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Transparent Airfares Act of 2014: Making Airfare Purchases Less…Transparent?

by on April 28, 2014 · 10 comments

in Airline Industry, Travel Industry

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This past March, President Obama announced his Fiscal Budget for 2015, which includes a proposal to increase aviation fees and taxes annually by $4.2 billion. Almost two months later, the almost universally unpopular Transparent Airfares Act of 2014 now seems poised to pass into law. This act would void a 2012 Department of Transportation (DOT) ruling called the full-fare advertising rule that requires airlines to include all mandatory taxes and fees in the base price of a flight, and is being championed by the bipartisan House Transportation and Infrastructure Committee, headed by three Republicans (Bill Shuster, Tom Graves and Frank LoBiondo) and three Democrats (Peter DeFazio, Nick J. Rahall, II and Rick Larsen).

This committee argues that full-fare advertising allows the DOT to hide ever-increasing taxes and fees (e.g., TSA security fees, airport facility charges, etc.) from public scrutiny, and subjects the “financially troubled” airline industry (which has actually, in general, recently posted huge profits) to unfair rules not applied to the less heavily federally-regulated car rental and hotel industries – as well as almost any other type of consumer product.

However, as I’ll show with screenshots below, the present process of purchasing airfare is actually relatively transparent, so it seems to me that there’s no good reason for America to revert the full-fare advertising rule in an effort to match the often shady consumer practices of rental car agencies and hotels.

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The House Transportation and Infrastructure Committee are champions of the Transparent Airfares Act of 2014

Until the announcement of the budget, this act was being pitched almost exclusively by airline industry lobbyists as an economic stimulus, and fought by consumer rights’ advocacy groups like FlyersRights.org. If the act passes, airlines will be able to quote a price that 15-20% lower than the actual price of a flight (the typical taxes and fees on a ticket), and you’ll only be able to see the full fare at the end of the booking process, right before you pay. The Federal Trade Commission (FTC) calls this sort of practice drip pricing, and is routinely critical of hotels and car rental agencies for engaging in it.

When you reserve a car through an American rental agency, you’re shown a base price that is far lower than what you’ll actually pay. For example, if I want to reserve a Lincoln Navigator through Avis (here for pickup and return to Washington, DC-Dulles (IAD) from May 8-12, 2014), I’m quoted a base price of $679.96, if I want to pay later.

Avis rental of a Lincoln Navigator from/to IAD, May 8-12, 2014 - $6

Avis rental of a Lincoln Navigator from/to IAD, May 8-12, 2014 – $679.96

When I choose this option, I’m taken to a screen which shows me that that base price is actually now $156.62 more, thanks to surcharges, fees and taxes.

Avis rental of a Lincoln Navigator from/to IAD, May 8-12, 2014 - $6

Turns out that $679.96 is actually $836.58, thanks to surcharges, taxes and fees

When I click on the + sign next to “Surcharges & Fees/Taxes,” I’m led to a itemization of these charges. Everything is clearly delineated –  except for the taxes.

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An itemization of each surcharge and fee associated with my vehicle rental, except for taxes

Booking a room from an American hotel chain is a similar process. As an example, when trying to book a room with two double beds at the Grand Hyatt Washington for May 8-12, 2014, I’m shown a base price of $339 a night.

Grand Hyatt Washington, May 8-12, 2014

Grand Hyatt Washington, two double beds, May 8-12, 2014 – Base price of $339 a night

I’m shown a line that says “Taxes and fees may apply,” and when I click on it, I see that I’ll actually be charged a non-itemized $196.62 in addition to the nightly base price of my room. I’m not shown what the sales tax rate is for Washington, DC (5.75%), just the total amount of sales tax I’ll be paying. It’s up to me to do the math.

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An additional charge of $196.62 in sales tax applies to that base nightly rate

My total then, goes from $1,356 for four nights to $1,552.62.

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With sales tax applied, my hotel stay goes from $1,356 to $1,552.62

Why Flights Are Different

At present, purchasing a flight is quite different. When you purchase a flight through an airline, you’re quoted a base price up front, then shown taxes and fees as you begin to hone in on the details.  For a random example, I looked up a May 8-12, 2014 itinerary between Los Angeles (LAX) and IAD on JetBlue. The lowest fare for my LAX-IAD (non-direct) leg was quoted at $376.

Screen Shot 2014-04-28 at 10.11.39 AM

My IAD-LAX return was quoted as $363.

Jet Blue

Jet Blue

Once I chose both departure and return flights, I was shown my combined base fare of $646.52, plus taxes and fees of $92.48, for a total of $739 – which is what $376 and $363 add up to – so the taxes and fees were already included in the fares being quoted.

Screen Shot 2014-04-28 at 10.12.18 AM

Clicking on “Taxes & fees” took me to a screen that itemizes the types of taxes and fees I would be charged, including a US domestic transportation tax of 7.5% of the base fare of travel within the continental US.

Taxes and fees

JetBlue’s itemization of different types of taxes and fees charged for flights within the US

That’s not even the worst of it – imagine if this were the case with airlines who charge huge taxes and fuel surcharges like British Airways. For instance – instead of the full $1,239 this roundtrip economy New York-London ticket is quoted at now, after the act’s passage, British Airways could quote you an airfare as low as $539 for it and then hit you with the $700 in additional taxes and fees listed at check out.

Screen Shot 2014-04-28 at 12.14.24 PM

So right now, the taxes and fees are required to be bundled into the total prices airlines quote you. What the Transparent Airfares Act of 2014 proposes is selling flights based on their base price, then providing a clearly delineated itemization of all taxes and fees before purchase, ostensibly to level the playing field in other kinds of travel industry fare-advertising. As consumers, we want disclosure, clarity and a healthy airline industry, but perhaps it’s time to take a closer look at the travel industry’s practices as a whole, and ask for full, up-front disclosure of all prices associated with taking a trip.

In my opinion, the push for passage of the Transparent Airfares Act of 2014 is ridiculous and good for no one – except possibly airlines hoping to pull a bait and switch. Even though hotels and rental car agencies are still allowed (for goodness knows what reason) to price gouge this way with hidden taxes and fees tacked on at the end, there’s no reason airlines should be allowed to do the same – especially when taxes and surcharges can vary extremely widely and more than double the price of a ticket.

To show your support for the full-fare advertising rule and opposition to the Transparent Airfares Act, contact your state legislators or visit this page to voice an opinion that will be e-mailed (upon your approval) to your representative in Congress.

You might also want to share information about this issue on social media to raise awareness, using these resources:

Department of Transportation on Twitter (@usdot) and Facebook (www.facebook.com/USDOT)
House Transportation and Infrastructure Committee on Twitter (@Transport)

What are your thoughts about the possible passing of the Transparent Airfares Act of 2014? Do you feel it’s a step in the wrong directions- at least for consumers?

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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  • nrdk

    FYI, everyone can go to https://www.popvox.com/bills/us/113/hr4156 in order to sign up and fill in a letter (which will be emailed upon your approval) to your congressperson in opposition or support of this bill.

  • James

    I think Australia’s rules on this are good – it must be possible to purchase something for the advertised price. This applies to *everything*, not just airfares, hotels and so on.

    Not everyone has to be able to get it for that price, but someone has to be able to. If taxes vary from state to state you can quote whichever is cheapest, but you can’t quote without tax unless there is a jurisdiction that has none.

    Same applies to shipping costs too, you can change more for expedited deliver but you advertised price must include the minimum shipping costs. Of course you can leave it out if it’s possible to pick up from the warehouse for free.

    Best of all, the ACCC does actually take people to court for breaking those rules. The current crackdown is on hidden credit card surcharges where they offer no other way to pay.

    Unfortunately I don’t see the US changing to apply that to everything.

  • John P

    I think based on the text of the law, fuel surcharges are included in the base fare (as base fare is defined in the law as excluding only government-imposed taxes and fees). So BA probably won’t be able to advertise their flights for $539.

  • guest 5678

    It looks like it might get a floor vote in the House. It would still have to pass the Senate and be signed by the President to become law. Not that travelers shouldn’t work against it at all stages, but, lots of bad ideas pass one house or the other and never become law.

    Second point: the President’s budget is a starting point, and frequently, barely even that, in Congress. Some people might say DOA. Anything that raises taxes or fees of any kind would have a very difficult time getting through the current Congress.

  • Rusty Longwood

    I think the big reason for this change is that people will actually realize how much they’re paying in taxes for airfare. If it’s all lumped in to begin with, you don’t necessarily realize just how much is going into taxes. Now it will really stand out and perhaps turn people in favor of reducing these taxes.

  • shay peleg
  • Or N

    great article. enjoyed it thanks.

  • Wobblydangly

    Why do governments continue to tax what is perhaps the most unprofitable industry in the last 80 years?

  • iahphx

    Yeah, I can’t support a law that singles out airlines for “all in” pricing — especially when airlines are a group particularly subject to excessive gov’t taxes. Consumers should know what the taxes are. I do agree that airlines should not be allowed to advertise phony prices, like those which do not include fuel charges. I find it outrageous that hotels can advertise rates without mandatory resort charges.

  • Dean

    But I know exactly how much I’m paying in taxes. It gives the exact amounts when I buy. All this law does is guarantee that you won’t know what your ticket actually costs until you get to the very end of the process.

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