Why do airlines get to game ticket pricing?

Guest Column:
Adam Minter
U.S. consumers may well remember the days, pre-2012, when shopping for an airline ticket was complicated by the airlines’ favored pricing scheme. Back then, an advertised $240 fare might suddenly turn out to be a $300 fare, given that taxes account for roughly 20 percent of the average domestic U.S. airfare. Passengers hated the system while the airlines – which hate price-comparison shoppers, because they drive down prices – embraced it. Fortunately, in 2012, the Department of Transportation imposed a rule requiring that the airlines advertise fares inclusive of the base fare, taxes and fees. Yet, notably, the rule didn’t prohibit the airlines from publishing the taxes and fees separately; it just required that they do so less prominently than the advertised, fully inclusive fare. The airlines, incensed at this pro-consumer bit of rulemaking, have been trying to overturn it ever since. More

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OP-ED / LETTERS TO THE EDITOR

Why do airlines get to game ticket pricing?

Guest Column:
Adam Minter
Posted 8/4/14

U.S. consumers may well remember the days, pre-2012, when shopping for an airline ticket was complicated by the airlines’ favored pricing scheme. Back then, an advertised $240 fare might suddenly turn out to be a $300 fare, given that taxes account for roughly 20 percent of the average domestic U.S. airfare. Passengers hated the system while the airlines – which hate price-comparison shoppers, because they drive down prices – embraced it. Fortunately, in 2012, the Department of Transportation imposed a rule requiring that the airlines advertise fares inclusive of the base fare, taxes and fees. Yet, notably, the rule didn’t prohibit the airlines from publishing the taxes and fees separately; it just required that they do so less prominently than the advertised, fully inclusive fare. The airlines, incensed at this pro-consumer bit of rulemaking, have been trying to overturn it ever since.

On July 28, the U.S. House gave them a big boost by passing on a voice vote the Transparent Airfares Act, against almost universal consumer opposition. The misleadingly titled bill (which has yet to be taken up by the Senate) rolls back the 2012 Department of Transportation rule so that airlines can go back to advertising their cheap-looking base fares, minus taxes and fees. Under the new legislation, the latter will only need be revealed via an “easily accessible” link or popup. By all rights, the legislation should be renamed the Opaque Airfares Act.

How do the airlines and their allies in Congress justify this anti-consumer jujitsu? Shamelessly, they champion themselves as tax crusaders. Consider, for example, the letter that Doug Parker, chairman and CEO of American Airlines, published in the July issue of American Way, American’s in-flight magazine. In it, Parker notes that the Transparent Airfares Act “would allow airlines to show base airfares in advertisements while clearly and separately disclosing government-imposed taxes and fees as well as the total cost of the ticket.” However, he does not note that airlines are already free to disclose this information in their advertisements (a freedom that existed before the DOT’s 2012 rule), but generally have chosen not to do so.

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