A DISCUSSION OF LAW AND JOURNALISM

Dispiriting Airline Fees

By Will Bartholomew

“Unintended Consequences of DOT Regulations: $1.86.” What does that even mean?

“Passenger Usage Fee: $16.99.” I get charged again for “using” the services I’ve paid for?

Anyone who has ever bought a plane ticket is probably familiar with frustrating “hidden fees” that seem to be tacked on at every turn. I bet many have thought to themselves: “How can they get away with this? This has got to be illegal.”

A recent New York Times article memorialized the exasperation travelers experience, and this piqued our interest here at LASIS. We decided to more closely examine one of the culprits listed in the article, Spirit Airlines, to help explain the law on hidden fees, and how an airline like Spirit tries to get around it.

The Department of Transportation (DOT) has the authority to regulate how airlines advertise their airfare prices. In carrying out its duties, the DOT has frequently butt heads with Spirit.

Historically, Spirit’s advertisements have misled consumers by suggesting that some of the fees that wind up in the airline’s pocket actually go to the government. By falsely portraying these added fees as government-imposed, Spirit leads consumers to think that these fees are mandatory, and that they would be added to the base fares of other airlines, which is not the case.

Spirit has tried to keep this deception going by staying one step ahead of the DOT’s rules.

Until this year, airlines were allowed to advertise only their base airfare as long as the government-imposed taxes and fees were disclosed elsewhere in the advertisement.

The Department of Transportation describes the way things are supposed to work with this example:

A carrier or ticket agent could advertise a flight in the following manner: “$260 + Taxes and Fees” with the phrase “Taxes and Fees” set off as a hyperlink that takes the viewer directly to the bottom of the screen or a pop-up, or place on a separate screen, where the nature and amount of taxes and fees are prominently and immediately displayed.

This “Taxes and Fees” section, then, should include only those charges actually going to Uncle Sam.

In 2008 the DOT fined Spirit $40,000 for including its own mysterious charges in the Taxes and Fees set off section, including a “Natural Occurrence Interruption Fee” of $2.50, an “International Service Recovery Fee” of $8.50, and a “Passenger Usage Fee” of $7.50.  All of these were monies bound for the Spirit coffers.

Other airlines behaved similarly, and in January of this year the DOT finally had enough and added new rules intended to create greater transparency in airline ticket pricing.

Under these rules, airlines and ticket agents must prominently display the total airfare in their advertisements, including all taxes and fees levied by the airline and government. If a breakdown of taxes and fees is provided, those issued by the government must be clearly distinguished from airline-specific charges.

Spirit (and other airlines) complied with the rule to display total airfare — but not the rule about clearly distinguishing government and airline-imposed fees in the breakdown.

So just one month after the new rules had gone into effect, the DOT issued a February 2012 Guidance Notice to the airlines and ticket agents stating that some airlines were breaking the rules.

The DOT gave an example of a particularly misleading price breakdown that one unidentified airline provided for a trip from the U.S. to Europe. The airline correctly listed the full price of the trip as $769.41, but it claimed that the base fare was $170 and that “taxes incl 9/11 fee” were $599.41. However, a full 85% of that that $599.41 was actually made up of a , or $476 fuel surcharge (money to the airline) and a $33.78 “passenger service charge international” (ditto).

Last month, Spirit made headlines because of a class action in federal district court for this same type of practice, albeit on a less brazen scale than the example above. The plaintiffs allege that between 2008 and 2011 Spirit disguised its “passenger usage fee,” or “PUF,” as a government fee or tax. In reality, the PUF is a fee that Spirit adds on to all tickets that are not purchased at Spirit’s airport ticket counters.

Over the three-year period being contested, these charges ranged from $8 to $16, and earned Spirit a cool $142 million.

Today, Spirit lists its PUF as a component of the airline’s fare. Government taxes and fees are listed separately.

But Spirit continues to fight the good fight in going around official rules and regulations.

It now charges an “Unintended Consequences of DOT Regulations” fee, which seems to be a mischievous response to a new Department of Transportation rule requiring airlines to allow passengers to cancel their reservations within 24 hours of making them if those reservations were made more than a week before takeoff.  The rule is supposed to be unconditional. Spirit’s Unintended Consequences fee completely guts that rule.

At least the airline’s coming clean about this fee: the airline says that it charges the fee because the new rule requires it to effectively put a 24-hour hold on a seat for someone who might not end up flying. The airline claims this makes it more difficult to fill its flights.

Perhaps smarting from the negative attention it received because of its PUF, perhaps seeking to just make a statement about the cost of DOT regulations, Spirit has set this fee at a meager $1.86.

Which as we’ve seen, can add up to a tidy fortune, and keep the airline in high spirits as it continues to outfox the DOT.

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