[Federal Register Volume 62, Number 179 (Tuesday, September 16, 1997)]
[Proposed Rules]
[Pages 48584-48585]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24567]
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DEPARTMENT OF TRANSPORTATION
Office of the Secretary
14 CFR Part 260
[Docket No. OST-97-2622]
Truth in Airfares
AGENCY: Office of the Secretary, DOT.
ACTION: Request for comments, petition for rulemaking.
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SUMMARY: The Department is inviting interested persons to comment on a
petition for rulemaking filed by Consumers Union of U.S., Inc. (``CU'')
on June 16, 1997. The petition asks the Department to establish a
``Truth in Airfares'' regulation that would require commercial
passenger carriers to disclose directly to consumers the most recently
available average fare and lowest fare charged by the carrier for the
route and class of service quoted to an inquiring party. CU also
requests that the Department require the carriers to make this fare
information available to computer reservations system vendors as well.
DATES: Comments must be submitted on or before November 17, 1997. Reply
comments must be submitted on or before December 15, 1997.
ADDRESSES: Comments must be filed in Room PL-401, Docket OST-97-2622,
U.S. Department of Transportation, 400 Seventh Street, SW., Washington,
DC 20590. Late filed comments will be considered to the extent
possible. To facilitate consideration of comments, each commenter
should file eight copies of its comments. Comments filed prior to the
publication of this notice will also be considered.
FOR FURTHER INFORMATION CONTACT: Jim Craun, Director of the Office of
Aviation and International Economics, Office of the Assistant Secretary
for Aviation and International Affairs, Office of the Secretary, U.S.
Department of Transportation, 400 Seventh St. SW.,
[[Page 48585]]
Washington, DC 20590 at (202) 366-1032 or (202) 366-7638 (FAX).
SUPPLEMENTARY INFORMATION: In its petition, CU stated that airfares
have dropped during the past 15 years. As measured on an inflation-
adjusted basis, average fares have decreased from 12.7 cents per mile
in 1981 to eight cents per mile today, according to CU. CU also
indicated that more than 550 million passengers traveled on commercial
flights on U.S. airlines in 1996 and many of these trips were made
possible because of the lower fares. Despite the large number of
airline passengers and the increase in passenger travel 1
since airline deregulation, however, CU claims that it is almost
impossible for passengers to determine whether they are getting a good,
fair, or poor value, because of the way in which many airlines set
their ticket prices.
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\1\To quantify CU's statement regarding the increase in
passenger travel, the Department notes that there were approximately
250 million domestic passengers traveling on U.S. airlines in 1978.
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In support of its claim, CU cited a study of more than three
million discount airline tickets purchased on 34 of the most heavily
traveled domestic routes in 1996. (CU published an article on the study
in the July 1997 issue of Consumer Reports and attached a copy of the
article as part of this petition.) Based on an analysis of the average
restricted coach class fares on each route, CU concluded that airline
ticket prices for a given class of service between two points can vary
by hundreds of dollars depending upon the availability of a wide range
of fares, with availability determined not so much by the number of
seats actually physically available but by how many seats the airline--
in its sole discretion--chooses to supply at each price. CU also
asserts that, at any time, sale fares that are available in limited
quantities can suddenly appear and disappear. According to CU, these
constant fare changes confuse customers and effectively remove price
information that helps consumers assess the value of the
transportation.
CU claims that the lack of reliable ``fair market price'' or
``going rate'' information available to the consumer at the time of
ticket purchase establishes a barrier to effective comparison shopping
and price-based bargaining by the ordinary consumer. This barrier gives
an unfair advantage to a number of airlines (including the very largest
airlines) in the buyer-seller transaction. The airlines can allegedly
engage in opportunistic pricing practices because the consumer lacks
the information needed to counter these practices.
CU stated that consumers cannot rely on travel agents to solve the
problem and cited, in support, an unsourced consumer test conducted by
representatives of several state public interest research groups. In
the test, fourteen phone calls were made to nine travel agents and
airlines requesting the ``lowest'' advance-purchase round-trip fare
from Boston to Houston on specified travel dates and at specified
times. The requests netted ten different fare quotes ranging from $504
to $1,323.68 with six of the ten different fare quotes coming from
travel agents.
CU's Petition
In order to address these issues, CU has filed a petition that asks
the Department to adopt a regulation which would require airlines,
their agents, and computer reservations system (CRS) vendors to
disclose the average and lowest fares an airline charges for each class
of service on a route to any person to whom they quote fares for a
specific class of service on that route. The petitioner also requests
that the Department require that airlines make this information
available to CRSs and that the information be based on the latest
available quarterly fare data in Databank #1 of the Department's
Origin-Destination Survey of Airline Passenger Traffic. (Presumably,
CU's petition applies to fares in domestic markets only since the
Department is prohibited by regulation from publicly disclosing
international fare data in the Origin-Destination Survey of Airline
Passenger Traffic.) CU also asks that the Department either supply to
each carrier the data to be disclosed or allow each carrier to
calculate the data to be disclosed according to calculation standards
prescribed by us and based on the information the carrier submits to
the Department for inclusion in Databank 1 of the Origin-
Destination Survey of Airline Passenger Traffic.
CU states that its petition provides the substance and the elements
of the rule it is seeking but not a proposed text for a rule. However,
since the purpose of its request is to give consumers bargaining power
by increasing consumer information, the petitioner considers it
important that a final rule cover as many consumer transactions as
practicable and that neither the scope nor the specific provisions of
the rule be so narrow as to limit the effectiveness of the rule.
CU stated that by knowing both the average fare and the lowest fare
charged by route, by airline, and by class of service, consumers would
be armed with two key benchmarks of value that are critical to making
an informed purchase decision. These two pieces of information, used
together, would show the relevant range of prices with the average fare
providing a broad indication of the relative value available by airline
and the lowest fare indicating the market-clearing price. According to
the petitioner, easy access to this information would enhance
comparison shopping, informed consumer negotiation, price competition
and market efficiency.
Request for Comments
In response to an increasing number of inquiries from consumers
about domestic airline prices, the Department recently published the
first edition of a report entitled Domestic Airline Fares Consumer
Report. This report provides information about average prices being
paid by consumers in the 1,000 largest domestic city-pair markets for
the third quarter of 1996. In addition to the Department's commitment
to provide fare information to consumers in this report, we have
decided to consider further the issues raised by CU. We invite
interested persons to comment on all aspects of the petition including,
but not limited to, whether such a rule should be adopted and, if so,
should the rule apply only to airlines, or to airlines as well as
travel agents and discount travel brokers, such as consolidators.
We will decide after reviewing those comments whether we should
propose a rule as requested by CU. To the extent that commenters
provide quantified estimates of the value or cost of implementing such
a regulation, we ask that they provide specific supporting details
regarding the methodologies used in determining these benefits and
costs. We also encourage commenters to provide information on other
possible alternatives for accomplishing the goals sought by CU in this
petition.
Issued in Washington, DC on September 8, 1997.
Charles A. Hunnicutt,
Assistant Secretary for Aviation and International Affairs.
[FR Doc. 97-24567 Filed 9-15-97; 8:45 am]
BILLING CODE 4910-62-P