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A DIFFERENT KIND OF AIR RAGE
By Joe Brancatelli
December 2, 2009 -- Can government regulations, aggressively enforced by bureaucrats, make the nation's skies friendly again? It looks like we're about to find out.

With surprisingly little fanfare, the Department of Transportation in the last three months has suddenly become the consumer advocate again. After a decade of somnambulance, especially during the George W. Bush years, the Obama Administration's DOT has suddenly come alive with righteous indignation, and it's wielding its regulatory cudgel with gusto. Needless to say, the nation's airlines are less than thrilled with Transportation’s attention to the letter (and especially the broader spirit) of the nation's consumer-protection infrastructure.

Although it was buried by other news and then immediately forgotten in the run-up to Thanksgiving, the DOT last week hammered the three airlines involved with last August's aircraft diversion in Rochester, Minnesota, when 47 passengers were stranded overnight on the tarmac in a regional jet. A total of $175,000 in fines was handed out to Continental Airlines (the carrier that marketed the flight as a commuter connection), ExpressJet (the airline that actually operated the aircraft), and Mesaba (the only airline with staff at Rochester's airport at the time).

The unprecedented size of the fine—the equivalent of a whopping $3,700 a passenger—was an unambiguous, if overdue, message to airlines that it cannot treat passengers like prisoners. It has also sent the carriers scrambling to revisit procedures for "irregular operations" such as flight diversions and on-the-ground delays. After all, a $3,700-a-head fine is much more costly to airlines than the toothless procedures proposed in the "passenger's bill of rights," which has been stalled in Congress for two years.

"I hope that this sends a signal to the rest of the airline industry that we expect airlines to respect the rights of air travelers," said Transportation Secretary Ray LaHood, a former Republican Congressman from Illinois, an Obama confidant, and the Democratic president's major nod to a bipartisan cabinet.

LaHood's pro forma pronouncement of the bureaucratic righteousness would be predictable and easy to dismiss if it weren't for the Transportation Department's renewed vigilance in the months just before last week's thunderbolt. Among the DOT's pro-consumer moves:

    * It fined Spirit Airlines, a carrier best known for repugnant customer service and smarmy, cringe-inducing promotions like MILF fares, a total of $375,000 for a panoply of infractions of the agency's rules on fare advertisements, baggage liability, the handling of disabled passengers, and the disposition of passenger complaints.
    * It fined UltimateFares.com $600,000 for advertising and promoting lowball airfares that did not include mandatory government taxes and fees and a battery of extra charges imposed by the site. It even fined the site's owner, Roni Herskovitz, $30,000 and barred him from any involvement in the online travel agency business for a year. Don’t go looking for the site. It’s disappeared from the Net.
    * It issued an official notice demanding that airlines remove wording from internal guidance to employees and their "contracts of carriage"—you agree to the contract whenever you buy a ticket—that would limit the federal liability on lost, damaged, or delayed luggage. DOT regulations require that airlines accept liability of at least $3,300 a passenger for checked baggage.
    * It issued an official notice demanding that airlines involved in code-sharing operations on international flights align their luggage rules with internationally accepted norms. Airlines had been denying responsibility for certain costly items (such as laptop computers) they accepted in checked bags on international flights.
    * On Monday, it required British Airways to fully reimburse passengers who had purchased a lowball fare from the United States to India that BA had mistakenly posted on its website. More than 2,220 passengers bought a $40 fare listed on BA's site, although about $520 in taxes and fees increased the price to within a few dollars of the airline's actual price to India. When it discovered its error, BA unilaterally cancelled the bookings. The DOT noted that BA offered the flyers a $300 voucher for future travel, but insisted that the airline also cover any related cancellation fees that passengers might have incurred from hotels or connecting airlines.

"It's hard to tell whether this is going to be an activist Transportation Department or it is just reacting to some recent high-profile events," a Washington lobbyist with an airline client told me this week. "Either way, we've told our client to assume the worst. Airlines aren't particularly popular with passengers, and it would cost the DOT nothing to adopt a populist stance on every real or imagined slight."

Of course, nothing happens in a vacuum in Washington, and the DOT's new pro-consumer bent may be just the tip of two gigantic icebergs that skittish airlines spy on the horizon.

In the last few years, the DOT has almost routinely approved code-share agreements, antitrust waivers for multi-airline alliances, and even outright mergers. But due to objections raised by the Department of Justice, the Transportation Department has delayed its final approval of antitrust immunity for British Airways, American Airlines, Iberia, and their Oneworld Alliance. The controversial hookup, foiled twice before in slightly different configurations, seemed destined for approval this time.

Even more ominous, at least from the airlines' point of view, is LaHood's decision to "have a plan for the future of aviation." The comment came last month after he chaired a conference on competitiveness sought by the airline industry's labor unions. Airline chief executives were invited to the roundtable, but they sent underlings instead. Then the carriers railed against any attempt by the DOT to re-regulate commercial aviation, which was largely freed from government control by the Airline Deregulation Act of 1978.

"We think we see where this is going," one airline executive told me last month after the conference. "And we don't like it."

The Fine Print…
LaHood was a notable advocate of a closer alliance between American Airlines and British Airways when he was a congressman. (American Airlines maintains a large hub at Chicago's O'Hare Airport.) However, he recused himself from consideration of the antitrust application before the Transportation Department. LaHood has also dismissed airline fears of further government involvement in the largely unprofitable airline industry. "I have never heard one word spoken by the administration about re-regulation," he said after last month's conference.
ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.

THE FINE PRINT This column is Copyright © 2009 Condé Nast Inc. All rights reserved. Reprinted with permission. JoeSentMe.com is Copyright © 2009 by Joe Brancatelli. All rights reserved.