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OST-2015-0031 - - Petition for Rulemaking - Limitation on Change Fees for International Flights



The Filed Rate Doctrine - Transpacific Passenger Air Transportation Antitrust Litigation - Memorandum and Order Granting in Part and Denying in Part Motions for Summary Judgment

OST-2015-0031 - Limitation on Change Fees for International Flights

February 11, 2015

Petition for Rulemaking - Limitation on Change Fees for International Flights and the undersigned hereby petition the Department of Transportation to regulate change fees for foreign air transportation under 49 USC §§ 41501 and 41509.

In selectively exempting US and foreign air carriers from international passenger tariffs, the DOT acknowledged a continuation in the "evolution of a policy where we rely on market forces rather than continual government oversight to set prices for air transportation." In providing international passenger tariff exemptions, DOT affirmed that this would "not materially lessen [DOT's] ability to intervene in passenger pricing matters should it be necessary." Further, the DOT stated that it "has always had the statutory authority to take action directly against unfiled passenger fees and rules." DOT confirmed that under 49 USC §§ 41501 and 41509, air carriers engaged in foreign air transportation must "establish reasonable rates and rules" and that DOT has the authority to "cancel a rule that is unreasonable after notice and hearing." However, in the more than "34 years since the passage of the Airline Deregulation Act," DOT has "declined to use this authority to strike down fare rules in foreign air transportation."

DOT has the statutory authority to regulate fares and fees in foreign air transportation and is obligated to do so. While DOT has regulated extensively in analogous areas it has yet to promulgate rules concerning change fees in foreign air transportation.



February 23, 2015

Comments of Donald Pevsner

The undersigned strongly supports the Petition for Rulemaking at issue in this Docket, which raises many of the same issues that I previously raised in Docket OST-2012-0109, cited repeatedly in the new Petition.

The signal Supreme Court decision in the case of Massachusetts v. EPA, 549 US 497 (2007), should have been applied to internal DOT decisionmaking in Docket OST-2012-0109. It is now formally raised in the new Petition as an ideal precedent to rectify further DOT abdication of responsibility for regulating rates, fares and charges in foreign air transportation, pursuant to 49 USC 41501, et seq.

If DOT still refuses to act, I eagerly look forward to the US Court of Appeals for the District of Columbia Circuit, and/or the US Supreme Court, forcing DOT to---however belatedly, after nearly 37 years of deliberate inaction--honor the express will of Congress and do its duty on behalf of the too-long-mulcted air travel consumer.

By: Donald Pevsner


February 11, 2015

Motion for Leave to File of IATA and Airlines for America and Joint Comments Opposing Petition for Rulemaking

The hardest question to answer in this petition is defining what exactly is reasonable for change and cancellation fees in foreign air transportation. Airlines may argue that any and all fees are reasonable at any level and DOT, by declining to regulate at all in this arena, has apparently accepted that premise.

In life there are many eventualities that consumers cannot expect or plan for. They should not be left holding the bag while airlines charge exorbitant fees umelated to the actual costs of the passengers' actions. Neither should airlines needlessly suffer financially because of their passengers' actions. Therefore, reasonableness, for the purposes of § 41501, should be tied to the actual cost or loss incurred by an air carrier when a passenger changes a flight.

In most instances, the airline bears no burden from passengers changing flights, quite the opposite. The passenger typically must pay the differential in price for the new flight along with a hefty change fee. As the costs associated with shifting a passenger's electronic reservation from one flight to another are minimal, the effect of changing that passenger from what is typically a cheaper to a more expensive ticket, coupled with a change fee, amounts to a windfall profit for the airline. As a result, such change fees end up being an unfair and umeasonable profit source for airlines, not a reasonable charge to cover the actual costs.

Furthermore, there is no deterrence rationale strong enough for a passenger changing flights that would necessitate the exorbitant change fees we currently see. However, airlines have made deterrence-based arguments for higher change fees and at least one airline CEO has stated that change fees are in fact intended to discourage changes. Airlines have argued that lower change fees could lead to consumers speculatively buying tickets far ahead of potential travel, but since airlines charge the differential in ticket price along with the change fee this would not in fact be a beneficial practice for consumers. Airlines have also argued that another cost necessitating high change fees is the loss of revenue airlines will experience if consumers purchase regular fares instead of high priced flexible or refundable fares. Once could argue this would force airlines to increase regular fares to compensate. However, as we address in the next section, refundable/flexible fares are already a minority of tickets purchased and priced so comparatively high that a reduction in change fees would have little to no impact on their sale. Furthermore, Southwest continues to successfully charge no change fees without succumbing to the plethora of negative consequences described by others in the airline industry.

In reality, change fees no longer bear any resemblance to a reasonable approximation of the cost incurred by the airlines but exist merely as a tool to gouge consumers faced with the unpredictable nature of life.

DOT has the statutory authority to regulate fares and fees in foreign air transportation and is obligated to do so. While DOT has regulated extensively in analogous areas it has yet to promulgate rules concerning change fees in foreign air transportation. We urge DOT to rectify this situation and prevent unreasonably high fees by imposing caps on change fees. While the use of competition to mitigate high fares was the intent of Congress in passing the Airline Deregulation Act and has been DOT's policy since, consolidation within the industry and antitrust exemptions granted by DOT have thwarted this hands-off approach. Some level of governrnent intervention is necessary to protect consumers. Accordingly, we respectfully petition DOT to cap change fees at $100 on international routes absent a convincing cost justification by airlines.

Counsel: Bruce McDonald and Bert Rein

July 21, 2015

Motion for Leave to File of the International Air Transportation Association and Airlines for America and Joint Comments Opposing Petition for Rulemaking

The Petition contends that DOT nevertheless is justified in ignoring statutory policy guidelines because airline consolidation during recent years has made reliance on competition “flawed and obsolete.” First, the sources cited in support of that premise (principally press reports) manifestly provide no semblance of substantiation. Conducting a proceeding to test that biased observation, which IATA and A4A maintain is self-evidently incorrect, would be a massive waste of Department resources. Moreover, the suggestion that the Department is somehow empowered to decide on its own that the defining tenet of national aviation policy as enacted by Congress is “flawed and obsolete” - and thus to ignore it - simply strains credulity. Until and unless Congress amends this core element of the Department’s enabling legislation - an amendment that would return US aviation policy to the 1970s - the Department remains subject to Congress’s requirement that it place “maximum reliance on competitive market forces and on actual and potential competition.”

Counsel: Wiley Rein, Bert Rein, 202-719-7000

October 2, 2015

Motion for Leave to File and Response of to Joint Comments of International Air Transportation Association and Airlines for America

Under US law the Open Skies bilaterals and multilaterals are executive agreements rather than treaties. They are negotiated by the State Department with the assistance of DOT and often with advice from US airlines. § 40105 provides the necessary congressional imprimatur that the DC Circuit noted in British Caledonia Airways v. Bond restricted the authority of the Federal Aviation Administration. However, in British Caledonian, the statutes relied on by the FAA Administrator to override the international obligations of the US were generalized and did not grant the Administrator specific authority. The court rejected the suggestion that "Congress granted the administrator authority to override [the section] by invoking the generalized language of other sections of the Act." In this instance, the DOT Secretary's authority over pricing in foreign air transportation is specifically granted and long standing through 49 USC §§ 41501, 41509 and thus inapposite to the facts of British Caledonian. The specific nature of the Secretary's authority overrides the general command of § 40105(b)(1)(A). Indeed, DOT has already introduced regulations, such as the 24-hour rule, that under lATA/A4A's view would violate the pricing language in most Open Skies agreements and these regulations have been upheld.

Moreover, it is both ironic and hypocritical for major airlines to aggressively oppose foreign carrier entry in US domestic markets under Open Skies agreements and defend exemptions from antitrust laws for international alliances, while simultaneously proclaiming that market forces in this proceeding prohibit the DOT from regulating clearly unreasonable change fees.



Order 2019-2-1
- Limitation on Change Fees for International Flights

Issued February 1, 2019

Order Denying Petition for Rulemaking

By this order, we deny the Petition for Rulemaking filed by requesting that the Department regulate change fees in foreign air transportation.

FlyersRights states that while Congress fully deregulated the domestic airline industry through the Airline Deregulation Act, the passage of the International Air Transportation Competition Act of 1979 did not entirely deregulate foreign air transportation. Specifically, 49 USC § 41501 requires every air carrier and foreign air carrier to establish “reasonable prices, classifications, rules, and practices related to foreign air transportation.” Price is defined as a “rate, fare, or charge.” Pursuant to 49 USC § 41504, air carriers and foreign air carriers who engage in foreign air transportation must file international passenger tariffs (which include charges and fees) with the Department. Section 41509 authorizes the Secretary to determine if prices, classifications, rules, or practices in foreign air transportation are unreasonable or unreasonably discriminatory. Upon such a finding, the Secretary may cancel or reject the tariff and prevent the use of the price, classification, rule, or practice. 49 USC § 41509. According to FlyersRights, these statutes create a framework similar to 49 USC § 41712, upon which the Department relies to regulate unfair or deceptive practices and unfair methods of competition in air transportation.

FlyersRights asserts that the Department’s policy of relying solely on airline competition is flawed and obsolete. According to FlyersRights, consolidation in the industry has led to increased fares, reduced capacity, increased ancillary fees, reduced passenger choice, and the possibility of anticompetitive and collusive behavior in the setting of change fees. By way of example, FlyersRights states that in 2013, major US airlines raised their domestic change fees to $200 within two weeks of each other. FlyersRights also notes that the Department grants certain groups of airlines immunity from antitrust laws affecting international transportation, thus allowing coordination on prices, scheduling, and marketing. FlyersRights contends that as a result of these trends, the Department cannot rely on competition to keep change fees at a reasonable level.

FlyersRights identifies the Department’s tarmac delay rule, 14 CFR 259.4, as an example of a successful regulation that opponents argued was a governmental intrusion into the free market of the airline industry. FlyersRights notes that the number of tarmac delays has drastically decreased since promulgation of the rule, and argues that regulating change fees would be equally effective.

Given the highly complex and dynamic nature of fare calculation in the international airline industry, and the innumerable situations under which passengers change reservations, the Department is not in a position to set a single prima facie “reasonable” change fee, even if we were inclined to do so. FlyersRights suggests that the Department could approve fees above the cap on a case-by-case basis, leaving airlines with the burden of justifying those fees. In our view, that degree of continuous regulatory involvement with airline pricing structures may have unintended consequences (e.g., higher base fares), and would not address the more fundamental concern that setting a cap on international change fees is inconsistent with the Department’s statutory role in regulating fees in foreign air transportation.

By: Steven Bradbury

OST-2015-0256 - Notice of Montreal Convention Passenger Delay Rights to Airline Passengers

February 1, 2019

Denying Petition for Reconsideration

We have examined your petition in depth and have concluded that rulemaking is not warranted at this time. As such, by this letter we deny the petition filed by you on behalf of in Docket OST-2015-0256.

In your petition, you asked the Department to regulate how carriers provide passengers notice of their rights on international flights under the Convention for the Unification of Certain Rules for International Carriage by Air. You assert that carriers have a policy and practice of misinforming passengers that they are not entitled to compensation for delays on international flights. Your petition asked that the Department require through rulemaking that airlines provide and explain the delay compensation rules in the Montreal Convention using conspicuous notices during the booking process, at check-in, and during delays, among other situations. Specifically, you state that airlines should be required to print· a brief outline of the compensation available on passenger tickets, including instructions on how to apply for such compensation, a link to the Montreal Convention, and information on liability limits, expressed in the approximate US dollar equivalent. You assert that these notice requirements would benefit passengers and businesses and encourage airlines to prevent and avoid delays.

We have been presented with insufficient evidence that carriers are failing to fulfill their notice obligations under the Montreal Convention or are otherwise attempting to conceal information regarding delay compensation. Our review of the contracts of carriage of several major US carriers revealed that there was adequate notice regarding the availability of compensation for delays on international flights subject to the Montreal Convention. In addition, many US carriers incorporate language into their airport signage and/or ticket notices- stating that die Montreal Convention may limit carrier liability for the delay of passengers and baggage. Furthermore, there is insufficient evidence of consumer confusion that would warrant rulemaking on this issue.

Our disposition of this petition notwithstanding, we continue to review notification requirements regarding carrier liability limits in foreign air transportation and have included revisions to these requirements in a Notice of Proposed Rulemaking, "Aviation Economic Regulation Amendments." (See 83 FR 21684, which was published May 9, 2018) In addition, the Department's Office of Aviation Enforcement and Proceedings has updated its "Fly Rights" webpage to clarify that passengers may be able to obtain reimbursement on certain international itineraries under Article 19 of the Montreal Convention.

By: Steven Bradbury

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