David Zalubowski/AP Photo
Transportation Secretary Pete Buttigieg greets well-wishers after a news conference to announce a new partnership that will streamline how consumer complaints against airlines are resolved, at Denver International Airport, April 16, 2024.
Every news outlet has a busy period. For Variety, it’s the time when Hollywood gives out awards; for The Wall Street Journal or Bloomberg, it’s quarterly earnings season; and for the Prospect, it’s the narrow period when executive branch agencies issue final rules in the last year of a presidential term, before the window opens whereby these regulations could be overturned the following year by a new president, under the Congressional Review Act. (It’s a long story; the Prospect wrote about it this week.)
In just the past few days, the executive branch has banned all employee noncompete agreements, enacted a minimum staffing ratio for nursing homes, initiated the American Climate Corps, opened up overtime benefits to more employees, updated the definitions that require investment advisers to operate in the best interest of retirement savers, enhanced privacy protections for medical records for out-of-state abortions, and prevented illegal fees in mortgage servicing. It is only Thursday, with more actions still to come this week.
I have written about most of these issues at one point or another, and several of them were part of our Day One Agenda series. But there are only so many hours in a day. So I will restrict myself to commenting on just one set of these, the Department of Transportation’s new rules on refunds for air travel delays and elimination of hidden airlines fees. That’s because it is an admirable example of policymakers responding to circumstances, and of policymakers also growing when it came to their regulatory positions.
A couple years ago at this time, the name “Pete Buttigieg” was more of a four-letter word around these parts. The summer of 2022 was a disaster for air travel, with rampant cancellations across multiple airlines due to computer glitches and manpower shortages, both problems of the airlines’ own making. At the outset, Buttigieg was criticized for using little of his powers as transportation secretary to combat these abuses and protect travelers. This got worse at Christmas 2022, when a Southwest meltdown caused nearly 17,000 cancellations.
A month later, the Prospect broke the news that Jen Howard, Lina Khan’s former chief of staff at the Federal Trade Commission, had joined DOT as its new chief competition officer. Since then, the department has gotten much tougher on the airlines.
DOT supported the lawsuit that ultimately blocked the merger of JetBlue and Spirit. It issued the largest fine in its history for the Southwest cancellations, and secured $600 million in refunds to passengers who suffered from the debacle. Overall refunds that DOT has helped to pursue total $3 billion. A dashboard was set up to explain airline policies on delays and cancellations. And in a new partnership with state attorneys general from both parties, consumer complaints are supposed to get an accelerated review to hold airlines accountable.
Last year, flight cancellation rates fell to their lowest point in more than a decade, which perhaps can be credited to this stricter mindset.
On Wednesday, Buttigieg announced that airlines will be required to give passengers automatic full cash refunds whenever flights are canceled or significantly delayed, when checked bags do not show up in a timely manner, or when Wi-Fi or other services purchased on a flight are not delivered. If these new rules work, they would relieve travelers from the customer service hell they experience whenever trying to obtain compensation from airlines. Up to now, thwarted passengers would often get travel vouchers instead of cash, which prevented them from rebooking elsewhere.
Airlines will be required to give passengers automatic full cash refunds whenever flights are canceled or significantly delayed.
Under the new rule, passengers would not have to affirmatively request a refund in these situations; it would be delivered automatically within seven business days for all credit card purchases (which is almost always the way that airline tickets and services are purchased). Vouchers or travel credits would not be allowable unless the passenger agrees.
A second rule is intended to end the practice of “drip pricing,” where customers get hit with a cascade of fees after starting the process of making a purchase. The rule would require airlines, online travel sites, and ticketing agents to describe all fees up front. That includes ancillary fees for checked bags, carry-ons, and changing or canceling a reservation, and all the rules surrounding them. Airlines would also have to tell customers that they don’t have to purchase a seat assignment to guarantee a seat on a flight. And companies could not advertise a low price that doesn’t include all the fees.
There’s a healthy debate in the consumer protection world about whether junk fees need to be merely disclosed or disallowed. But it is true that comparison shopping, in this case for flights, cannot work unless people know exactly how much they will have to pay in advance.
Airlines have been profiting from hiding fees from customers for many years now. There’s a bizarre consulting firm called IdeaWorks that holds an “Ancillary Revenue Master Class,” which schools executives on how to layer on more junk fees. Ancillary fees, not surprisingly, have increased significantly in recent years. IdeaWorks will actually tell you that in its glowing press releases; last year, those fees hit $117.9 billion in revenue globally, a new record. DOT estimates that U.S. passengers will save more than $500 million due to the rule, obviously a small portion of the global total but a significant sum of money that people shouldn’t be charged.
“This is just one part of my administration’s plan to prevent companies from playing the American people for suckers,” said President Biden in a post on X. And in a signal of the sea change at DOT, William McGee, a senior fellow at the American Economic Liberties Project who was perhaps Buttigieg’s greatest critic, introduced the transportation secretary at Washington National Airport to make the announcement.
“The DOT’s new rule is a watershed moment for passenger protection in the airline industry,” McGee said in a statement. “There’s more work to be done, but the DOT is showing that it’s getting serious about taking on corporate power across the airline industry—and we’re thrilled to see that.”
There are other potential rulemakings under way, including proposals to ban fees for families who want to sit together, enable passengers with wheelchairs to fly more easily, and require other payments for delayed flights, including for hotels and meals. The department has also initiated a very interesting privacy investigation into whether consumer data is being sold to third parties or used to target ads at passengers during flights.
The watchword of Sen. Elizabeth Warren and her allies is that personnel is policy—that it matters whether we select policymakers with the will and intent to safeguard the public and produce tangible results for them. Buttigieg was not necessarily the first choice of the Warren wing of the party for transportation secretary. But he has come to understand in the job that fulfilling his department’s mission not only makes a difference to people’s lives, it’s good politics. He has developed that will and that intent, and he deserves to be credited for that.
Any agency within the government, and any official running it, should have this capacity to learn. It’s a reminder that redefining what politics ought to be about can matter as much as the fights over who gets to carry it out. Personnel is still policy. But there are now so many examples of good policy producing results and positive feedback effects that future personnel now have a road map for how to deliver.
