Air Fares Up Up And Away

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Thursday, January 12, 2012 - 10:30am

New regulations will soon result in higher advertised ticket prices, but are you really paying more?

Air travelers are sometimes shocked to find that the final cost of a trip is much higher than the advertised price, but airlines soon will be required to disclose the total cost -- including taxes and mandatory fees.

"It's what consumers want," said Rick Seaney, founder of the Dallas-based discount website FareCompare.com. "They want to make better decisions."

For example, Southwest's website recently quoted prices starting at $99 to fly from Dallas to Los Angeles.

Come January 26, Southwest could have to show a fare of $120.60.

The new rules from the U.S. Transportation Department begin January 26.

Currently, airlines just have to note that other charges apply and provide a link or footnote to the details.

Government and airport charges can add 20 percent or more to the price of an airline ticket.

Airlines protest that other industries don't have to include taxes in advertised prices, and they worry about the effect on ticket sales.

"We're not raising our fares, but it will look to the consumer like we've had a big price increase," said Robert Kneisley, Southwest's associate general counsel.

David Berg, the general counsel of Airlines for America, a trade group of the biggest carriers, said the change will depress travel.

"It's basic economics," he said. "History tells us that consumers will see higher prices and buy less."

Southwest, Spirit Airlines and Allegiant Air are fighting the government in court, hoping to roll back the rule, but a decision in that case isn't expected until after the rule takes effect.

Seaney said while the changes are good for customers, implementing them will be a headache for airlines.

"Here's the problem," he said. "You're a marketing guy. You don't know what the taxes are. So now, you have to call over to the pricing department...now I can't say, 'Europe starting at $249' or 'Europe starting at $300.' I have to say, 'Including all taxes.'"

Transportation Department officials have been cracking down on airlines that, in their view, failed to make it clear enough that extra taxes and fees would be added to the advertised price.

In 2011, airlines and travel agencies admitted violating price-advertising rules in more than 20 cases and agreed to fines totaling more than $1 million.

In the biggest case, Continental, which has since been acquired by United, agreed to a $120,000 fine after it was found to have touted some international flights at $240 less than the final cost by failing to include fuel surcharges in the advertised fare.

Penalties, however, are routinely cut in half if the airline avoids violating the rules for a year, and they pale in comparison to airline profits -- about $850 million in just the first nine months of 2011 -- and could be seen as a minor cost of doing business.

That's one reason that some consumer advocates wanted the Transportation Department to go even farther than it did in regulating how airlines describe prices.

The new rules will only require disclosure of government levies for things such as security and airport improvements.

They won't include the proliferating airline fees for checking bags, getting an assigned seat and other items.

Those must be listed somewhere on an airline's website, but the Transportation Department this week delayed whether to require more prominent disclosure.

Just two days before the advertising changes kick in, several other new rules delayed from last year will also take effect, including a ban on airlines raising fares for tickets already sold.

Allegiant Air raised the possibility of selling discounted seats that could go higher -- even after the customers paid -- if oil prices rose.

Another new rule will give customers 24 hours to cancel a reservation without penalty if it's at least a week before their flight.

Some airlines already allow that.
 

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