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Estimated reading time for this article: 4 – 6 minutes

New consumer protection rules mandated by the United States Department of Transportation will take effect soon. Some rules will come into effect on January 24th, while others come into effect January 26th. Passengers, however, will likely see the effects of the new regulation over the next few weeks as airlines put policies into effect earlier to sort out teething difficulties.

A summary of the various rules that will take effect, borrowed with permission from Travel Weekly:

• requires that all advertisements and published listings for airline fares, or for travel packages that include air, list the total price with all taxes and mandatory fees included

• requires airlines to allow travelers to hold a reservation for 24 hours without payment, or to grant cash refunds for cancellations made within 24 hours of payment

• prohibits post-purchase increases in airfares or in any component of an air-inclusive package

• prohibits airlines and travel sellers from passing on any price increase between the time of the deposit and the due date for final payment unless passengers provided written consent at the time of booking to accept such increases

• requires airlines to publish information about known delays, cancellations or changes in the status of a flight within 30 minutes of becoming aware, by making the information available at the boarding gate, on the Web, and (upon request) via call centers

• requires airlines to print specific information regarding baggage allowances and fees on e-ticket confirmations

• requires airlines on multi-carrier itineraries to, from or within the U.S. to uniformly apply the the baggage policies of the originating carrier on the entire itinerary

Source: Allegiant Airlines

When the DoT announced these rules, US based airlines unsurprisingly complained  a lot. Especially on the new policy that requires airlines to advertise fares with all mandatory taxes and fees included, airlines were rather unhappy. Southwest Airlines, Allegiant Airlines, and Spirit Airlines, all low cost/low fare carriers, (although Southwest only arguably so) have all filed a lawsuit about the specific rule back in November. The airlines claim that the federal agency has no proof that the practice of advertising base fares and the fees and taxes separately is “unfair or deceptive conduct,” according to court documents.

“The price advertising provision was adopted to make sure passengers know the full amount they will have to pay for air transportation when they buy a ticket,” said DoT spokesman Bill Mosley, countering their argument. Regardless of their unhappiness, Southwest, Allegiant, and Spirit will all be forced to deal with the rules anyway, at least until they get a verdict on their lawsuit. Since a $113 ticket doesn’t lend itself as well to marketing as a $99, discount carriers who advertise fares will likely reduce their lowest prices, forcing them to compensate by increasing their higher ticket prices. Since the fare decrease will have no effect to marketing due to the new rules, and the fare increases will reduce demand, the net fare increase will be greater than any discounts available. This will also mean lower load factors for airlines, which will prompt additional capacity cuts. This rule will have relatively minor effects in the grand scheme of things, but fares will go up overall as a result of this legislation.

Source: Wikimedia

The rule regarding 24 hour holds is not that big of a deal to airlines. Many already offered this service, and for those that don’t, it is a relatively minor revenue stream that doesn’t bring in any goodwill anyway. However, airlines may compensate by increasing fares to make up the loss of the revenue stream.

The rule that prohibits fare increases after the ticket has been sold will likely have no effect on most airlines. The only airline which will be disappointed about it will be Allegiant Airlines. They were considering to try a new business model where passengers could choose to base their ticket price on the price of jet fuel. This could lead to savings for customers if fuel prices went down, or fare increases if fuel prices went up. Allegiant hasn’t really decided to fight this rule however.

The rule about passing on information about known delays is also unlikely to lead to any major change. Airlines already do their best to try to pass on information about delays and cancellations, and enforcement will be extremely difficult for the DoT to handle. It is a good customer service gesture to keep passengers updated, so this rule is unlikely to be something the airlines are too concerned about.

Source: Wikimedia

The last 2 rules, regarding baggage allowances, are a major problem for airlines worldwide. Many airlines do not have the capability to implement this rule, especially those which do not fly internationally but instead feed international carriers from smaller cities. These airlines will be adversely affected by this rule without having any business in the USA at all. The second part of the rule also does not conform to the IATA standard rule, which is the “most significant carrier” rule. This rule says that the carrier which flies the passenger the furthest gets to dictate the baggage policy. This rule makes the most sense for airlines, and is logical for passengers to follow as well. However, it seems like the DoT didn’t like this rule and decided to “simplify” it. This will result in costs for carriers, both domestic and international.

Despite the fare increases, some of the rules are likely to yield net benefits for consumers. The 24 hour cancellation rule in particular will help passengers who made a mistake during booking.  The most interesting thing to watch in my opinion will be the outcome of the lawsuit. It will be a fierce battle, there is no doubt about that.

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