STATEMENT OF
ROBERT S. RIVKIN
GENERAL COUNSEL
U.S. DEPARTMENT OF TRANSPORTATION
BEFORE THE
SUBCOMMITTEE ON AVIATION
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
CONCERNING
AIRLINE FEES
JULY 14, 2010
Chairman Costello, Ranking Member Petri and Members of the Subcommittee:
I am pleased to appear before the Subcommittee today to discuss the U.S. Department of Transportation’s commitment to vigorous compliance and enforcement efforts to protect the rights of airline passengers. I will emphasize steps taken by the Department to ensure that airline passengers have accurate and complete information about the full cost of the air transportation they are purchasing, including the ancillary airlines fees they must pay.
First, let me emphasize the importance Secretary LaHood and this Administration place on the rights of airline consumers. From the start, we have carefully examined our regulatory authority to determine how best to assist airline consumers with the most serious problems they face, including lengthy tarmac delays, chronically delayed flights, and lack of consumer information on the on-time performance of flights. We decided to add clear limits on tarmac delays, tough rules on chronically delayed flights and more disclosure to passengers than had been proposed in the prior administration’s rulemaking we inherited. In December 2009, we took the most forceful regulatory action then available to us by issuing a rule including those provisions.
Recognizing that much more had to be done, after issuing our first consumer protection rule, we have now proposed more comprehensive regulatory protections. In June we issued a Notice of Proposed Rulemaking (NPRM) to strengthen the reforms enacted by our first rule—for example, to cover foreign carriers and more U.S. airports under our tarmac delay rule—and to deal with a number of other problems, most notably inadequate denied boarding compensation, deceptive air fare advertising, and insufficient disclosure of airline ancillary fees.
Because the topic of today’s hearing is “airline fees”, I will expand on the NPRM proposals designed to make it easier for consumers to know how much they will have to pay for airline transportation and ensure that airlines’ fee-related practices are fair. First and foremost, the NPRM would require true full price advertising. Under the proposal advertised prices would be required to include all mandatory taxes, fees and charges. If the consumer has to pay the charge to fly, like a fuel surcharge, an excise tax, a travel agent service charge, or an internet ticket convenience fee, the charge would have to be included in the price presentation to each consumer.
Also, as we explain in the NPRM, we are skeptical that airlines should be allowed to label as “fares” prices that do not include numerous mandatory charges, and thus serve only to confuse or deceive consumers regarding the true full price of the ticket and to make price comparisons difficult. We have proposed to prohibit this misleading listing of fares.
Second, we propose that airline optional fees be fully disclosed on airline websites. By optional or ancillary fees, we mean charges for things like checking baggage or seat assignments that passengers can avoid but still fly. Our optional-fee-disclosure proposal results from what the Department feels is often a lack of clear and adequate disclosure of these fees by airlines; consumers are not always able to determine the cost of their own travel (the ticket price plus the price of additional fees for optional services) prior to purchase.
Third, the NPRM would require more detailed and prominent disclosure for fees related to carry-on baggage and the first two pieces of checked baggage. For example, carriers would be required to issue e-ticket confirmations to passengers that include information regarding their free baggage allowance and/or the applicable fee for a carry-on bag or the first and second checked bag on the e-ticket confirmation. By providing this information to consumers on the e-ticket confirmation, passengers will be clearly informed well before the flight date and arrival at the airport of the applicable baggage rules and charges.
Fourth, we seek comment on the costs and benefits of requiring that two prices be provided in certain air fare advertising—the ticket price which is the full fare, including all mandatory charges, as well as that ticket price plus the cost of baggage charges that traditionally have been included in the price of the ticket, if these prices differ. We solicit comment on whether such a requirement for a second price, if adopted, should be limited to the full fare plus the cost of baggage charges or expanded to include other optional services that traditionally have been included in the price of the ticket, such as obtaining seat assignments in advance.
Fifth, the Department is considering requiring airlines to provide their agents and global distribution systems—that is, computerized, online airline reservations systems like Amedeus that display multiple carrier offerings—complete, accurate, and up-to-date information on ancillary fees so that internet and store-front travel agents can provide that information to consumers.
Sixth, the NPRM seeks comment on the possibility of requiring sellers of air transportation to display on their websites comparative full fare information based on the ancillary service desires of a passenger. So if a customer wants to select a seat and check two bags on a flight from A to B on a specific date, the customer would see what the total price would be for each carrier providing the desired air transportation.
In addition to prohibiting deceptive fee advertising and disclosure, the new proposed rule also addresses fee reimbursement. It solicits comments on requiring carriers to reimburse passengers the fee charged to transport a bag if that bag is not timely delivered and explains that, when a flight is cancelled, carriers must refund not only the ticket price but also any optional fees charged to a passenger for that flight (e.g., baggage fees, “service charges” for use of frequent flyer miles when the flight is canceled by the carrier).
The comment period on the NPRM is currently scheduled to close on August 9, 2010, although we have recently received a request to extend the comment period. We have set an aggressive timeline and hope to complete our rulemaking by the end of the year.
Our wide-ranging rulemaking activities have not detracted from an expansion of our aviation compliance and enforcement work. For example, over the past two years our Aviation Enforcement Office has conducted 16 on-site investigations at airline headquarters to measure their compliance with our existing passenger rights regulations. Five of those investigations have already resulted in cease and desist orders assessing large airlines almost $1.2 million in civil penalties, primarily related to violations of our denied boarding compensation requirements.
The other investigations may result in similar enforcement actions. More important perhaps than the resulting enforcement actions, these on-site visits emphasize to carriers their responsibilities and foster future compliance.
Another significant enforcement activity focuses on deceptive airline and agent fare advertising. During the year ending June 30, 2010, the Department issued 11 cease and desist orders assessing $520,000 in civil penalties in cases involving deceptive advertising alone. Three other orders covered deceptive advertising as well as other issues.
In the past year we also issued our first enforcement orders related to lengthy tarmac delays. Specifically, the Department levied a total of $175,000 in civil penalties against three carriers for their roles in causing a lengthy tarmac delay after a flight was diverted to Rochester International Airport in Minnesota due to bad weather.
For the year ending June 30, 2010, the Department issued a total of 37 cease and desist orders against airlines and agents relating to non-safety related aviation matters. Those orders assessed close to $3.2 million in civil penalties. Those numbers reflect a reversal from a downward trend in the prior few years.
Before closing, I would like to thank this Committee and Congress as a whole for helping invigorate our consumer protection program. In the past few years Congress has appropriated additional funds that have enabled us to increase our consumer protection staffing, conduct on-site investigations, and take a number of other proactive steps to support our consumer rulemakings and to strengthen our consumer protection program overall. We also appreciate the work of this Committee’s staff, as well as Senate Commerce Committee staff ,who have approached us for technical assistance on the Passenger Rights Legislation currently being considered by Congress. We hope these contributions have been helpful to the Committees.
In conclusion Mr. Chairman, we believe we have a high level of appreciation for the many problems faced by airline passengers and we will continue to take aggressive and timely action to mitigate those problems in the future. I want to assure you on behalf of Secretary LaHood and the other employees of the Department of our continuing commitment to this important work. Thank you again for the opportunity to discuss these critical matters. I would be happy to answer any questions you may have.