Where to begin with this spectacularly-named legislative proposal? The Congressional Office of Clever, Original Acronyms (COCOA) deserves a bonus for this one.
We all hate airline fees, so a bill to reign them in is playing to the crowd. That’s what Senators Edward J. Markey (D-Mass.) and Richard Blumenthal (D-Conn.) did yesterday by dropping this spectacularly-named law with the crazy idea that prices should actually be meaningful and have some connection to services rendered. It’s unfair, for example, to charge a $50 bag fee and then lose a passenger’s bag. It’s also unfair to charge random fees.
Here’s a list of randos provided by the senators:
A recent investigation by the minority staff of the U.S. Senate Commerce, Science and Transportation Committee found that of the eight carriers the Committee queried three increased checked baggage fees by 67 percent between 2009 and 2014. And four airlines increased domestic cancellation fees by 33 percent between 2009 and 2014, one increased the fee by 50 percent, and one increased its fee by 66 percent…Through the first three quarters of 2015, airlines collected more than $5 billion in bag fees and change/cancellation fees.
If you are a free marketeer, you might argue that airlines are entitled to charge whatever-the-heck they want to, but that’s not quite right. The randomness of the fees points to a broken market; if the fees were fair and the market functioning they would cluster in some way. Instead, many of these fees are the result of captive consumers who have no choice in the matter; thus, the wide array.
Thus, need for rules to fix the broken market. FAIR aims to do that.
“There is no justification for charging consumers a $200 fee to resell a $150 ticket that was cancelled well in advance. The FAIR Fees Act puts a stop to this fee gouging and will help ensure passengers are flying the fair and friendly skies,” the senators said.
The legislation would link the fee to the actual cost for airlines. For example, change fees could not exceed the cost of processing the new tickets and any potential loss of revenue due to the cancellation.
“Airlines are overcharging consumers with fees that are grossly disproportionate to the value of the service received and result in a windfall for airlines. “Exhibit A” is change fees, where airlines charge $200 when the true cost of a change is 6 to 7 times lower, if not zero,” said Business Travel Coalition founder Kevin Mitchell. “This kind of unconscionable consumer price gouging is a textbook example of unfair methods of competition that underpin competition laws.”
FAIR laws would be sensible in many industries. Penalty charges and fees nearly always involve a captive consumer — people don’t shop for products based on what the punishment might be for a misstep. Sure, penalty fees are important to protect corporations from consumers who don’t live up to their obligations, but they shouldn’t be wildly disconnected from the actual cost to companies when consumers break the rules.
This airline AIR doesn’t stand much of chance. Another bill that would standardize airline fee disclosure — a good start, but hardly revolutionary — was introduced on Wednesday by by Sen. John Thune, R-S.D. and Sen. Bill Nelson, D-Fla. It’s got some bipartisan support. FAIR will probably be offered as a amendment to that legislation, but don’t hold your pressurized cabin breath.
Members of Congress are trying to fix the sinking seat problem, too — which is another kind of fee. After all, if you are getting a smaller seat for the same price, or the option to pay more to get the legroom you used to get, that’s a fee. On that one, you probably should hold your breath, just to fit in your seat. Sen. Chuck Schumer (D.-N.Y.) said last week he would support an effort started in the House to pass the Safe Egress in Air Travel (SEAT) Act, (There’s that COCOA again).
For obvious reasons, airlines will fight that effort. After all, they have plenty of money to do so. They’re making a killing this year, thanks to low oil prices. Specifically United Airlines, which reported earnings of $4.2 billion last year but paid $0 in taxes, according to this recent USA Today story. (The firm should have paid $1.5 billion but used tax credits from prior year losses to zero out the bill). So in essence, the airline is using your money to fight rules that would make your air travel suck less.
That’s the free market at its best!
(To get more details on what happened in that picture above, click here.)
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