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DOT’s rules for US airlines nothing to do with competition

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DOT’s rules for US airlines nothing to do with competition

Unread post by bimjim » Wed Oct 19, 2016

http://atwonline.com/blog/dot-s-new-com ... ompetition

DOT’s new “competition” rules for US airlines have nothing to do with competition
Karen Walker
Oct 19, 2016

The White House press conference held Wednesday was purportedly about competition among US airlines. It was nothing of the sort.

If, as the White House stated in the media invitation, the aim was “to discuss new actions by the Obama Administration to spur competition in the airline industry”, then the discussion was at best lacking in substance and at worst, hypocritical.

The conference was led by transportation secretary Anthony Foxx and White House council of economic advisers chairman Jason Furman. They outlined a set of new regulations that they characterized as “consumer protection” for airline passengers, including expanding airlines’ monthly operational performance reporting requirements and beginning the process for developing a rule on compensation for delayed checked baggage.

Two final rules were contained in the package. The first will prohibit online ticket agents from undisclosed biasing of flight offerings while the second, to take effect from January 2018, broadens US major airline reporting requirements to include operational data, such as on-time performance, for flights operated by their US domestic codeshare partners. More US carriers will also be covered by the reporting rule.

There will also be a change in how mishandled baggage is reported. Instead of mishandled bags per passenger, airlines will have to report mishandled bags per checked bag. And carriers will be required to report on how often they mishandle wheelchairs.

DOT has also issued an advance notice of proposed rulemaking (ANPRM) to require airlines to refund baggage fees when a passenger’s luggage is “substantially delayed”, although the DOT official said it was still soliciting comments on what constituted a “substantial delay”.

And DOT is conducting a separate rulemaking process to “explore” requiring airlines to disclose an “all-in-one price” on online travel sites, the department said. Fees to be potentially included in the disclosed price are baggage fees, seat assignment fees, and change and cancellation fees. “The idea here is the department is exploring what are the optional services that are so intrinsic to air services that they should be displayed along with the fare [online],” the DOT official said.

That last point is probably the one that had most airline executives taking a sharp intake in breath as it’s a clear stab at airline ancillary fees. Those “explorations” could easily turn into further re-regulation of the industry, effectively dictating how airlines sell their services and products and run their business.

But there are many other reasons to shake your head at all of this nonsense. How, for instance, does burdening airlines with a whole new raft of statistics’ reporting make the industry more competitive? For one, the rules apply only to US domestic flights, so it does nothing for the international traveler. For another, there is real time and cost involved in day-on-day, month-on-month reporting requirements. And it’s now going to be applied to some of the US’ smallest regional carriers, some of which are already operating on the margins of financial feasibility. Where does DOT think that cost will end up going?

Similarly, there’s a great big hole in the proposal for a new refund fee for delayed baggage. As DOT admitted, it has yet to define a “substantial delay”, but whatever terms are ultimately agreed, regulation isn’t the competitive solution. Regulation simply binds all airlines to the same, government-mandated compensation terms. In a free market, Airline X might compensate its customer better for a lost delayed bag than Airline Y. That’s competition; and you shouldn’t shackle it with regulation.

Now for the hypocrisy part of this maneuver. DOT has sat for more than three years on low cost carrier Norwegian Air International’s application to serve the US under the US-EU Open Skies agreement, despite giving tentative approval to NAI in April. DOT has also denied Norwegian UK’s application while the NAI application remains pending.

If DOT were truly serious about airline competition, it would be welcoming new entrants into the transatlantic market, especially low cost carriers, but most especially airlines that come under the umbrella of open skies treaties the US itself has forged round the world. Because it did so under the pretext that this was good for the consumer and good for competition.

But with its re-regulatory tactics and reneging of its open skies commitments, the US is looking more protectionist than pro-competition.

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