I am ordinarily sympathetic to citizens and businesses that are victims of regulatory overreach, but airlines have earned an exception.
After decades of customer abuse, from misleading fare advertisements to being bumped off flights – sometimes forcibly – for the airlines’ own convenience, rule one is that airlines deserve everything they get. Rule two is, when in doubt, consult rule one.
Airlines, of course, disagree. And they are making their case to the Transportation Department, which has asked them to suggest changes or cuts to existing regulations, The Wall Street Journal reported. This is not unlike asking a 5-year-old to suggest changes to rules about bedtime or how many cookies he is allowed to eat in a sitting. Yet airlines have been quick to argue that this is merely a course correction, reining in existing regulatory excess.
“DOT has strayed far from the limited scope of the statutory mandate Congress gave it when deregulating the airline industry nearly 40 years ago,” David Berg, senior vice president at the industry group Airlines for America, said in a filing submitted to the department.
Among the rules the airlines would like to jettison are the tarmac delay rule, designed to prevent passengers from being trapped in a grounded plane for hours on end; a rule requiring airlines to provide a full refund within a 24-hour grace period for passengers who made a mistake while booking; and requirements to display the full price of tickets to shoppers, including fuel surcharges and other ancillary fees. Airlines for America reportedly filed 222 pages of comments, and United Airlines alone filed an additional 50.
The Transportation Department is not only asking for suggestions on existing rules to cut, however. It is also delaying the implementation of new rules ordered by legislators. Congress passed a law in July 2016 requiring airlines to automatically refund checked baggage fees for bags that arrive 12 hours or more after the passenger’s flight. Lawmakers asked the Transportation Department to finalize the details by July 2017, a deadline DOT missed. Congress also asked the department to propose detailed regulations about providing wheelchair-accessible lavatories on planes, but DOT has also missed that deadline by about six months.
Given the disappearance of interline agreements, the prevalence of significant fees for checked baggage and ticket changes, and the not-uncommon experience of getting bumped from overbooked flights, it is hardly surprising that passengers often find air travel frustrating. As former Transportation Secretary Ray LaHood said, “When people are paying a pretty good amount of money to fly, they ought to be given the service they paid for and they ought to be treated with respect and treated like adults.” The main check on airline behavior these days is the Transportation Department.
If DOT is in fact exceeding its statutory authority, the right policy response is not to withdraw rules about stranding passengers on tarmac for excessive amounts of time, refunding baggage fees when baggage isn’t delivered or being truthful about the real price of a ticket. The correct response would be for Congress to pass a robust law guaranteeing passengers all of the rights currently imposed by rule, along with anything else lawmakers see fit to add.
Could some rules stand to be modernized? I don’t doubt it, but how they get modernized is important. Take the airlines’ desire to issue refunds via debit cards rather than cash. That would be more convenient for airlines but less convenient for customers. So maybe the department can allow this method, but require that airlines add a couple of percentage points to the refund to compensate. And those debit cards should come with no fees (or with fees borne entirely by the airlines) and no expiration date. Congress can write these stipulations into statute or delegate the rule-writing to DOT. Either way, the airlines would not be able to honestly complain that regulators are exceeding their authority.
North American airlines are used to little in the way of competition. When that competition does arise, airlines have been more inclined to try to undermine the competitor than to step up their own offerings. But if the air travel industry doesn’t want to face an eventual regulatory backlash, it would do well to learn to live with the rules Congress mandates.
Banks learned this lesson the hard way. After years of mistreating customers with scams such as sequencing overdrafts to trigger maximum (and outrageously large) fees, they generated a backlash that led to the creation of the Consumer Financial Protection Bureau. Airlines should look at this example and give thanks to DOT. Had regulators not reined in the airlines’ own natural proclivities, they might already live under the same arbitrary policing scheme as the banks, and they certainly would not like it.
Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book,
The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book
Looking Ahead: Life, Family, Wealth and Business After 55.
Posted by Larry M. Elkin, CPA, CFP®
photo by Katie Haugland Bowen
I am ordinarily sympathetic to citizens and businesses that are victims of regulatory overreach, but airlines have earned an exception.
After decades of customer abuse, from misleading fare advertisements to being bumped off flights – sometimes forcibly – for the airlines’ own convenience, rule one is that airlines deserve everything they get. Rule two is, when in doubt, consult rule one.
Airlines, of course, disagree. And they are making their case to the Transportation Department, which has asked them to suggest changes or cuts to existing regulations, The Wall Street Journal reported. This is not unlike asking a 5-year-old to suggest changes to rules about bedtime or how many cookies he is allowed to eat in a sitting. Yet airlines have been quick to argue that this is merely a course correction, reining in existing regulatory excess.
“DOT has strayed far from the limited scope of the statutory mandate Congress gave it when deregulating the airline industry nearly 40 years ago,” David Berg, senior vice president at the industry group Airlines for America, said in a filing submitted to the department.
Among the rules the airlines would like to jettison are the tarmac delay rule, designed to prevent passengers from being trapped in a grounded plane for hours on end; a rule requiring airlines to provide a full refund within a 24-hour grace period for passengers who made a mistake while booking; and requirements to display the full price of tickets to shoppers, including fuel surcharges and other ancillary fees. Airlines for America reportedly filed 222 pages of comments, and United Airlines alone filed an additional 50.
The Transportation Department is not only asking for suggestions on existing rules to cut, however. It is also delaying the implementation of new rules ordered by legislators. Congress passed a law in July 2016 requiring airlines to automatically refund checked baggage fees for bags that arrive 12 hours or more after the passenger’s flight. Lawmakers asked the Transportation Department to finalize the details by July 2017, a deadline DOT missed. Congress also asked the department to propose detailed regulations about providing wheelchair-accessible lavatories on planes, but DOT has also missed that deadline by about six months.
Given the disappearance of interline agreements, the prevalence of significant fees for checked baggage and ticket changes, and the not-uncommon experience of getting bumped from overbooked flights, it is hardly surprising that passengers often find air travel frustrating. As former Transportation Secretary Ray LaHood said, “When people are paying a pretty good amount of money to fly, they ought to be given the service they paid for and they ought to be treated with respect and treated like adults.” The main check on airline behavior these days is the Transportation Department.
If DOT is in fact exceeding its statutory authority, the right policy response is not to withdraw rules about stranding passengers on tarmac for excessive amounts of time, refunding baggage fees when baggage isn’t delivered or being truthful about the real price of a ticket. The correct response would be for Congress to pass a robust law guaranteeing passengers all of the rights currently imposed by rule, along with anything else lawmakers see fit to add.
Could some rules stand to be modernized? I don’t doubt it, but how they get modernized is important. Take the airlines’ desire to issue refunds via debit cards rather than cash. That would be more convenient for airlines but less convenient for customers. So maybe the department can allow this method, but require that airlines add a couple of percentage points to the refund to compensate. And those debit cards should come with no fees (or with fees borne entirely by the airlines) and no expiration date. Congress can write these stipulations into statute or delegate the rule-writing to DOT. Either way, the airlines would not be able to honestly complain that regulators are exceeding their authority.
North American airlines are used to little in the way of competition. When that competition does arise, airlines have been more inclined to try to undermine the competitor than to step up their own offerings. But if the air travel industry doesn’t want to face an eventual regulatory backlash, it would do well to learn to live with the rules Congress mandates.
Banks learned this lesson the hard way. After years of mistreating customers with scams such as sequencing overdrafts to trigger maximum (and outrageously large) fees, they generated a backlash that led to the creation of the Consumer Financial Protection Bureau. Airlines should look at this example and give thanks to DOT. Had regulators not reined in the airlines’ own natural proclivities, they might already live under the same arbitrary policing scheme as the banks, and they certainly would not like it.
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