Two years ago, federal regulators changed the rules on how airlines may advertise their ticket prices, saying the change would make the cost of flying more transparent.
Bipartisan legislation in the House introduced Thursday would undo that change, and the lawmakers behind the bill say it would make the cost of flying more transparent.
“While the DOT had good intentions, the new rule effectively reduced transparency,” said Rep. Peter DeFazio (D-Ore.), ranking minority member of the House transportation committee. “Consumers haven’t been getting the whole picture of what an airline ticket pays for.”
The difference stems from disagreement over what a passenger wants to know in considering a ticket price: the genuine bottom line or what percentage of that bottom line reflects government taxation.
The bill was introduced two days after a White House budget proposal included hikes in several areas that could impact the per-ticket price paid by fliers. The administration wants a $3.50 increase in the passenger facility charge, a $2 increase in the customs user fee, a $2 increase in the immigration user fee, and a 40-cent increase in the TSA passenger security tax.
The bill won immediate approval from the airlines industry, which said in a statement that “without a change in the law, if the budget were approved, it would be portrayed as simply higher airfare.”
“It’s a misnomer to characterize the current law as a consumer protection rule when it really protects the government, not airline passengers, and it’s disingenuous for Washington to hide the ball and not be held responsible for the taxes they impose on air travel,” said Nicholas E. Calio, president of the industry group Airlines for America.
The original regulation in 2012 from the U.S. Department of Transportation was intended to save passengers from hidden taxes and fees. It required airlines to state the full price of a ticket in their advertising. It also mandated the airlines to include all mandatory taxes and fees in published fares, and that they disclose baggage fees to consumers buying tickets.
Prior to that rule, airlines were allowed to list additional government-imposed taxes and fees separately from the advertised fare. That 2012 DOT rule said the bottom line shown in advertising had to be the true cost of the ticket, and the airlines also had to list up front any baggage fee charges.
Sponsors of the bill introduced in the House on Thursday said in a statement that it would “ensure that airfare advertisements are not forced to hide the costs of government from consumers.” It would allow airlines to state the base fare and “separately disclose any government-imposed taxes and fees and the total cost of travel.”
“The fact that Americans are paying higher and higher government-imposed taxes and fees to travel by air is being hidden from them,” said Bill Shuster (R-Pa.), who chairs the House transportation committee. “This common-sense bill will allow consumers to see the full breakdown of their ticket costs, so they know how much they’re paying for the service, and how much they’re paying in government-imposed taxes and fees.”
Rep. Tom Graves (R-Ga.), another of the bill’s sponsors, suggested that the DOT requirement had forced airlines to hide the component elements in the cost of a ticket.
“This regulation means airlines may unfairly shoulder the blame for price increases, even if it’s a government tax hike that’s responsible,” Graves said. “Our bill ensures transparency by informing consumers about what fees they’re paying, and where their money is going.”
An example of what the DOT considered misleading advertising led to a $60,000 fine levied against AirTran Airways two years ago. In online advertising, the airline promoted $59 one-way fares. The ad carried a couple of asterisks that mentioned that additional taxes, fees and exclusions would apply. But DOT said there was no explanation of what those taxes or fees amounted to until a would-be passenger clicked on the ad and then scrolled to the bottom of the page, where the information appeared in fine print.
Airlines for America said that on a typical $300 round-trip domestic ticket, customers pay $61 in federal taxes, or 20 percent of the ticket price.
“ That number will increase to $63, or 21 percent, in July when the TSA passenger security tax more than doubles – from $2.50 per flight segment to $5.60 per one-way trip, costing passengers more than $1 billion annually,” the group said.