Doug Lavin, IATA’s Vice President, Member and External Relations, North America says re-regulation of the US market will not deliver consumer benefits.
In 2009, despite almost three decades of falling airfares and rising passenger numbers in the United States since the passage of the 1978 Airline Deregulation Act, the Obama Administration’s Department of Transportation (DOT) determined that free-market competition was not delivering the outcomes it expected in terms of consumer benefits.
So, it issued the first of three comprehensive, so-called Enhancing Airline Passenger Protections regulations, covering such areas as fare advertising, flight delays, pricing disclosure, ancillary fees, disclosure of codeshares, and service quality.
DOT said this retreat from the deregulatory principle that “the market should decide” was necessary to prevent “unfair and deceptive practices” by airlines. This backsliding was briefly interrupted by the Trump Administration (2017-2020), which sought to limit DOT’s regulatory overreach, including narrowing the definitions of unfair and deceptive practices to be more consistent with the original intent of the standard.
Unfortunately, the Biden Administration has taken up where the Obama Administration left off in re-regulating the deregulated airline industry. In doing so, it has moved away from the premise for the 1978 Airline Deregulation Act: that the free market will deliver better results for consumers than government regulation.
Two recent DOT “Notice of Proposed Rulemakings” (NPRMs) are of particular concern. “Airline Ticket Refunds and Consumer Protections” is a regulatory response to the inability of many airlines to keep up with the unprecedented refund demands during the height of the COVID-19 pandemic. In addition to proposing a broad definition of cancelled or significantly changed flights eligible for refunds, the NPRM would require airlines to provide non-expiring vouchers when passengers decide on their own not to fly during a public health emergency or if they may have a condition that they believe may pose a threat to other passengers. This would serve as an invitation to passengers to falsely claim they were ill or uneasy about flying to secure vouchers or refunds on non-refundable tickets when their travel was no longer convenient to them.
The second NPRM, “Enhancing Transparency of Airline Ancillary Services,” proposes to fundamentally change today’s airline distribution system. Under the proposal, airlines and travel agents would need to display ancillary information on baggage, change and cancellation fees, and family seating, on a passenger-specific or itinerary-specific basis, as part of the initial fare search. DOT argues that this will support better comparison shopping—something that DOT has no mandate to promote—and which is not technically possible with systems used by most agents today. If enacted, this NPRM would result in higher costs for airlines and agents with no clear benefit to consumers since they have complete information before purchase.
For its part, IATA has undertaken a campaign in opposition to both NPRMs, working closely with member airlines and regional airline associations, as well as travel agency associations. The good news is that we have never found such broad industry opposition to DOT proposals, particularly in the case of the ancillary NPRM. The bad news is that all indications are the Biden Administration’s commitment to the rights of the individual over the businesses that serve them makes it unlikely we will see a positive result in either of these two regulatory proceedings.