Higher Airfares, Better Compensation
Posted by: Justin Bachman on April 20, 2011
An interesting confluence of events today: Federal regulators imposed new consumer-friendly rules on airline travel; crude oil futures topped $111 per barrel; and the airlines achieved their seventh successful fare increase of 2011.
The headline news from the Dept. of Transportation’s mandate is compensation of as much as $1300 for passengers who are involuntarily bumped from a flight and experience arrival delays longer than two hours domestically and four hours internationally. The DOT also told airlines they must refund baggage fees if the bags are lost en route, including bags that are handled by partner airlines. Few things in life are as infuriating as paying a company $25 to lose your underwear.
The least-noticed aspect of the new rule might be the DOT’s decision prohibiting airlines from increasing post-purchase fares. Allegiant Travel Co., which operates Allegiant Airlines, wanted permission to sell variable-priced fares as a way to hedge fuel costs. In effect, the Las Vegas-based company was hoping to let customers “gamble” on whether crude oil futures would rise or fall. A rise would mean you pay more to fly, up to a pre-disclosed cap; if oil fell you’d get some money back before your flight. (The big airlines wanted no part of this scheme, for what it’s worth.) An interesting proposal, appealing at first blush, but it struck me as unworkable in the real world. For one thing, who’d monitor this “mini-futures pit” for timely settlements, not to mention policing for irregularities and fairness?
And there's this: "What Allegiant Air is proposing is simply a mechanism for off-loading the normal airline business risk of fuel price increases onto the consumer, where it does not belong," Burton Rubin, head of a group called AirlinePassengers.org, wrote to DOT Secretary Ray LaHood in February.
Instead we are seeing higher fares, the place many people argue expensive fuel costs should rightfully be addressed. On Wednesday, airfare watcher Rick Seaney declared victory for U.S. airlines that sought their 11th airfare hike of 2011 over the past 48 hours. On Monday Delta added $10 to roundtrip fares and Southwest finally matched late Tuesday, according to Farecompare.com, which tracks fares. "In the past five years we have yet to see a hike attempt fail which included Southwest," Seaney wrote in an email.
We're paying more to fly these days. That makes it reasonable that the compensation for inconveniencing us, be it for lost luggage or lost seat, should also be greater.
