The Biden administration is proposing new airline regulations that would require more transparency, and refunds of baggage and WiFi fees when these services are not delivered as planned. Like many regulations, these goals sound noble and fair. Of course, we all want to be clear about what we are paying for when we buy anything, and we expect to get services if we pay for them.
But the devil is in the details and again, like many regulations, these proposals as broadly defined would lead to many unintended consequences and confusion. It’s not even clear that these proposals address the most important customer issues facing airlines, or that many customers are clamoring for help in these areas. But if this is what is being proposed, then at least some significant clarifications will be needed.
All About Transparency
When we purchase things, it is important to know what we are getting for the price we are paying. This is generally called transparency, meaning that what you get is very clear and so by buying, you are accepting that the money you pay is worth it for the goods or services as clearly defined. For airlines, the proliferation of ancillary fees has created a transparency challenge. This is especially true because airlines have different policies around what is separately charged and even when they agree, the charges themselves often have different rules and rates. Thus, if a customer is choosing between a $150 fare at one airline and a $135 fare at another for the same route and similar time, they can’t always be sure that they will end up paying less with the $135 ticket since the $150 ticket may include services that require a separate charge with the $135 ticket.
Airlines have addressed this well on their own websites and apps, and tend to get high marks for transparency when you buy on their home sites. But a majority of customers buy their tickets from third-party travel agencies, like Expedia. These sites sell hundreds of airlines and thousands of hotels, so a detailed parsing of every charge and rule is not practical. As the CEO of Spirit Airlines, I noted that complaints about bag fees being a surprise almost never came from customers who bought on our website, but were common for customers who bought from a travel agency.
So what transparency does this new regulation proposal mandate? If a customer buys a ticket on Orbitz, and Orbitz does not clearly outline a specific charge that later the customer learns is required, who has failed to meet the regulatory requirement? If that customer had bought from the airline, it’s possible that charge would have been fully transparent. We all want transparency, but we all have a personal responsibility to know what we’re buying as well. If a customer sees a note on a travel agency website that says something like “other fees and charges may apply” and does not look into what those might be, the airline itself has not failed a transparency test. Without clarification of where the customer buys, this kind of regulation will be very confusing.
“Lost baggage” is an overused term because most bags are not actually lost, they are just not where they are supposed to be. One of the biggest causes for this is that passengers rush to connect but bags need help with this. We’ve all seen and been the person rushing through the terminal to get to the gate on time, but if we’ve checked a bag the urgency on the ramp to keep the bag moving as quickly may not be there. This is why low-cost airlines tend to misplace fewer bags than big airlines. It’s because they connect fewer customers and concentrate on point to point flights.
There are other reasons bags get misplaced too, like tag problems, human error, and more. But eventually the airlines gets the bag where it needs to go, and here’s where the regulation sets a goal: 12 hours from the flight’s landing. If the bag is not available by then, the passenger would get a refund for the fee they paid to carry the bag. At it’s core, getting a refund for a late-delivered bag makes sense and some airlines are already doing this. But it is not clear what the 12 hours actually means.
If a flight lands at noon and the airline gets the bag onto the proper belt just before midnight, would they have met the regulatory requirement even if the passenger is now hours away from the airport? If it means the customer must be in possession of the bag, that also implies that the customer may have a role to play in this so the regulatory response should consider this. Years ago, when the government passed the tarmac delay rule, it fined the airlines $27,500 per passenger if a flight left the gate but hadn’t taken off within three hours without returning to the gate. This virtually eliminated long delays, but cancellations skyrocketed. That’s because airlines chose to cancel rather than face this huge fine, and studies have shown that passengers were delayed more as a result of this regulation. This bag proposal, with a fixed time that is uncertain as to what it actually means, clearly needs clarifications to both allow airlines to comply and customers to understand what they are really getting with this protection.
WiFi on planes tends to generate a lot of emotions. We all want WiFi for free, so paying on airplanes and at expensive hotels is always annoying. Yet not having WiFi is even worse for most people, so if you’re paying, the WiFi had better work. That’s the goal of this piece of the protective regulatory proposal, and it is fraught with uncertainty. Some airline WiFi is land-based and others are satellite based. In both cases, there are times, because of geography, weather, or something else out of the airlines’ control, where the WiFi is unavailable. Some airlines have on-plane content that still can be used in those times and that is very nice. Given this, it is hard to say when the service has been unavailable long enough to require a refund.
Clearly, on a two-hour flight, if paid WiFi is available for all except a minute or two, most would agree the service was fairly provided. If it’s longer, and especially at a crucial time in a live sporting event, or to respond to an important email or text, it may be more of a problem for the customer. If this regulation is strictly enforced, meaning that the service must be always available, then this provides a strong incentive for airlines to just not offer the service, with little chance to collect any revenues to offset the costs of providing it. It also likely to generate a large number of spurious claims by customers about the WiFi being unavailable when it was just slow, or maybe due to their own equipment, or something else. Soon, everyone who pays for WiFi will learn how to demand a refund based on an a claim of lack of availability. WiFi is already a loss-leader for airlines and this well-intentioned regulation will make it even more financially burdensome for airlines to even offer the service.
Why are these three issues being proposed at this time? There is much greater frustration around ticket refunds especially during the height of the Covid pandemic, and biological safety, and around on-time reliability in general. It seems as though these three things have been considered for years, and already addressed by many airlines without regulation, and were dusted off to create the perception of consumer-friendly regulation by a consumer-friendly administration. This is a poor use of the federal regulatory process and mis-prioritization within it as well. But if it’s going to be used, then at least provide clarifications and reasonable understanding, so that companies know what they need to do to comply and customers know just how well they actually are protected. Let’s all push for greater transparency!