted that having the surgery done under a general anesthetic was more dangerous than having it done under a local anesthetic. My question to him, was how much more dangerous was a general anesthetic than walking across the street. The general anesthetic was safer than walking across the street, and I walk across streets all the time without giving it a second thought!

          1. Hi Nick. I respectfully disagree with the N/S added value. It would be easy to find markets where N/S is less than connecting. [not including segment fees] My belief is flyers in hub cities pay a higher fare because the hub carrier has a N/S monopoly on most routes. Compare fares on a monopoly N/S route to/from a hub and one with competition, especially from Southwest, of the same distance. The fare is much lower in the market with two or more carriers. The hub cities get screwed.
            No I don’t expect the full contract to be posted. Nor do I feel less safe on a regional. Most people believe when a plane says DELTA on it, it’s operated by Delta with Delta employees, under Delta management. Aside from scheduling, Delta has no operational authority over that flight. Example, if a regional flight is cancelled because a crew is unavailable, Delta can do nothing about that. The regional manages crews. The regional carrier is no different than a code share carrier such as Air France is with Delta.

            1. If people consider a N/S flight to be the same as a connection they’d pay the same amount for it. They don’t. I did a comparison of three routes into major hubs. SEA->DFW, SEA->ATL, and SEA->EWR on July 7 returning on July 11. In two of the three cases there were options with connections priced cheaper than the non-stop options.

              There were a few interesting aberrations:
              1. AA was cheapest on SEA-DFW non-stop. They charged almost $100 more to get there with a stop.
              2. AS charged almost $300 more to go SEA-EWR with a stop.
              3. AA and US both sold the same flights on SEA-EWR, but the N/S connection pricing was inverted.

              But since the airlines have to price a connection cheaper to sell it, economics dictates that passengers value it less than they value a non-stop fare.

              Re: Regionals. What specifically do you want? The regionals airplanes are all painted as “Marketing Carrier (Express/Connection/Eagle)” (The one exception to this is Alaska, which has all the planes painted Alaska with a smaller Horizon or Skywest as part of the livery.) The flight listings list the operating airline. The tickets list the operating airline. (Yes, not as prominently as the marketing airline.) The plane must have the operating airline painted on it. And AFAIK, the operating airline is announced by the crew on the plane. What more specifically do you want the majors to say about their regional partners?

              I’d also argue that the mainline carriers can and do penalize their regionals for poor operations, such as not having a crew, just because you’re not privvy to the details doesn’t mean it doesn’t happen. (There have been a few lawsuits on this, Delta vs. Mesa?)

            2. Oops.. I made a mistake..
              “3. AA and US both sold the same flights on SEA-EWR, but the N/S connection pricing was inverted.”

              should have read:

              “3. AA and US both sold the same flights on SEA-DWF, but the N/S connection pricing was inverted.”

              We regret the error.

      2. “A bottle of water is more expensive if you buy it from a gas station one by one, instead of buying a whole case.”

        Yes, but does the gas station raise the price of the bottle of water by 50% if they are down to the last 10 bottles? If it’s the last bottle left do they raise it another 100%? If the same gas station did that with the gasoline they’d be fined for price gouging. Is commercial air travel a commodity?

        I fully agree that in the deregulated market airlines should be allowed to price their product how they wish. That said, a lot of public hatred comes from the seemingly shady way their service is priced. The advent of fees adds to the resentment.

        At least with regulation there was question about how flights were priced. The airlines also made enough money to pay their staff well and provide a world leading level of service. Right now competition on price alone has us in a race to the bottom environment that requires the DOT to police the airlines. There should be a better way.

      3. I am not Don but I think that would actually be a good idea, Nick. Service was better, the airlines didn’t fee everyone to death and airlines weren’t going under and filing bankruptcy left and right when we had the CAB. The first thing I would do as the CAB would be to mandate the length of seat belts at 72 inches minimum (adjustable for those that need a smaller seat belt), leg room at 36 inches minimum and have a seat width of 30 inches minimum. I find it a travesty that being a large person I either have to fly first class (which seats I barely fit in as it is today) or purchase two coach seats to fly (even more uncomfortable sitting in the middle of two seats). The almost cross country round-trip (Grand Rapids, MI through Chicago O’Hare to either San Francisco or Oakland, CA) flight that costs a normal size person $500 costs me $1300 minimum (it has been as high as $2300) flying first class. I say raise the coach seat to $750 and give people seats that are comfortable and everyone can use.

        1. Sorry, but I find it a travesty that you want to double (at least) the cost of a coach seat for everyone despite the fact that many of us fit just fine in the seats as they are, including the current seatbelt length and other considerations. I have room to spare and I’m not particularly small (I need to lose 25 lb, just like many Americans).

          Perhaps they should install three or four “supersize” seats that cost less than first class and more than coach. That would address the needs of large people without making the rest of us subsidize your fare.

          1. Julia, the supersize seat idea is not a bad one. Unfortunately the airlines haven’t done it as of yet. Hopefully one of the airline CEOs read your comment and implement it.

            Nick, I am aware that fares were higher during the CAB era. However, first and second bags were included, meals were included (and tasted a lot better than today’s meals), seating was more comfortable, airlines weren’t going bankrupt and the planes were safer as they (in general) had four engines and generators rather than the two they generally have today just in case something went wrong twice on a flight. For example the Capt. Sully incident where both engines were taken out by flying birds would not have happened in the CAB era as at least one engine would likely have survived and the landing would have been at LaGuardia rather than in the Hudson River (I am sure even ace pilot Sully would have preferred to land at an actual airport rather than in the river).

            1. I’m not going to look up the statistics, but I’d argue that today’s ticket prices, plus bag fees for two bags is still less than you’d’ve paid in inflation adjusted terms for a similar route in the CAB era. The airplane food might’ve been better back in the CAB era, but I’d rather save some money and have a nicer meal on the ground, where I don’t have to wear a seat belt.

              Your argument that two engine planes are less safe than four (or three) engine planes isn’t supported by the facts. Take a look at page 19 in this document from Boeing:
              http://www.boeing.com/news/techissues/pdf/statsum.pdf The two engined planes have significantly fewer hull losses and fewer hull losses with fatalities than the older four engine planes. Though I’d argue that this is just a correlation, as two engined planes have become much more prevalent as aviation has become safer, as shown on pages 16 and 17 of the document from Boeing.

            2. mharris127 – Oh sure, the supersize seat exists, just not on your traditional airlines. Try Spirit and you can get the Big Front Seat for a relatively small buy-up.

            3. I like how the big front seat exists because they have to have it for crew rest seats, and they only sell them on flights the crew doesn’t need to use them.

            4. Nick – No, that’s actually why they exist on Allegiant. On Spirit, they exist because before changing its model, Spirit had First Class. They just left the seats in there but eliminated any differentiation in service. Apparently it makes them enough money to keep it!

        2. I’m not 100% sure, since I’ve never flown in the CAB regulated, era. But I’d guess seat width has stayed about where it is at. The 737s and 757s, have the same cabin width as a 707s and 727s did back in the day. They all usually seated six abreast in coach.

          You’re right the pitch has come down in today’s planes, but there are many options for a slightly more expensive seat with more seat pitch.

          Airlines have seat belt extensions do they not? If they were using lots of them I’m sure they’d consider extending the belt, but I’m not a small guy, and I probably have 5-10 extra inches of belt that I don’t use.

          Finally, you’re probably paying less in inflation adjusted even when buying two tickets than you would’ve paid in the CAB days, so you should be happy about the deregulation, or you could be paying four times as much as you are right now!

    3. Don Beyer – I think the issue here is that you are arguing for cost-based pricing when in fact airlines do not (and should not) price that way. They price based on the willingness to pay in the market. Nonstop flights cost more precisely because there is less competition. To use your analogy, if I’m Delta, I know that nobody else flies from Minneapolis to Paris nonstop, so I have a superior product to anyone else and I want to charge more for it. But if I’m flying one stop from Kansas City to Paris with a single stop, then I have very similar competition from United and American/US Airways over several different hubs. Pricing will be lower there. The same goes if you have multiple airlines flying nonstop in a market. You use Southwest as an example, but the issue isn’t Southwest. If there are two airlines flying nonstop in a market, you have more capacity and more competition so fares will be depressed.

      Does that mean that people in a hub are getting screwed? Absolutely not. They may pay more for their nonstop flights, but they have a far greater of nonstop flights than they could ever support on their own. So it’s a tradeoff. Would you rather have more nonstop flights to places you want to go or would you rather pay less but have to connect a lot more? It’s not an issue of getting screwed but rather an issue of what you value.

  3. Question; If someone buys a refundable full coach fare, aka walk-up fare, is that fare an all inclusive fare? Or is one still required to pay any of the various fees?

    1. I answered my own question. I called Delta. Spoke to a delightful 23 year woman. She said yes, baggage fees apply to full fare coach tickets, but not first class. She did not know there was a time when a ticket at any price included all the services that are now an extra cost.

  4. This is a weird one, “””””There’s a separate bit here that would also require ticket agents to disclose if there’s an airline flying a route that’s not being shown – go ahead and call that the “Southwest” rule.”””””

    If it’s not being shown, how would a ticket agent know and how would they know who the airlines are? So the GDS would have to say ‘hey between AAA and BBB these airlines fly this route but we don’t show them’. Which also gives the question how would the GDS know who might fly a route that isn’t listed in a GDS anyway?

    1. My question as well. If Southwest doesn’t send their data, then how can you alert anybody that a Southwest flight exists but isn’t being shown?

      1. tharanga – Southwest actually does share their flight schedule data publicly so that wouldn’t be an issue. But for Allegiant, for example, it’s not out there.

  5. The requirement that a GDS/ticket agents disclose if there is another airline flying the route that isn’t being shown is just purely unfair. I’d argue that it is forced advertising for a supplier that chose not to work with you.

    Southwest has chosen not to participate in GDSes for public presentation long ago because of the cost issues. There was a spat many years ago where Orbitz wanted to show WN’s itinerary and direct people to Southwest.com to purchase tickets, but WN threw a fit and had Orbitz remove WN’s results.

    Southwest has decided not to have a relationship with GDSes and other online fare display services for various commercial reasons. The DOT shouldn’t force the GDSes to advertise for WN.

    That being said, there should be some way to prevent an Amazon vs. Hatchette situation with airlines and a GDS, without going to this forced advertising extreme.

    1. Nick and David – I should point out that the bit about presenting the information about competitors who aren’t in the GDS was more of a throw away kind of point. I get the feeling they’re just asking for input on that but don’t expect it to happen.

      1. Ah, thats an interesting way to gather public comment. I’m sure the GDSes etc will comment quite negatively. Wonder where WN will come out on this proposal? I’m guessing silent or against it.

  6. All the proposed changes make a lot of sense and are common sense. Which is why I suspect they will probably somehow get killed before they make it into law…

  7. I chuckle, part II. I’m amazed at seeing, the last time I checked, regulations.gov says there have been 445 comments to this notice already.

    Now I might wonder, how is it so many people have the time to read and comment on this hundred-page-plus document? But, it seems that the airline industry has a special propensity to get our juices running. (Of course, any mention of “mistake fares” is always a plus!)

    In any event, thanks Cranky, for your bringing all this to us with such brevity, clarity, and balance, reserving my right to disagree with you here and there, of course but, well done!

  8. I’m curious about “Make Large Ticket Agents Abide By Airline Customer Service Rules”. I recently had a strange issue with Expedia regarding a hotel booking (so I know the rules won’t cover it, but still the matter is interesting): Expedia quoted a non-refundable, pay immediately charge in US dollars, but then the charge itself was made in GB pounds (the hotel was in London), and my credit card slapped a foreign transaction fee. Upon inquiry it turned out that inside Expedia’s reservation they could see a note that the charge would be made in GBP, but the website did not display this note at any point during the booking process. I was not able to engage Expedia any further, though to me it looks like a straightforward IT problem on their side.

    I know the rules about currency for airline tickets are stricter than for hotels (something about place of purchase, which goes back to the days when you physically purchased a ticket at a particular place). But the issue I experienced was not just a matter of currency, but transparency about the currency (to allow the customer to choose a method of payment appropriate for the currency they will be charged in). I wonder if there are regulations about that.

  9. That mistake fare/bad faith clause better be written very explicitly, because if not it has potential to be a fiasco.

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