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New airline rules give meaning to price tags; other industries should follow

Cry as it might about the new federal rules designed to clarify flight ticket prices, the airline industry brought this on itself. The hidden fees and “after charges” encountered by flying consumers had reached such absurdity that one might rightly call them an attack on the English language.

Witness, for example, Spirit Airlines "passenger usage fee," which adds up to $16.99 to flights purchased online – each way.  The fee’s name implies that buying a ticket costs one price, but actually using it costs extra.  That's absurd.  It's also not quite what Spirit is doing -- the fee is assessed to consumers who purchase tickets through the airline’s Website. The only way to avoid the fee is to buy tickets at the airline's airport counters.  

Spirit Airlines held "The Weiner Sale" last year, with airfares advertized as low as $9 each way to selected cities.


Either way, consumers have had enough, and now the Department of Transportation has, too.  Could similar rules for other industries, such as cell phones or pay television, be far behind?

On Thursday, new consumer-friendly federal Department of Transportation rules kicked in that require airlines to quote prices including all required fees and taxes.  The airlines aren't happy and have filed lawsuits over the requirement.

But already, consumers should notice the changes. For example, in the past, you might typically see an ad for a $199 one-way fare that in reality cost $245 after security fees, taxes, and other tack-on charges were applied. Now, airlines must use the $245 figure in an ad. (AlaskaAir.com uses this example on its Website.)

The rules do not require inclusion of "optional" fees, such as checked luggage costs, in the advertised price -- so consumers still have a lot of homework to do when they are shopping around for the best deal on a ticket.

Still, after years of battling what I've called "The Death of the Price Tag," a phenomenon that makes it nearly impossible for consumers to properly comparison shop for many products and services they buy, there's finally a small reason to celebrate.

"Now there are no more '$9 fare' sales. Airlines have to advertise the full price," said Christopher Elliot, a travel writer and author of “Scammed: How to Save Your Money and Find Better Service in a World of Schemes, Swindles, and Shady Deals." “(For some airlines) deception has been their business model. It's definitely not only the airlines who were doing this kind of thing, but they have made an art out of it." 

Chris Schneider / ASSOCIATED PRESS

Travelers wait in line for security screening at Denver International Airport in this file pic.

The new rules clean up some other advertised price issues, too. For years, airlines have hawked bargain-basement round-trip tickets by slicing the price in half and publishing a one-way fare -- even in situations where purchase of a round-trip ticket was required. In other words, there was no way to buy something anywhere near the price in the ad. The new rules require prominent disclosure of the round-trip price.

Edgar Dworsky, who operates Mouseprint.org, cheered the changes and said other federal regulators should consider similar requirements.

"The car rental industry is notorious for quoting a low daily rates, but when you add up the fees and everything else, the price comes out to 20, 30, even 40 percent above the stated price," he said. He also cited a friend in New York who recently signed up for cable television and Internet service after answering an ad claiming the price would be $99 per month. “His bill was $147. He didn't realize he would be charged extra for a box in every room, and goodness knows what else." 

Tack-on fees are huge business for the airlines. Domestic carriers collected nearly $5.7 billion in baggage and change fees alone in 2010, according to Consumers Union. So naturally, the airline industry is hardly going down without a fight. Spirit Airlines is risking the wrath of regulators by railing against the new rules with a large pop-up notice placed on its home page labeled "Warning." The notice accuses regulators of planning to "carry out their hidden agenda and quietly increase their taxes...And if they can do it to the airline industry, what's next?"

Industry trade associations are also complaining about the change. Steve Lott, a spokesman for the Air Transport Association, has complained in several publications that "basic economics" dictate consumers will shy away from flying because prices appear to be higher.

In other words, Lott suggests, deceptively low price tags are good for the economy. If that were true, then fixing the economy would be easy -- simply let all retailers cut the price tags they place on items by 50 percent.  

In reality, price transparency is essential for economic activity, and it's just as likely that more clarity will lead to more purchases, not fewer.

Sadly, the new airline rules go only half-way toward real price transparency in the airline industry.  The aforementioned Spirit Airlines "passenger usage fee" still rates as optional in this new system, so it would not be included in advertised prices.

The real solution, says Elliot, is to force airlines to offer up their entire fee schedules to third parties that could create true apples-to-apples comparisons for consumers. 

"There are still some fees that were traditionally included in the price of the ticket that are, as the industry calls it, 'unbundled,’ now,” he said. "What would be great is if there were some way of forcing them to release data to the outside world, to online travel agencies, so they could build a fare tool that would include all of that."

And the simplest form of consumer protection in America would be a rule that simply forbids all firms from advertising a price for any item -- monthly cable service, airplane tickets, or a telephone line -- that is impossible to get. The problem is so rampant that many industries, such as auto sales, have adopted twisted language like "out-the-door-price” or “OTD price" to distinguish between fake price tags and real ones.  The Department of Transportation has taken one small step in this direction; other regulators should take notice.

Other friendly features of the new DOT airline regulations:

*Consumers now have 24 hours to cancel flight purchases without penalty, as long as the flight is at least seven days in the future.  That will give consumers extra time to shop around for prices; it will also allow them to get out of bookings made in error. Some airlines already extend such refunds to consumers as a courtesy; now, they all have to do it.

*Also, airlines must display baggage fees on the first screen of Websites containing a fare quotation for a specific itinerary, and must show the fees on ticket confirmation notices, too, the DOT says.

 

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