In his July 9 executive order to promote competition in the American economy, President Biden took on banking, tech and pharmaceutical giants, noting that consumers often pay too much for services in the wake of industry consolidation.
He leveled similar charges at airlines, suggesting a list of changes to the industry — from common-sense refunds of checked bag fees for lost luggage to more generalized directions to “ensure competition in air transportation.”
“This is the first time since deregulation that we have a White House recognize that we have an industry lacking competition, and consumers are paying the price as a result,” said Kurt Ebenhoch, the executive director of Travel Fairness Now, a nonprofit that supports more competition and transparency in the industry. “We hope it would have a ripple effect on the decisions the Department of Transportation makes.”
But what exactly are those provisions and when might they be realized? Experts say that the takeoff runway may be lengthy.
What’s in the executive order?
The July 9 order is nothing less than sweeping, calling for more than 70 initiatives to be taken on the part of federal departments, from agriculture to treasury, with the overall aim of making the economy more competitive. It notes that “as industries have consolidated, competition has weakened in too many markets, denying Americans the benefits of an open economy and widening racial, income and wealth inequality.”
In general, it provides directions for what the agencies should be working on.
In its directions to the Department of Transportation, the order asks it to work on making available flight information more comprehensive and not to exclude “new or lesser-known airlines.” It also demands a report on the failure of many airlines to provide refunds for flights that were canceled during the pandemic, and asks for refunds of fees paid for ancillary services that are not delivered — such as Wi-Fi access or checked bags that are lost.
“It’s telling the agency that it needs to take into account consumer-related concerns,” said Bernadette Meyler, the Carl and Sheila Spaeth professor of law at Stanford Law School.
The order is a mix of demands for studies, committee formations and suggested rule-making, meaning the timeline for its execution is vague. It has already been met with resistance from the airline industry.
“The order is directing agencies to act in certain ways, and agencies are notoriously slow,” Professor Meyler added, noting that any draft rule will require a public notice and commentary period. “Consumer and industry actors can weigh in before it’s implemented. There will be some back and forth and lobbying on the part of the industry.”
What are the arguments for and against so far?
The executive order indicates that the airline industry has become too concentrated through mergers and acquisitions. Airline representatives disagree, pointing to the growth of air travel and its affordability. According to Airlines for America, the association representing the largest carriers in the United States, only 49 percent of Americans had flown commercially in 1971; by 2020, that figure was 87 percent.
According to the Bureau of Transportation Statistics, the average domestic airfare, adjusted for inflation, was $496 in 1995 and $359 in 2019 (it fell to $292 in the pandemic year of 2020, when air travel plunged).
But consumer advocates say the figures don’t include things like baggage fees or take into account the loss of personal space on many airplanes, as leg room has shrunk to accommodate more and smaller seats.
Since 2001, there have been at least eight major mergers and acquisitions in the airline industry, creating the era of the big three legacy carriers — Delta, American and United — and reducing the choices consumers have for flying.
“I don’t know how anyone can look at that and say, yep it feels more competitive,” Mr. Ebenhoch said.
What’s the potential impact on airfares?
Shopping for cheap airfares might become easier if the recommendations of the order are adopted. The order instructs the D.O.T. to ensure flight searches are robust, transparent and include all airlines.
But this runs against airline practices. Southwest Airlines, for example, forbids other sites from automatically monitoring its schedules and fares and publishing them or selling them on third-party websites. That’s the reason you won’t see Southwest flights on consumer search engines like Kayak or online travel agencies like Expedia and Orbitz.
“Southwest Airlines has a unique and customer-friendly business model which includes making our fares available to the general public only on Southwest.com,” wrote Laura Swift, a spokeswoman for Southwest, in a request for comment. “This longstanding, direct-to-consumer business model is key to maintaining our 50-year tradition of transparency, low-fares and world-class customer service.”
To find the best fares, travelers often have to visit several websites, and results online may vary from site to site. The lack of a central site for comparison shopping makes it harder for fliers to find the best price.
“If all the gas stations stopped putting prices on signs outside, you’d have to go inside each one and ask the rate and whether that’s the discounted rate for cash or requires a carwash, and do the same at the next gas station,” Mr. Ebenhoch said. “In the age of the internet and information transparency, the airlines think they can stop the tide.”
Will fees and refunds be addressed?
Fees and refunds are the areas addressed most concretely by the order.
In the case of fees, the order says they must be clearly explained before a consumer buys a ticket. In many cases, airlines are already doing so. In the case of low-cost carriers like Spirit Airlines, stepping you through the fee structure is how they drum up sales, using an à la carte system for seats, carry-ons, checked bags and extras like flight flexibility, shorter security lines and early boarding on entry-level fares that add up as you are booking online.
The order also calls for refunds for undelivered services that a flier has paid for, like Wi-Fi, a premium seat or checked baggage. Under this provision, if your bag is lost, you could get your checked-luggage fee back as well as claim other lost-bag rights already stipulated by the D.O.T., up to a maximum of $3,800 on domestic flights.
Fliers say in the case of malfunctioning Wi-Fi, airlines are already giving refunds. Daniel Rodriguez, a software engineer in Chicago, flies frequently and shared a copy of a United email receipt for Wi-Fi directing passengers to the airline’s refund request page in the event of “technical difficulty or system outage.” Using it, the $4.99 fee he had paid for an hour of service was refunded.
The order also directed the D.O.T. to submit a report on the failure of airlines during the pandemic to issue refunds as required in the case of a canceled flight; many airlines offered credits instead. Senators Edward J. Markey of Massachusetts and Richard Blumenthal of Connecticut have been calling for expanding refunds — they say airlines are sitting on $10 billion in unused flight credits — or eliminating expiration dates on flight credits.
The report, published last week, said the D.O.T. received more than 102,000 consumer complaints about airlines in 2020, 568 percent more than the year before; 87 percent of them were refund complaints. The report also said the agency had induced at least nine airlines to make clear that passengers are entitled to a refund when the airline cancels a flight, and that it is pursuing a formal complaint against Air Canada for continuing to delay refunds (foreign airlines have been the biggest offenders, according to the report, accounting for 58 percent of refund complaints involving airline cancellations or changes in 2020 and the first half of 2021, compared to 24 percent for U.S. carriers and 18 percent for travel agents and tour operators).
“Air travel is a vital American industry that has withstood a hard period, and travelers deserve to have their lives, their rights, and their pocketbooks protected every time they fly,” said Pete Buttigieg, the transportation secretary, in a written response to a request for comment. “Our administration has taken actions to protect air travelers, including issuing a proposed rule requiring refunds for services airlines promise but do not deliver, and appointing four strong leaders to our consumer protection committee. We will continue to protect air travelers at each step of their journey.”
What about train travel?
The executive order briefly covers rail travel, encouraging the Surface Transportation Board to enforce new on-time performance standards for passenger rail service, which should have priority over freight. Those went into effect July 1, and indicate that intercity passenger rail service should arrive within 15 minutes after its published schedule at least 80 percent of the time over the course of two consecutive months, meaning the earliest investigation into a possible violation would be in 2022.
Passenger trains largely run on tracks owned by commercial railroads, and those competing uses often cause travel delays.
“We want a strong freight rail industry in the U.S.,” said Sean Jeans-Gail, the vice president for policy and government affairs for the Rail Passengers Association, which supports improved and expanded passenger train service. “It’s a key part of decarbonizing our transportation network, but we also have to move people from highways and airplanes.”
It will take a big effort: In fiscal year 2019, 32.5 million people rode Amtrak; in 2019, airlines carried 811 million passengers on domestic routes.
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