Bill aims to scuttle new airfare pricing rule

Enjoy the government’s new airfare rule. It might not last.

On Jan. 26, the Transportation Department began requiring airlines and ticket agents to quote fares that include all mandatory taxes and fees. Since 1988, they’d been allowed to advertise fares that didn’t include government-imposed taxes and fees.

Consumer groups cheered the move, which made airfare shopping one step simpler for most travelers and effectively put an end to those $9 fare sales that occasionally popped up online. But several airlines whose business models depend on the ability to quote a low base fare weren’t happy with the change. And as it turns out, they have friends in Congress.

This week, Rep. Tom Graves (R-Ga.) introduced a bill that would reverse the DOT requirement. His proposed Travel Transparency Act, co-sponsored by Rep. Ron Paul (R-Tex.) and Rep. Lynn A. Westmoreland (R-Ga.), gives airline passengers the right to a clear, separate disclosure of the fees and taxes they pay on each airline ticket, he says.

“If the goal of the DOT’s rule is to prevent companies from deceiving passengers about the total cost of their ticket, why is the department mandating that airlines hide the taxes, surcharges and government fees in the fine print?” Graves asked.

A spokeswoman for Graves says his constituents started asking questions about the new DOT rule “on the same day” airline industry representatives approached the congressman’s legislative staff with their concerns. But Graves’s rhetoric closely matches that of Spirit Airlines, one of the carriers that stands to lose the most from the new rule. In an e-mail sent to its passengers last week, Spirit outlined its arguments against the government’s “all-in” price rule.

“Thanks to the U.S. Department of Transportation’s latest fare rules, Spirit must now hide the government’s taxes and fees in your fares,” it wrote. “If the government can hide taxes in your airfares, then they can carry out their hidden agenda and quietly increase their taxes.”

Specifically, the Graves bill would label the failure to clearly and separately disclose both the base airfare and taxes as an “unfair or deceptive practice” and would require that both the original airfare and all required taxes and fees be shown separately in advertisements and fare displays. Spirit did not return calls and e-mails questioning whether the airline had played a role in promoting the bill.

The assertion that quoting the full fare is deceptive drew harsh criticism from consumer rights advocates and their supporters in Washington. Last week, Sen. Barbara Boxer (D-Calif.) sent a strongly worded letter to Spirit’s chief executive, Ben Baldanza, accusing him of misrepresenting the DOT regulations and urging him to stop.

“What the rule says is that you have to tell your customers the full cost of a ticket,” she wrote. “It prohibits Spirit or any other airline from advertising fares ‘that exclude taxes, fees or other charges since the major impact of such presentations is to confuse and deceive consumers.’ ”

She added, “Today’s consumers are faced with many options when planning air travel and being able to compare the full price before purchase is both necessary and fair.”

Passenger advocates didn’t mince words, either. Kevin Mitchell, whose Radnor, Pa.-based Business Travel Coalition represents corporate travelers, called Spirit’s statements “a new low” and labeled its actions “reckless” and “anti-consumer.”

“Regulators understand that there is great profit in consumer confusion and have justifiably interceded,” he says.

The DOT is defending its rule. Although he wouldn’t comment on the legislation, a department spokesman told me that the new regulations don’t preclude an airline like Spirit from listing taxes and fees separately, as long as the top number includes every mandatory tax and fee.

“DOT wants to make sure that consumers can easily determine the full price for air transportation before you travel,” Justin Nisly said. “Arriving at the airport only to be hit with surprise fees is no way to start a trip.”

The airline industry is widely expected to support the Travel Transparency Act, and if it passes, air travelers would return to the days of having to spend a few extra minutes with a calculator if they want to know the full price of a ticket while they’re fare shopping.

Even if the effort fails, all is not lost for the unhappy airlines. Three carriers, including Allegiant Air, Southwest Airlines and Spirit, have asked the U.S. Court of Appeals for the D.C. Circuit to reverse the DOT rule, saying it violates their First Amendment right to free speech. In a court filing, the airlines say they have the right to let passengers know about the “significant” tax burden on air travel.

It’s easy to understand why airlines are fighting the new DOT rules with such force: Quoting a low base fare, minus taxes and fees, makes airfares look cheaper. And people buy cheap tickets.

Critics of the new regulations say that the government has unfairly singled out airlines with this requirement and that no other industry is forced to advertise prices in this way. That’s not true. If you buy gas, you’re paying an “all-in” price at the pump, too.

For most airline passengers, none of this really matters. For them, it’s an issue of fairness. If you see a $29 ticket to Las Vegas advertised on a billboard, shouldn’t you be able to buy that ticket for $29? And that’s a question that neither the proposed bill nor some airlines’ creative parsing has answered.

(Photo: Richard Johnstone/Flickr)

  • guest

    The best approach from the point of view of the consumer would be to mandate a complete list of all individual fees and taxes, with clear definitions of each, reaching a total price that the buyer would have to pay if the ticket is purchased.  Why is this so difficult??

  • Chris

    Of course, it’s easiest for customers if the prices quoted are all-in.  But on principal, why should the airlines be singled out?  Every other business I can think of quotes their prices, and then adds taxes at the register or time of check-out.  Car dealerships, mobile phone companies, car rentals, hotels, and even big box retailers quote their prices based on the revenue that goes to the business, not based on the revenue that goes to the government.

    I know it’s popular to bash airlines, but at the end of the day they are trying to make an honest living like the rest of us.  How about we get back to being a land that values the rule of law, where everybody plays by the same rules, and we stop using the government the force other people to do what is most expedient for us as individuals. 

  • Anonymous

    Then there is the move by the airlines to mislead the public about the amount of taxes and fees being imposed by the governments.  Over the last year or two, the airlines have been moving their fuel surcharge from being part of the base fare, to a “YQ tax”, which shows up in the taxes, not as part of the fare.  This amount is fairly significant and will generally make up a significant part (frequently in excess of 50%) of the taxes and fees.  So even with the new rules from the DoT, the airlines are still misleading the public.

  • Robert B

    That would be true in many industries but airlines have buried much of their revenue in the form of “taxes” on an airline ticket.  So called “Q” charges often appear in the fare calculation as a tax but the money goes straight to the airline bank account and goes to the bottom line.  Airlines claim that these are mostly to reimburse them for fuel, but fuel is an operating expense just as is labor, rent, and utilities.  Airlines change, or adjust, these “Q” charges all the time based on what they think the market will bear.  There is also a new fee that European travelers have started to see, one that most airlines would love to implement here in the US.  That fee is a surcharge to use a credit card for purchasing an airline ticket.  I’m sure that if airlines manage to implement that fee, they will want to hide that charge as well.   

  • Anonymous

    I see both sides. It IS easier for governments to raise taxes if they are hidden in an all-in total rather than spelled out. It is also easier for airlines to advertise unavailable fares if they don’t have to give the full price. I think the airlines should be required to include in the advertised fare all revenue that goes to the airline for charges unavoidable to the customer, and that includes the so-called “fuel surcharge.” And this should apply to “resort fees” at hotels too.  But nobody else has to list government taxes as part of their advertised prices.

  • Anonymous

    I have no problem with the concept of a detailed bill — show the base fare, all fees, and all taxes as separate line items.  For advertising, though, the total should be mandatory.  Why?  Because (a) different airlines add different fees, and (b) the taxes can be different on different flights.  It’s not like paying sales tax at the local store, where all stores will charge the same percentage on the same items.  On airline tickets some taxes are percentages, some are flat rates, some depend on exactly what airports are used, and so on.  It’s not reasonable for the average customer to be able to compute the total.

  • Michelle

    But when I shop for a hotel room, retailer, etc I don’t expect the cost of the milk, room, or laptop to double due to extra charges.