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Senate Commerce Committee markup of FAA bill a test for consumer protections

Mar 14, 2016

WASHINGTON, DC – The Business Travel Coalition (BTC) today applauded the US Senate Commerce Committee for its leadership on behalf of airline industry consumers as it moves to markup its Federal Aviation Administration (FAA) bill this Wednesday. As sure as the sun rises in the east, come Wednesday, airlines in their characteristic Orwellian custom will label pro-consumer amendments to the FAA bill anti-consumer.

Indeed, Air Transport World on March 10, 2016 quoted the airlines’ trade association as saying: “Regulations proposed in the Senate bill under the cloak of consumer protection have the potential to drive up the cost of air travel for consumers and potentially harm service to small- and medium-sized communities.”

Well, it is hypocrisy in the extreme to signify concern about service to mid-size communities now that the major U.S. airlines have secured antitrust immunity for their global alliances and joint ventures, locked up the North Atlantic market and radically consolidated the domestic U.S. market from 11 airlines controlling some 80 percent of seat capacity a decade ago to 4 airlines today. It is this airline-driven model that incentivized U.S. airlines to reduce service at non-hub airports in favor of flying only the highest yield traffic over their mega-hubs and onto their alliance partners’ planes.

“What makes this faux worry so cynical is these very same U.S. airlines have politically blocked Norwegian Air International’s application to serve the U.S. for 2 years while waging a scorched earth political and defamatory campaign against the Gulf carriers,” stated BTC founder Kevin Mitchell. “These foreign airlines can accelerate the process of returning air service, connectivity and affordable airfares to those decimated mid-size communities both directly and through their code share partners like JetBlue,” added Mitchell.

The major U.S. carriers claim that they are worried about the potential of consumer protections in the FAA bill to “drive up the cost of air travel for consumers.” When they are not making that argument, they are saying small increases in the price of air travel, e.g., a $4 increase in passenger facility charge (PFC), will have a serious dampening effect on demand. Yet, a few years ago United Airlines raised its ticket change fee $50 on one day from $150 to $200.

There is abundant evidence that airlines do not reflect on consumers’ concerns and instead mislead and confuse consumers through opaque pricing strategies while seeking to undermine their regulator’s consumer protection authority and block foreign carrier new entry.

Consider the following examples:

- Northwest Airlines’ (now Delta) Doug Steenland told The New York Times in 2008 that “the [fuel] fee would be temporary, and as fuel prices dropped, ‘we will revisit this decision;’”

- while decrying the dampening effects taxes have on consumer demand, airlines raised fares when ticket taxes were temporarily suspended in July 2011 and pocketed a $25M per-day windfall;

- airlines keep consumer prices artificially high due to exclusionary practices such as blocking Norwegian Air International’s application and the scorched earth campaign against the Gulf carriers;

- airlines have worked overtime undermining the 2011 U.S. Department of Transportation (DOT) full advertising rule in drafting the Orwellian named Airfare Transparency Act of 2014, which is now word-for-word the Curbelo amendment to the House FAA bill; and

- airlines’ argument that consumer protections in the FAA bill would increase fares is disingenuous because if there were robust competitive rivalry instead of tacit coordination (according to the U.S. DOJ) airlines would compete on consumer-protection standards and any such impact consumer protections would have on prices would be moderated.

The work of the Senate Commerce Committee on behalf of consumers is critical to offset the millions of dollars of airline campaign contributions and armies of airline lobbyists that simply render consumers uncompetitive in having their interests receive a fair hearing. Many Senators grasp the anger among their constituents toward access to power among special interests in Washington where money and favors often trump votes.

“Members of Congress have similarly taken note of ever-increasing complaints about airlines from their constituents in the context of a 30 percent increase in consumer complaints about airlines to the U.S. DOT in 2015 over 2014. They see real harm when consumers are gouged $200 to change a ticket, which is 6 to 7 times the cost of providing that service. Gouging is a long-established example of an unfair method of competition under antitrust law and can be often found in failed marketplaces,” Mitchell said. “Some participants in the U.S. commercial aviation marketplace seek to maintain market power and tacitly coordinate (according to the U.S. Department of Justice (DOJ)) among competitors slamming consumers into a corner where they find unequal bargaining power,” added Mitchell.

A private right of action - the right of consumers and State Attorneys General to sue airlines for unfair and deceptive practices and unfair methods of competition - needs to be restored to reflect the intent of Congress when it passed the Airline Deregulation Act of 1978. State Attorneys General would then be able to protect their citizens as they do in every other consumer-facing industry. This would strengthen the enforcement hand of the U.S. DOT and provide sorely needed discipline in a radically consolidated industry to prevent airlines from trampling upon the rights of consumers.

Senate Commerce Committee markup of FAA bill a test for consumer protections

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