The US Senate just passed the FAA re-authorization, and it now goes to the
House.
What is notable about this is that despite the best efforts of airline
lobbyists,
the requirement for airlines to automatically refund tickets with real
money for canceled flights remained in the bill.
Originally, the bill had language to roll back a USDOT order requiring
airlines to refund flyers money automatically, but once Dave Sirota's The
Lever web site started covering this issue, and other news media picked up the
story, and the lawmakers in the airlines' pockets were forced to back down:
Today’s piece is about how airline lobbyists were soundly thrashed in a
fight over whether and how to offer refunds for flights that are canceled.
While you would think something so simple would have been fixed long ago,
it turns out that airlines have been stiffing people, on the order of
potentially
tens of billions, for years. Finally, this week, they lost, and Congress, yes, the
dysfunctional body everyone hates, passed a law mandating that airlines
give automatic refunds when your flight is canceled and you aren’t
rebooked.
But it’s how the airlines lost that matters, because
their loss implies that it is in fact possible to govern. The dispute
represents, in miniature, the broader rethink of regulating corporations
in America going on right now. You won’t hear this kind of good news most
places, because we’re so inured to imagining politics can’t work. But it
can. And it just did.
………
The two new phrases that
emerged in politics last year were “junk fee” and “enshittification.” Junk
fee means an unfair or hidden charge tacked onto what you thought was the
price, while enshittification is the experience of seeing pervasive
financial incentives destroy a communications platform. That these are
actual new words requiring additions to our language shows that these
concepts are commonplace.
………
Leading the way
on that front has been the airline industry, which has found innovative
ways of charging fees and annoying customers since pricing was deregulated
in the 1980s. It’s so bad that there’s a consulting firm in the industry
called IdeaWorks - whose
slogan is ‘Building Revenue Through Innovation’ - that sends out regular
press releases cheering the amount of airline junk fees they help
invent.
There are a couple of reasons airlines were leaders in
irritating customers. First, there really is a lot airlines can’t control.
They are careful about safety, they manage weather risk, and there are
accidents. But also, deregulation was an extremely bad policy choice, and
led to a situation where airline CEOs can treat customers poorly, and it
doesn’t affect their competitive position or profits.
………
Covid,
however, shook us out of our demoralized slumber. From 2020 to 2022, it
was an exceptionally obnoxious time in the industry. During the height of
Covid, Trump’s Secretary of Transportation, Elaine Chao, along with her
deputy and former airline lawyer Stephen Bradbury,
paved the way
for a miserable flying experience by making it harder for the DOT to
propose consumer protection rules. At the same time, Congress bailed out
the airlines with a $54 billion aid package in the CARES Act because there
were simply no passengers. This money was necessary, but also showed that
these are public utilities that should have some sort of obligation to the
public.
Airline executives, however, saw the situation
differently. They proceeded to screw customers over Covid-era refunds,
with thousands of people complaining to DOT that they weren’t given their
legally
required refunds. A few years later, airlines over-scheduled their
flights, which caused a summer of hell in terms of delays and canceled
flights. Finally, during Christmas of 2022, Southwest canceled thousands
of flights due to a poorly structured IT system. Basically, in the
post-Covid era, there were a lot of headlines like this:
………
………
And yet, the Covid-era bailout and refund
fiasco still colors the political environment around the industry, a
situation airlines have never made right. So last month, Buttigieg
announced a new rule to fix the refund problem. Airlines are
required
to refund passenger money if they cancel a flight and don’t rebook you.
But the thing is, they often just… don’t.
There are many
reasons. Passengers don’t know how to request a refund, airlines will
offer vouchers instead of cash, the payments get delayed until a passenger
jumps through a bunch of hoops, and again, sometimes the airline just
doesn’t issue refunds because they’d prefer to keep the money. Since you
can’t sue an airline, there’s little anyone can do except complaint to the
Department of Transportation.
How much money are we talking
about here? The answer, as it turns out, is that
we don’t know. In 2010, Ralph Nader
tried
to find out, and airlines refused to tell him. This year, the Lever
examined investment documents, and found that just two airlines -
Southwest Airlines and Delta - “suggested in financial statements that
they were holding up to an estimated $2 billion and $6 billion each in
unused flight credits, respectively.” Bob Sullivan at NBC argued that
unused tickets are actually a big profit center for airlines.
………
Of
course, we’re not talking about making non-refundable tickets versus
refundable, but refunds when the airline cancels a flight or otherwise
doesn’t deliver a service to the customer, after the customer paid for
that service. Last month, Buttigieg
finalized a rule
proposed in
2022
that would fix this problem by mandating automatic refunds if a flight is
canceled and you aren’t rebooked. It was a simple and elegant solution,
since it takes the onus off the passenger and puts it onto the airline,
which can implement automated systems. It’s also something that Allegiant
Air already does, so it’s an industry practice, just not a widespread one.
………
Lobbyists at the industry’s trade association,
Airlines for America, reacted strongly and angrily to the new rule,
issuing a
harsh rebuke
of the Biden administration.
"Unnecessary regulatory rules issued without collaboration will lead to
three things: confusion for consumers, reduction in choice and a decline
in competition, which historically drives up prices," A4A said. "Very
simply put, a one-size-fits-all approach is anticompetitive and
anticonsumer."
What comes next is usually where such rules come to die. Corporate
lobbyists have a number of tricks to thwart popular ideas. They typically
don’t confront it directly, since it’s popular and politicians don’t like
to openly thwart the will of voters, if they can help it. Instead,
lobbyists go after these kinds of rules procedurally. Instead of straight
repeal, they often try to cut funding to enforce a rule. Or they can make
it procedurally difficult to take advantage of a consumer or worker right,
in the name of ‘due process’ for a dominant corporation. Sometimes, they
can sue in the courts. Or they can put forward a similar proposal that
looks similar to the popular provision, but is different in point of fact.
And that’s what they did here.
Every five years, the Federal Aviation Administration gets reauthorized,
and this time, lobbyists got language into an underlying bill that would
require passengers to request a refund, the goal being to undercut the
convenience of the automatic refund rule. The lead Senators, Maria
Cantwell and Ted Cruz, probably didn’t realize what had happened, as they
did seek to do something useful for consumers, and the FAA reauthorization
bill is sprawling and it’s easy to lose track of the details of every
provision. But journalists Katya Schwenk and Freddy Brewster at the Lever
reported
on the bad language, and then Senator Elizabeth Warren tweeted out the
problem.
As an aside here, I'm pretty sure that "Tailgunner" Ted knew that this
provision was in there and was likely involved in putting in the language
emasculating the requirement.
………
The Lever’s coverage led to a CNBC appearance where Cruz,
who is the highest ranking Republican on the relevant committee, was
confronted with the language by anchor Andrew Ross Sorkin. Cruz sought to
downplay disagreement, and argued that the automatic refund rule meant that
passengers couldn’t be rebooked, which wasn’t correct.
Of course it wasn't true. It was a Ted Cruz ratf%$#ing.
After this appearance, Senator Warren and Senator Josh Hawley put forward
an
amendment
that would replace the lobbyist language with language putting the automatic
refund rule in law. The Biden administration, as well as consumer advocates,
lobbied for it, and Cantwell and Cruz put it in the base text.
Yesterday,
the full FAA authorization bill passed the Senate, and will likely pass the
House next week, after which it will be signed into law.
This
outcome is better than just having a regulation for a number of reasons.
First, if it were just a regulation based on broad DOT authority to ban
unfair practices, the airlines would have likely sued and tried to overturn
the rule. It may not have worked, but judges in Texas have all sorts of
tools they use to block administrative actions to take on corporate power.
Now it’s almost impossible to sue and win. Second, the new practice of
automatic refunds cannot be retracted without Congressional action, which
means a different administration can’t just decide to repeal it on a whim if
the airline lobbyists are able to influence the Secretary of
Transportation.
In other words, Airlines for America tried to use
their clout in Congress to undercut a popular rule put forward by Pete
Buttigieg, a rule designed to fix a problem they caused by screwing people
during the pandemic after they got bailed out. But their plan backfired,
because politicians, journalists, and policymakers were actually paying
attention. So now instead of repealing a rule they don’t like, they got that
rule written into law.
Another aside here, I think that Matt Stoller is giving Buttigeig
WAY too much benefit of the doubt. As was clear from the
Southwest debacle, "Mayor Pete" will only do the right t5hing when public
outrage makes doing nothing impossible.
The fact that the lobbyists did not win is heartening though.
