Monday, April 2, 2018

Time to re-regulate U.S. airlines

At a time when the airlines are pushing for the repeal of a variety of consumer-protection measures, it is high time we travelers joined forces and pushed back with a firm, “Hell, no!” I travel frequently for both business and leisure, and I believe the U.S. airline industry needs more regulation, not less.

The U.S. airline industry has shown itself to be tone-deaf to the wants and needs of its customers, which is borne out over and over by various polls and studies. The most recent, released in March, comes from the well-respected publication Consumer Reports, which polled 55,000 members who had recently taken airline flights.

The results underscore what many of us have said for some time: that the burgeoning levying of nickel-and-dime fees is confusing and frustrating, that “main cabin” seats are largely uncomfortable, that no single airline consistently offers better fares (or service) than any other.

Further, the airlines seem to be engaged in a race to the bottom. When one introduces “basic economy fares” that add on charges for everything except using the in-flight lavatory, the others quickly follow. When one installs smaller seats and less legroom, the others do likewise.

On that topic, the pitch of a coach airline seat – the distance from the back of one seat to the back of the one in front of it – has dropped from around 33 to 34 inches before 2001 to around 30 to 31 inches now, according to Henry H. Harteveldt, founder and travel industry analyst at the Atmosphere Research Group. Seat width has also become narrower, with 17 inches a typical economy seat width, according to SeatGuru.com. Try opening a laptop to get some work done in those confines; it’s practically impossible.

About two years ago the airlines, via their trade group, strong-armed the Senate into killing proposed legislation that would have forced airlines to stop shrinking seat space.

An amendment to the 2016 FAA reauthorization bill, introduced by Sen. Charles Schumer (D-N.Y.), would have ordered a moratorium in reductions to seat width and pitch. It would also have empowered the FAA to consult with experts and set new standards for seat dimensions that maintain “the safety, health and comfort of passengers.” At present, experts can only consider safety when making such rules.

The airline industry took the position that “the market” should be allowed to decide, as did several misguided newspaper editorial writers. That position missed the mark rather dramatically because there is no real “market” as there is meaningful difference between the various U.S. airlines when it comes to space, save jetBlue (NASDAQ:JBLU) and Virgin America on the more generous end and Spirit (NASDAQ:SAVE) on the jammed-in-like-sardines end.

If regulators would mandate larger seats with more legroom, business travelers could actually be productive while en route, thus providing additional benefit to the companies that paid for their tickets.

Airlines are also running rampant when it comes to wringing extra dollars out of their passengers through what the industry calls “ancillary revenue.” While that includes non-ticket income like commissions and revenue from selling frequent flyer miles to the banks that issue their affinity credit cards, it also includes those hated nickel-and-dime fees levied for everything from checked bags to my personal pet peeve: reserving your seat in advance.

Nickel-and-diming their passengers enables the airlines to engage in a “shell game” of sorts. By getting revenue from those other sources, it allows them to offer artificially low “ticket prices” that don’t reflect the true, full cost of the trip.

And the airlines show no sign of slowing that practice. In 2007, the first year ancillary revenue was tracked by a company called IdeaWorksCompany, the 10 airlines worldwide that earned the most, generated $2.1bn from various ancillary revenue sources. In 2016, the last year for which figures are available, that figure had soared to more than $28bn, an increase of more than 1,300 percent.

In fact, according to that report, nearly half of Spirit’s total revenue (46.4 percent) came from the ancillary revenue sources.

There are things that arguably should be à la carte, such as in-flight meals, alcoholic beverages and use of Wi-Fi. But many of us chafe at having to pay to check a bag. I bristle when an airline wants to charge me to reserve my seat in advance, and it makes me absolutely furious that different fees apply to reserve different seats within the same cabin class. I see that as greed, pure and simple.

In its campaign to rid itself of what little regulation it currently has, the airlines want the government to reverse the Department of Transportation (DOT) rule that requires them to offer free cancellation privileges within 24 hours of ticket purchase, within certain parameters.

Seriously?

Retail operations ranging from upmarket chains like Nordstrom (NYSE:JWN) to warehouse giant Costco (NASDAQ:COST) all provide refunds on purchased goods that aren’t used or are unsatisfactory. Why should airlines be the exception? In fact, allowing them to refuse refunds or cancellations after a mere 24 hours is already a gift. Why not 14 days? Or 30 days, as with many retailers?

As most people are aware, “transparency” has become the rallying cry in many business and government sectors. U.S. airlines, by contrast, seem to favor obfuscation.

Late last year, the DOT instituted a Request for Information (RFI) that would have enabled it to review the transparency of U.S. airlines’ pricing practices, which have become increasingly arcane. In addition, airlines are withholding pricing information from third-party metasites. Those practices reduce consumer choice by making it exceedingly more difficult to comparison shop for the best flight at the lowest price in a simple and efficient way.

However, the DOT suspended the RFI without explanation before the end of the public comment period. Senator Susan Collins (R-Maine) has introduced legislation that would require the DOT to reopen the comment period and seriously consider the input from the traveling public.

Given the success of its lobbying efforts to date, nothing is likely to change in the public’s favor unless we travelers, whether business or leisure, petition our elected officials to reign in this industry that seems hell-bent on raking in maximum revenue while providing the absolute minimum in terms of service.

If that was any other company’s business model, I dare say it would soon be out of business.

Short of a return to the days of almost total control under the Civil Aeronautics Board (during which the industry enjoyed a greater number of profitable years than under the current deregulated scheme), legislation ensuring pricing transparency, modestly comfortable seating and some rational, almost-all-in pricing would be most welcome indeed by those of us who travel by air.

Even better would be legislation modeled after the European Union’s EU 261, which sets compensation levels for airline passengers who are delayed. With the exception of force majeure events, delayed passengers may be eligible for between €125 and €600 in compensation from their carrier depending on the length of their flight and the length of the delay.

But first, baby steps.

Contact your senator and representative and let them know that you, too, think the U.S. airline industry needs more, not less, regulation.

Visit my main page at TheTravelPro.us for more news, reviews, and personal observations on the world of upmarket travel.



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