Congress threatens to step in on airline fees
After sharply questioning Spirit Airlines' CEO today about his airline's fees and hearing new reports that the fees are confusing consumers and business people alike and making comparison shopping increasingly difficult, a congressional committee this week heard calls for action, a number from its own members.
"I say to airlines, that if they don't exercise some restraint, then there is going to be push-back from the traveling public and that Congress will act," said Rep. James Oberstar, D-Minn., chairman of the House Committee on Transportation and Infrastructure.He and other committee members indicated that if Congress stepped in, it wouldn't be to stop the fees, but to require airlines provide information on them to industry reservations systems, which would allow comparison shopping.
A committee panel today heard complaints that airlines are using the fees and differences to "obfuscate" the true price passengers will pay, making it difficult to accurately find the lowest fare and surprising passengers in the midst of trips with unexpected costs.
"Shoppers have very difficult time in finding out the true cost of their proposed trips," said Kyle Moore, a VP of Sabre Travel Industry Group [Travelocity] speaking on behalf of the travel agents and the web travel services companies. "They are left to find out the true cost, only when the trips are completed to their painful surprise and their blown budgets."
Moore said that although newly improved software can use the fees to comparison shop, the software only works if the airlines provide detailed information on the fees and who pays them into the systems, something they haven't been willing to do so far.
Kevin Mitchell, chairman of the Business Travel Coalition, said because elite members of an airline program, some corporations and some others don't pay certain fees, the fees make accurate comparison shopping very complicated.
He said a single airline with several new fees now has as many as 100,000 fare combinations that need to be checked.
"It is orders and orders more complicated than consumers have ever had before," he said. "This is a no mans land for consumer protection."
Robert S. Rivkin, general counsel for the U.S. Department of Transportation, also expressed concerns that consumers are losing out.
"It is difficult for consumers to compare fare offerings and make rational economic decisions based on the full cost of travel," he testified. "We believe consumers should have complete information about the full cost of their trip at the time they make their decisions about travel. We believe that information should be presented in a clear straight forward way."
Spirit Airlines president-CEO Ben Baldanza, defended the use of fees. Spirit introduces a carry-on baggage fee in August and has been aggressive in pushing fees. Baldanza said fees allow the airline to lower the cost for flying and let users who need specific services pay for them.
"Spirit believes unbundling – separating out and charging for optional customer services -- allows the choice of the customers to purchase services or not," he said to legislators who expressed some skepticism. "This benefits the public through lower total cost. Carrying more than one bag is not necessary for all travelers. We believe it is unfair to charge those customers for extra services they do not use."
Dave Ridley, senior VP of Southwest Airlines, said airlines should have the right to establish their own fee policy, but "we don't believe in nickel-and-diming customers."
The Government Accountability Office offered a new report saying that airlines, which booked $4.4 billion in losses in 2008 and 2009, have generated $7.9 billion in revenues from the baggage and change fees alone. The report suggested that airlines aren't willing to provide the detailed information about the fees to reservations systems because their fares would show up as higher priced.