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Unwanted Competition
New “competition” rules for airlines shun competition

Oct. 26, 2016

In some good ‘ol fashioned, end-of-the-presidential-term braggadocio, the Obama Administration announced an unbelievable new “achievement” for airline passengers.

At a press conference last week, the White House publicized “new actions to spur competition in the airline industry.”

Today’s Actions Respond to Executive Order Issued on April 15 to Spur Competition, Build on Strong Record to Create a More Transparent, Lower Cost, and Higher Quality Experience for Consumers” – The White House, Office of the Press Secretary



Competition Among US airlines? (All Nonsense)

Is America opening its skies to global airline competition? Will it welcome new entrants into the transatlantic market, particularly low-cost EU carriers? Is the US getting serious about Open Skies treaties it has forged round the world, under the pretext that this was good for the consumer and good for competition? The answer is no, no and no.

Maybe the application from Norwegian Air International has finally moved out of DOT limbo, where it’s been stuck for three years? Nope, wrong again.
The press conference was led by DOT Secretary Anthony Foxx and White House 
Council of Economic Advisers’ Jason Furman. All they did was boast about new regulations they characterized as “consumer protections” for airline passengers.
More Fee Disclosures, Bag Refunds
The administration leaders said they will “explore” requiring airlines to disclose an “all-in-one price” on online travel sites. 
This means fees might have to be disclosed upfront in the price. They would include 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],” a DOT official said.
Airlines would also be required to refund baggage fees if luggage is significantly delayed. But what’s the definition of  a “substantial delay”? DOT will be ‘seeking feedback’ on that – as well as whether it should differentiate between international and domestic flights and how soon a refund should be issued.

Currently, when a customer pays $35 for a checked bag and doesn’t receive it at the other end, they have every expectation to receive a refund. But FlyersRights’ experience with the airlines is that they’ll refuse returning the money without lots of phone calls and hassle.
It is a failure (or less charitably, a swindle) for airlines to charge you to put your bag on the flight, then not have it arrive with you. 

FlyersRights has maintained that consumers are paying more for less while airlines continue to attempt to merge and decrease competition. The number of airlines have decreased substantially between 1979 and 2016, which coincides with increased fares and decreasing customer satisfaction.

In regard to the contract of carriage, it is entirely in the airlines’ favor. They don’t need to provide anything but a seat from A to B (regardless of the arrival date or time), or a refund if they can’t give that to you. However, when you have boarded a flight and paid for the checked bag, there is an implicit agreement that it will arrive with you. Otherwise it would be called ‘cargo’, and you would ship it UPS.
Flights $1 — With $199- $399 Booking Fees

Of course the airlines don’t want to include their ‘gotcha’ fees into the fare – the price of a ticket might double!
Not only that, but taxes are a large driver of these ‘unbundled’ fees, When DOT talks about “requiring airlines to disclose an “all-in-one price” – airline CEO see millions vanishing from their profit margins.

Ancillary fees are exempt from the 7.5% excise tax on domestic airfare. So shifting $20 away from a ticket and call it a ‘fee’ for something means that the government takes $1.50 less.

Multiply that out by billions of dollars and it’s serious revenue gained through tax arbitrage. Airlines will ramp up donations to politicians in hopes of staving off excise taxes being applied to fees. But this is a big a pot of money for the government to ignore. Closing these tax loopholes will likely lead to most junk fees being eliminated.

Yet one could reasonably argue that the value-add fees (early boarding, drinks, food, etc.) allow airlines to differentiate in a way that gives consumers more choice. But the fees that only serve to gouge consumers without providing service (like change fees that often equal the entire fare, rendering the ticket worthless) should be included in ticket prices.

REINSTATING THE RECIPROCITY RULE

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