Representatives who should know better drink airline "price transparency Kool-Aid"

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Runway_traffic_jam
Yesterday, an anti-consumer bill about airline pricing was marked up by the House Transportation and Infrastructure Committee. Amazingly, the bill was introduced with bipartisan backing from some of the Democrats’ supposedly top consumer-friendly legislators. The bipartisan cabal of representatives added a most Orwellian name to the bill, “The Airfare Transparency Act of 2014.”

This bill does nothing to help transparency. It only allows airlines to make understanding the full price of travel more difficult.

This bill is the product of intensive lobbying by the airline industry that feels it has been overtaxed. Anyone who has read my columns or is familiar with my work in Washington, DC, knows that I have worked to limit travel tax increases. But, at the same time Travelers United, together with a legion of other organizations such as US Travel, American Society of Travel Agents and the Business Travel Coalition, have worked hard to preserve airline pricing transparency.

The airlines’ best customer is the uninformed customer
After four years of losing regulatory and judicial efforts to repeal a Department of Transportation rule that mandates that airlines tell passengers the full cost of airline travel, airlines are turning to the legislative path. They have managed to pull the wool over the eyes of Representatives who should know better.

Worse, after four years of contentious debate through the rulemaking process and then through District Court and an appeal to the Supreme Court, the House Transportation and Infrastructure Committee shamefully and smugly decided to markup this bill without a word of debate and no input from the very people who elected them or the non-airline travel community.

It seems that this band of lawmakers feels they know better than the thousands of consumers who commented on the rulemaking as it was being formulated and that they know better than the judges at the District Court and the Supreme Court who have upheld the regulation from withering attack from the airlines.

Worse, when I asked directly for them to delay the bill markup and allow for debate about this bill, they refused.

According to aides who helped shape this legislation, having an airfare on one page of a website, taxes on another separate page of the website, and then fees on a pop-up of a website and the final price on a 4th page of a website is more transparent than simply stating the full price to purchase an airline ticket.

No consumer asked for this bill. It only helps airlines confuse customers.
Not surprisingly, they cannot find even one consumer who believes such malarky. Nor, have the airlines over a four-year period been able to find even one passenger who complained about being told the full cost of travel.

In fact, even the airlines claim to want to eventually reveal the full cost of travel, but not upfront where it can be compared with other total travel prices. The airlines want to make comparing prices as difficult as possible. They do not seem to be able to sell a product without resorting to what amounts to “bait and switch” or “drip pricing.”

Airlines want to toss out a super low price, let’s say $65 from Boston to London, and only after three or four pages of web searching reveal that the real lowest cost for a ticket from Boston to London will be $751. That was the situation when the new regulation came into effect. Airlines want to turn the clock back.

Nefarious airlines such as Spirit and Allegiant prey on consumers by providing partial pricing information to entice passengers into their buying process by advertising absurdly low “airfares.” Later in the process they pump these airfares up with “optional fees,” such as check-in fees, convenience fees, baggage fees, carry-on fees and other fees to where, in some cases, they cost as much or more than travel on a larger carrier with far more service on the same routes.

Airlines are treated the same as every other business when it comes to taxes and fees
Staffers I spoke with in Congress claim that when they go out to purchase a car or a sofa, they get the price up front and then later find out the taxes and fees. They ask, “Why should the airlines be treated differently?” Taxes should be added on later, just like they are when purchasing a car or a sofa.

The truth is, airlines are treated just like everyone else in the economic universe when it comes to assessment of taxes. All taxes and fees that are added to the end of a purchase for a car or a sofa are state and local taxes and fees. Consumers do not pay any state or local taxes and fees when purchasing an airline ticket.

All federal taxes and fees are already figured into the price that is ultimately taxed by localities when purchasing an automobile or a sofa. When federal taxes and fees are a significant portion of the final price paid by consumers such as when purchasing cigarettes, beer, spirits or gasoline, the federal taxes and fees are rarely broken out and never after first touting the base price without any federal taxes and fees.

Aviation taxes and fees are hidden from the public
This is a flat-out lie promulgated by the airlines. The regulation as it is written and as it has been enforced allows the airlines to list all taxes and fees that they want to list. Nothing is required to be hidden; the base airfare, taxes, fees and other charges must only not be presented more prominently than the total cost of travel.

Airlines have the ability to type out in giant type their complaints about taxes and fees. They can bring in singing and dancing girls announcing that taxes and fees are too high, but when they put the actual airfare, fees and taxes into print the type size must not be more prominent than the final total price.

I have not met a single consumer who has ever complained about being told the full cost of travel. Neither have the airlines.

It is time that consumers let Congress know that they want real transparency, not some figment of transparency that allows the airlines to deceive and mislead the public.

Photo by Carlos Cunha Filho/Flickr Creative Commons

  • bodega3

    I wonder why nobody has posted here on this. Is it because this isn’t a problem that you are making it out to be?

  • http://upgrd.com/roadmoretraveled MeanMeosh

    Charlie, I can see both sides of the argument here and quite frankly am ambivalent on the issue, but can we please stop with the unnecessary hyperbole and scare tactics? I’ve seen several people use examples similar to yours that we will see a proliferation of $65 fare adds to London, which will turn into $750 after adding fees. This is based on either a misreading or misrepresentation of the proposed legislation, though. The legislation as proposed clearly states that “base fare” is total price less “government-imposed taxes and fees”. The $65 fare seems to be based on the idea that fuel surcharges can now be hidden, but I don’t see any reading of the proposed statute that would allow that. A current one-month advance purchase ticket from DFW to LHR runs $1,440, including $240 of government taxes and fees. The majority of that, $181, is UK taxes and fees, so $240 is probably about the top end of what you’re going to see. That’s a lot, but it’s a far cry from the claims that we’ll see ads for base fares that are not even 10% of the total price. This type of hyperbole just undermines the more credible parts of the arguments opponents are using.

    My other question to you is, if we agree that airfare should be a total price, then why shouldn’t that same logic apply to hotels and car rentals? Taxes for things like sports arenas and rental car facilities, along with “resort” fees, are far more insidious than what you see with airfare (as long as we’re not talking about allowing a breakout of fuel surcharges). Why is it OK in this case to hold the airline industry to a higher standard than the hotel or car rental industries? That doesn’t strike me as particularly fair, either, regardless of the merit of requiring an all-in price for airfare.

  • Charles Leocha

    Please reread this article and read today’s post from Kevin Mitchell. State and local taxes are the only taxes added onto sofas and automobiles. Airlines do not pay local taxes.
    The $65 example is taken directly from newspaper ads that were published before and after the current rule came into effect. The most egregious act by the airlines is the division of the round-trip airfare into two unpurchasable pieces.
    Please reexamine Spirit and Allegiant ads with “airfares” published as $9 – $19 plus taxes and fees. This rule does nothing for transparency and only encourages confusion.

    What part of the other side of the argument do you agree with?

  • bodega3

    How can they do it any other way Charlie? You can’t quote a full price if you don’t know the routing. If you place and order online for merchandise and have to pay for shipping, you don’t get the full price until the end of the transaction as that has to get calculated plus the tax is, too, so I just don’t get the issue you keep trying to make.

  • Charles Leocha

    The issue is that it is misleading to advertising a “airfare” of $9 or $19 when it is no where near the price that will be paid for for the transportation after mandatory taxes and fees. Consumers should know the upfront full cost of purchasing a ticket.
    The rule allows airlines to advertise “from $xx.xx” in cases where one routing had multiple stops and another is non-stop.
    Advertising come-on prices is deceptive and misleading.

  • http://upgrd.com/roadmoretraveled MeanMeosh

    I suspect the $65 example is from before fuel surcharges were required to be included in the base fare. The plain language of the proposed legislation clearly states that only government taxes and fees can be broken out – NOT fuel surcharges. There is simply no possible combination of government fees and surcharges that add up to $686 in your example. In addition, the Spirit and Allegiant examples are irrelevant to this discussion. Spirit and Allegiant advertise airfare before ancillary charges. We can argue about whether “unbundling” is a good or bad thing, but this legislation has nothing to do with unbundling. Once again, bringing something completely irrelevant to the discussion at hand does nothing to advance the substantive merits of your actual argument as to why taxes and fees should be included.

    The anti-legislation argument I agree with is that we propose to treat airlines differently from hotels and car rentals, which load consumers with far more egregious hidden taxes and fees. I said nothing about sofas and automobiles, yet you go back to that without addressing the question I raised. Once again, I ask, why should airlines be treated differently from hotels and car rental agencies?

  • bodega3

    I totally disagree with you, as many do. Buying an airline ticket isn’t as clear cut as you try to make it out to be. Nonstops are easier to quote a price, but when you have connections, which airport, how many connections affects the pricing. I just made a purchase for some blinds. My shipping costs varied depending on where I had them sent. That then affected the sales tax. After all was done, the sales tax was wrong as the system prices it on city limits pricing, not the unicorporated sales tax. Nothing is perfect, as there are things that will and do change your final price that can’t be calculated ahead of time.

  • kendall, FlyersRights

    In any other industry, the idea of prices changing every hour would cause an outrage.

    Why do consumers accept it from the airlines?

  • Preston Mckinney

    When purchasing an airline ticket from a travel agent, the cost is known at time of purchase. What is interesting that all of the experts try to tell us (the travel agent) that they found it cheaper online and we do not know what we are talking about. The airlines knows that there are many fools out there and they are simply marketing their pitches to them.