Date: July 14th 2010

BTC Verbal Testimony
Business Travel Coalition
House Aviation Subcommittee
Re Airline Fees
July 14, 2010

FULL WRITTEN STATEMENT:
http://businesstravelcoalition.com/written_statement.doc


Mr. Chairman, Ranking Member Petri, and Members of the Subcommittee thank you for inviting the Business Travel Coalition to appear before you today to represent passenger and corporate managed travel interests on airline product unbundling and fees.

Today’s hearing is critically important because of the potential for consumer abuse in this fast changing, unbundled marketplace for airline services. BTC is not against unbundling as a matter of principle, but rather, it is opposed to the absence of full disclosure of all add-on fees and charges such that all consumers cannot make genuine, apples-to-apples comparisons of all-in airline fares.

Without timely and complete airline disclosure of the increasing array of add-on charges to global distribution systems, and the travel agencies that they automate, consumers deprived of all-in information will become as economically trapped by airlines as they would be physically trapped during a seven-hour tarmac delay. The need for consumer protection in this area is acute, but the remedy need not be burdensome.

The highlights of BTC survey results of 188 travel industry experts released yesterday are revealing of a sea change in thinking about government oversight in commercial air transportation: CONSIDER:

• 100% of corporate travel managers indicated that unbundling and extra fees have caused serious problems for their managed travel programs.

• 86% believe that airlines, absent government rules, will not make fair, adequate and readily accessible disclosure of their add-on fees and charges so that travel managers and their TMCs can do comparison shopping of the all-in prices for air travel across carriers.

• 95% support the proposal that the U.S. DOT require airlines to make add-on data available and easily accessible to the travel agency channel through any GDS in which that airline has agreed to participate.

These survey participants are business people who do not generally favor government intervention in the marketplace. However, they see a market failure coming at them with the speed and impact of a Stephen Strasburg fastball to the side of the head.

With across-the-board unbundling of air travel services, and absent the government umpire stepping in, consumers will not have the ability to evaluate the full price of air travel options available to them. For decades the transparency of airfare information through all channels has been a marvel of modern technology and has benefitted consumers immeasurably. Unbundling without disclosure threatens to catapult us out of the 21st century and back into an opaque stone age where a telephone, calculator, pen and paper, and a lot of unproductive time, were needed to figure out how to compare airline services.

Add-ons like checked bags are material to air transportation, the way a chair is material to a restaurant meal. What some airlines are doing is akin to a restaurant advertising a $20 businessperson’s luncheon special and then surprising the patron with a $10 add-on fee for use of a chair when handed the menu. The patron is given partial information and essentially tricked into coming to the restaurant. The stakes of course are much higher at the airport for families and businesses on tight budgets, which is why you’re having this hearing today.

Of significance is that major airlines remain at a 30% to 35% cost disadvantage against low-cost carriers, and as such, cannot offer the kinds of across-the-board low fares LCCs do. There is therefore a motivation present to obfuscate the true all-in price by keeping fees opaque and especially resisting efforts to have fees and fares displayed transparently for travel agents via the GDSs.

Importantly, the Airline Tariff Publishing Company has a new airline-tested data system ready to facilitate the loading of add-on fees in the GDSs. However, not a single major U.S. airline has signed on, to BTC’s knowledge, to permanently use the new system because the first airline to do so would likely show higher all-in fares of 30% or more than competitors. In an industry where a few dollars can make the difference for a consumer in choosing one airline over another, no one airline can rationally be expected to make the first, potentially suicidal, move. That’s why a reasonable measure of government help is needed – to ensure that all airlines jump together for the benefit of consumers.

Moreover, except to the extent Congress or DOT mandates specific consumer protections, airline passengers are without legal rights and remedies because of federal preemption and lack of FTC oversight authority.

In conclusion Mr. Chairman, the International Airline Passengers Association (IAPA) and its 400,000 members join BTC in encouraging this Committee to urge the DOT in its NPRM to require airlines to make add-on fee data easily accessible not only on their websites, but also to the travel agency channel - through any GDS - in which an airline has agreed to participate. Congress could also provide this relief in the FAA Reauthorization Act through Senator Menendez’s sensible disclosure proposal. Either way, consumers would finally have the batting helmet needed to step up to the plate confidently in today’s unbundled marketplace.

Thank you and I look forward to your questions.


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