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DOT Requires Taxes, Fees Be Included in Advertised Prices

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The Department of Transportation (DOT) officially, finally, unveiled a series of consumer protections rules aimed at increasing transparency and fairness in the airline industry. The rules were proposed last June and won’t take effect for 120 days.

Here are the main components of the new rules:

  • Airlines must refund bag fees paid for bags that are lost in transit. Note that the rule stipulates bags that are lost, not delayed. That the DOT decided to exclude delayed bags from this provision is probably the most disappointing aspect of the rules. Bag fees ostensibly cover the shipping cost of your luggage. In many retail situations, customers with delayed shipments are often compensated with refunds or vouchers, in what seems like an obvious “make it right” scenario. Not so here. Worse, the definition of “lost” is left ambiguous, and presumably to the airlines’ discretion. It can take days and even weeks for an airline to qualify a bag as lost, meaning passengers will have to be patient if they want their $25 back. And as the DOT notes, “Airlines are already required to compensate passengers for reasonable expenses for loss, damage or delay in the carriage of passenger baggage.” So this strikes me as a “why bother?”
  • Full-fare advertising or bust. Advertised fares will include all mandatory taxes and fees, meaning the price you see is the price you’ll pay (prior to tacking on ancillary charges, such as bag fees). This rule applies to any ticket seller, whether it’s the airline, an online travel agent, or a human travel agent. Travel agents will also have to disclose bag fee information both before and after the consumer purchases their ticket. The agency had proposed a dual-price system, where one fare included mandatory taxes and another included taxes plus some basic ancillary fees, but this model was deemed too cumbersome to be useful (rightly, I’d say) and was dispatched.
  • Bag fee changes on airline homepages for three months. The DOT did follow through on its proposal to require carriers to, in its own words, “promptly and prominently disclose any increase in its fees for carry-on or checked baggage and any change in the checked baggage allowance for a passenger on the carrier’s homepage.” The notice should be obvious and remain in place for three months, and the rule also applies to foreign carriers that advertise or sell air tickets in the U.S.
  • Web page for all ancillary fees. Similarly, The DOT will require carriers to create “one central webpage on their website, linked from the carrier’s homepage, which lists all ancillary fees.” That’s all ancillary fees. Currently, most airlines have their fees scattered all over their websites, making it nearly impossible to track them all down in an efficient manner.
  • Compensation for bumping gets a bump. The new rules increase the minimum denied boarding compensation limits to $650 for short flights and $1,300 for longer flights, or 200%/400% of the one-way fare, whichever is smaller. The rules will apply to “zero fare” tickets, such as award flights, which are currently exempt from compensation requirements. The DOT will also adjust for inflation every two years.
  • Tarmac delay rules extended to international carriers. The DOT will impose a four-hour limit on tarmac delays for international flights, including those operated by foreign carriers. Food and water must be provided, as is the case with the existing three-hour rule for domestic flights. Interestingly, the DOT noted that “The extended tarmac delays experienced by passengers on international flights operated by foreign carriers at New York’s JFK Airport during the December 2010 blizzard was an important factor” in crafting this rule.
  • Lots of smaller changes. The new rules also include a ban on post-purchase increase, except when directly tied to new or increased government taxes; require airlines to communicate delays of over 30 minutes at the boarding gate, on its website, and via its telephone system; and allow passengers to hold a reservation for 24 hours without payment and cancel said reservation without penalty.

You can read the full 213-page ruling here.

In sum, these rules represent a meaningful win for passengers, and in most cases hold true to the original proposals put forth last year. Notably absent is any regulation on peanut service, which was a surprisingly controversial component of those proposals. And, as I mentioned above, the bag fee refund policy is disappointing. If an airline loses your bag, you have a lot more to worry about than a $25 fee. In my opinion, the DOT blew a chance to hold airlines accountable for the fee that causes the most pain among consumers.

But from a consumer standpoint, the agency’s requirements surrounding fare and fee transparency are huge, and will fundamentally affect the way we shop for airline tickets. Simply being able to see an airline’s entire menu of ancillary fees, and compare those fees to other carriers’, is a major change. Knowing, when searching, that the price you see is the full price, will allow consumers to make more informed decisions and avoid that awful feeling of being baited and switched.

The fact that we’ve come to this point, where the government has to mandate honesty and transparency from the airline industry, is more than a little disappointing. Much credit to the DOT for stepping up and giving consumers a voice.

Readers, what do you think about the new rules?

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