Traveler Advocacy Project

A Broken U.S. Airline Consumer Protection Model

INTRODUCTION: The analysis below, from the newly formed Traveler Advocacy Project, seeks to examine the effectiveness of the U.S. airline industry consumer protection model. It does not recommend specific consumer protections proposals, i.e. a consumer Bill of Rights. Rather, it looks at airline consumer protections in the larger ecosystem of airlines, the U.S. Department of Transportation (DOT), the U.S. Department of Justice (DOJ), the U.S. Congress, the Federal Trade Commission (FTC), State Attorneys General (State AGs), travel agencies, travel management companies, consumers and consumer advocacy groups.

ANALYSIS SUMMARY: Highly dedicated individual Members in Congress and skilled, dedicated federal DOT/DOJ government agency staff are not the problem with respect to airline consumer protections. Rather, it is the industry/government consumer protection model itself that is deeply flawed, and unworkable. This analysis assesses (a) the problem of a broken airline industry and federal government consumer protection model; (b) the effects on individual consumers and corporate, government and university travel buyers; (c) the primary causes of the crisis; (d) the secondary causes; and (e) proposed solutions. The airline industry consumer protection model must be repaired premised upon transparency, accountability and bold reform proposals for DOT, DOJ, Congress, airline manufacturers and airlines.

In addition to Boeing 737 MAX 8 concerns, aircraft-maintenance-outsourcing and other issues, this initiative is particularly timely now because in the nearly two years since the Covid-19 lockdowns began, U.S. airlines still have not refunded $10B+ in flight refunds and still are not operating all the flights they have scheduled. Despite three taxpayer bailouts, totaling some $58B, expressly designed to prevent crew and staffing shortages, thousands of flight cancellations are stranding countless passengers in the run-up to a particularly troubling upcoming holiday travel season.

Despite the best efforts of the nation’s leading consumer organizations - airlines, DOT and Congress are not effectively responding to the needs, complaints and concerns of passengers. This is not a political or personnel issue, because the root causes are systemic within an unfixable broken consumer protection model. Regardless of which political party is in power, or who heads up DOT, or chairs key Congressional committees, the model is simply broken.

PROBLEM

Millions of Americans are financially harmed every year because the U.S. airline consumer protection model is structurally broken beyond repair.

CAUSE

Primary: Radical Airline Industry Consolidation

 

Secondary:

·      airlines are no longer disciplined by fear of fallout from media, travel agents, individual consumers or managed-travel buyers over anti competitive and anti-consumer policies and practices;

·      airlines deny competitors access to airports by hoarding slots and gates and frustrating development of essential airport facilities that attract competitors; and

·      airlines block airport funding streams designed to increase airline competition. 

EFFECTS

Airlines have engaged in:

·      refusing refunds of $10B+ for cancelled flights despite three taxpayer bailouts of some $58B;

·      degrading customer service levels;

·      increasing pricing power in monopolized markets; and

·      pursuing unfair and deceptive policies and practices, including

o   blocking access to complete and accurate schedule, fare and fee information 

o   deceiving travelers with misleading seating charts

o   misleading families with young children expecting to be seated together

o   engaging in predatory practices vis-à-vis domestic and foreign entrants, and

o   confusing consumers with misleading and one-sided Contracts of Carriage.

 

SOLUTIONS

·      conduct a review of past DOJ merger approvals and DOT antitrust immunized alliance approvals vis-à-vis anticipated pro-consumer benefits

·      restore interline agreements

·      permit cabotage to increase consumer choices and promote critical environmental sustainability

·      relax foreign ownership restrictions thereby increasing competition and treating the airline industry like virtually all others

PROBLEM

(same as above) Millions of Americans are financially harmed every year because the U.S. airline consumer protection model is structurally broken beyond repair.

CAUSE

Primary: Captured DOT Agency

 

Secondary:

·      outsized financial and political influence by airline industry at DOT;

·      purposely flawed design of consumer complaint system; and

·      ineffective consumer protection oversight by DOT.

EFFECTS

DOT and its subsidiary - the Federal Aviation Administration (FAA) - failed to:

·      impose sufficient DOT enforcement actions and fines;

·      adhere to the highest standards of FAA safety oversight of aircraft manufacturers and airlines;

·      update and enforce aircraft evacuation standards;

·      mandate safe child seat restraint policies;

·      implement and enforce the highest safety and national security standards for foreign aircraft repair stations providing U.S. airline maintenance services; and

·      maintain sufficient domestic and international competition levels.

 

SOLUTIONS

·      ban former DOT/FAA officials and employees from lobbying the federal government directly or indirectly

·      mandate total transparency of FAA documents and meeting purposes, attendees, agendas and decisions

·      guarantee consumer representatives access to DOT Secretary and senior leadership

PROBLEM

(as above) Millions of Americans are financially harmed every year because the U.S. airline consumer protection model is structurally broken beyond repair.

CAUSE

Primary: Inadequate Congressional Oversight of DOT and FAA

 

Secondary:

·      campaign contributions and subsequent access to Members by airline lobbyists;

·      promises to Members of increased airport hub frequencies and threats of downgauged aircraft;

·      provision of air travel perks to Members; and

·      lack of sufficient Congressional interest in consumer protections.

EFFECTS

Congress has failed to:

·      demand any consumer protection obligations in return for providing airlines with $58 billion over three bailouts; and

·      prevent the erosion of airline industry safety and consumer protections.

SOLUTIONS

o   expand mission and membership of Congressional Aviation Safety Caucuses in both the House of Representatives and the Senate

o   require total transparency of FAA documents and meeting purposes, attendees, agendas and decisions

o   require consumer representatives at all airline industry House and Senate hearings relevant to consumers

o   Transfer DOT alliance antitrust immunity grant approvals to FTC as well as economic and consumer protection regulations

PROBLEM

(as above) Millions of Americans are financially harmed every year because the U.S. airline consumer protection model is structurally broken beyond repair.

CAUSE

Primary Cause: Insufficient Congressional Interest in Airline Consumer Protections

 

Secondary Causes Include:

·      campaign contributions and access to Members by airline lobbyists;

·      promises to Members of increased home airport frequencies and threats of downgauged aircraft as well as provision of air travel perks to Members; and

·      hamstrung consumer advocacy efforts, including lack of access and financial resources.

EFFECTS

Congress failed to:

·      be proactive rather than reactive to airline consumer problems;

·      respond to consumers’ interests rather than airline interests due to the industry’s outsized political influence; and

·      conduct serious consumer-centric hearings regarding airline mergers and competition.

 

SOLUTIONS

o   create new House and Senate Airline Consumer Protection Caucuses

o   require quarterly consumer focused hearings in the House Transportation Committee Subcommittee on Aviation and the Senate Committee on Commerce, Science Transportation Subcommittee on Aviation Safety, Operation, and Innovation

o   require consumer representatives at all airline industry House and Senate hearings relevant to consumers

o   produce a “Sense of the Congress” regarding the indifference by airlines to provide refunds to consumers for pandemic-related flight cancellations

o   transfer DOT responsibility to FTC for alliance antitrust immunity grant approvals as well as economic and consumer protection regulations

o   authorize a National Academy of Sciences Transportation Research Board study of pandemic-related consumer harms, along with recommendations for future pandemics, including consideration of a requirement that airlines purchase pandemic insurance to minimize future taxpayer bailouts

PROBLEM

(as above) Millions of Americans are financially harmed every year because the U.S. airline consumer protection model is structurally broken beyond repair.

CAUSE

Primary Cause: A right of legal action did exist before the Airline Industry Deregulation Act of 1978. However, the preemption clause in that legislation - strictly regarding routes, rates and services -  was interpreted by courts to include exclusive federal jurisdiction over unfair or deceptive practices and unfair methods of competition. (Congress had no intention of stripping consumers of a private right of action; it was not even discussed by Members or by staff in conference meetings - see legislative research at https://tinyurl.com/y2xfesn6).

EFFECTS

Congress has failed to recognize that:

·      in the absence of a private right of action there is near-zero discipline in the airline industry to prevent the trampling of consumers’ interests and rights; and

·      DOT is the sole arbiter of who is held accountable for consumer transgressions, and for what reasons. In 2019, for example, DOT leveled $2.4M dollars in civil penalties against U.S. airline revenues of $196B dollars. It's not even a slap on the wrist. Indeed, if AGs and consumers could have sued, or joined class action suits, the airline practice during the pandemic of not refunding airfares simply would never have happened (private right of action) for unfair and deceptive airline practices.

SOLUTION

o   restore a private right of action that Congress never discussed or considered to be stripped from consumers or State AGs; Senator Blumenthal has developed and finalized legislative language to restore a private right of action