Are Government Fines Really Improving Air Travel?

12/05/2016 08:07 am ET | Updated Dec 05, 2016

The Department of Transportation fined airlines $4.5 million in 2016 for infractions ranging from lengthy tarmac delays to failing to compensate passengers for lost luggage, almost double last year’s amount and the highest since 2013.

The DOT’s Aviation Consumer Protection Division, which is responsible for ensuring that airlines follow federal regulations, issued 23 consent orders — voluntary agreements worked out between the agency and an airline that generally have the same effect as a court order — in 2016, up from 15 last year. It’s the third-highest number, in terms of civil penalties, in 10 years.

But it isn’t clear whether these actions are benefitting the passengers they’re supposed to protect. Industry watchers say the numbers don’t tell the full story — something you already know if you’ve flown this year.

The year’s biggest enforcement action was a $2 million fine against United Airlines for violating federal disability assistance regulations. Investigators found numerous instances in which the airline failed to return passengers’ wheelchairs, other mobility aids or assistive devices to them in a timely manner. It also said the airline failed to return them to passengers in the condition in which the airline received them. United says the complaints it received represented “a very small number” when compared to the number of requests for wheelchair assistance it received.

One of the most interesting enforcement actions, and a sign that the DOT is taking its full-fare advertising rule seriously, is a $150,000 fine levied against VivaAerobus, a Mexican discount airline. (The rule stipulates that the full price of an airline ticket, including all mandatory taxes and fees, must be displayed in the price quote.) In response to a consumer complaint, the agency found that VivaAerobus advertised fares that did not include a mandatory “issuance” fee.

The fee could not be avoided and was not disclosed to the passenger until the final step in the booking process. The government also found that VivaAerobus used what it called the “opt-out” method of selling optional services, which preselected several optional services and required that customers remove them before finalizing the booking to avoid being charged for them. The airline blamed the infractions on a website error.

Several enforcement orders were addressed through a sting operation called “Task Force Lightning,” an undercover operation in which plainclothes DOT investigators visited a dozen American airports to ensure that airlines’ front-line employees were disclosing their obligations for compensating passengers. Airlines were dinged for infractions including improper disclosure of baggage compensation rules and providing inaccurate denied-boarding compensation information. The fines were relatively small, ranging from $30,000 to $45,000, but as I noted in an earlier column, DOT insiders say that the goal of the task force was education, not punishment.

Ben Edelman, a university professor based in Boston whose complaint resulted in a $40,000 fine against British Airways for inaccurately quoting taxes, fees and carrier charges on its U.S. website, says the government takes its time evaluating customer complaints. For example, he says, one grievance he filed against American Airlines for using the label “tax” for its own surcharges has been pending since Dec. 12, 2013.

Industry critics are also unhappy with the size of the DOT fines, saying they are not a significant deterrent. Airlines collect about $250 billion in revenue each year for travel to, from and within the United States, which means their DOT fines represent about 0.002 percent of their profits.

By comparison, the average traffic ticket ($150) is about 0.3 percent of the median household income of $55,775. Imagine if every speeding ticket were suddenly cut by a factor of 100, so that the average ticket was 0.003 percent of your annual income. Would you take a $1.50 speeding ticket seriously?

The DOT says the fines make a difference and are based on a variety of factors, such as the consumer harm caused by the violation, whether the airline profited from the infraction and whether it’s a repeat offense. “We try to figure out an amount that’s high enough to have a deterrent value,” says Blane Workie, assistant general counsel for Office of Aviation Enforcement and Proceedings.

Consumer advocates say that while they’re encouraged by this year’s enforcement actions, the DOT has focused on some issues while ignoring others. The takeaway from “Task Force Lightning” is that consumers still don’t know their rights, and more needs to be done to keep them informed, says Charlie Leocha, president of Travelers United, an advocacy group for air travelers. He thinks that the DOT needs to begin posting some of the rules that deal with lost-luggage compensation and denied-boarding statements at airports, so passengers will know their rights.

“It would keep the airlines honest,” Leocha says.

But would it make air travel any better? It’s hard to tell.

"Given the puny financial settlements, the real test of effectiveness should be whether airlines comply with the promises in these consent agreements," says consumer advocate Edward Hasbrouck. "But there's no evidence of DOT follow-up audits of compliance with these consent decrees, or of enhanced penalties for repeat violations -- even though violating a consent agreement is contempt of court."

If you're an airline shareholder or if you're fortunate enough to be sitting in first class, you probably have nothing to complain about in 2016. The North American airline industry is expected to earn $22.9 billion this year, the fifth consecutive profitable year for the business. Premium cabins are becoming more lavish than ever as airlines pile the perks on their best customers. But if you're stuck in the back of the plane, in what seems to be a shrinking seat, having to pay extra for every little amenity, it's hard to feel air travel is regulated at all. And no amount of fines imposed by the DOT will change that.

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