US Might Let Airlines Leave out Taxes Fees When They Promote Prices in Their Ads

March 13, 2006
For nearly 22 years, the federal Department of Transportation has held that airlines advertising fares must list the total cost of the ticket.

Federal regulators are considering allowing airlines to run airfare advertisements that understate the true price of a ticket.

For nearly 22 years, the federal Department of Transportation has held that airlines advertising fares must list the total cost of the ticket. Leniency was allowed for government taxes and fees, which could be omitted from the advertised price but had to be listed in the fine print.

But now the federal agency is considering amending its rule on price advertising and possibly doing away with it, which would theoretically permit airlines to advertise prices that didn't include taxes and fees as well as carrier-specific charges for fuel and other amenities.

"Comparison shopping is difficult enough," said Hugo Burge, vice chairman of of Boston, which helps travelers find fares. "This just seems like a step in the wrong direction. You end up comparing apples and hamburgers."

The push for a change in the Transportation Department's airline advertising rule began last fall, when the president of the Air Transport Association asked permission for airlines to break out rising fuel surcharges from advertised base fares. The request was rejected because it would have violated the agency's price advertising rule, but Transportation Secretary Norman Y. Mineta decided to open the rule for review.

The department asked for comments on four options: Maintain the status quo; toughen the rule by requiring advertised fares to include taxes and fees; eliminate the rule, or eliminate most of the requirements of the rule but make airlines list in the fine print all the elements of a fare so a consumer could ascertain the total price.

American Airlines is pushing for elimination of the rule. "Fare-setting by the federal government ended long ago under the Airline Deregulation Act," the airline said in its submission to the agency. "The department's price advertising rule, inherited from the Civil Aeronautics Board, should similarly be terminated in favor of the competitive market."

Ned Raynolds, an American spokesman, said no decision has been made on how the airline would advertise fares if the Transportation Department adopted its position.

"One step at a time," Raynolds said. "Right now, we're just making our input to the Department of Transportation on what we believe is best to do."

Several other airlines also support eliminating the rule, including Delta Air Lines, Continental Airlines, and United Airlines. US Airways and British Airways indicated they favor a more liberal interpretation of the rule and more leeway in advertising on the Internet, radio, billboards, and in promotions before movies. The airlines argue that competition would keep advertising from getting out of hand.

But carriers like Southwest Airlines, JetBlue Airways, Air Tran Airways, Frontier Airlines, and Spirit Airlines, as well as the American Society of Travel Agents, said full disclosure of an airfare's price is as necessary today as it was 22 years ago. The airlines and agents said airfare transparency enhances price competition.

The opponents of change said the potential for abuse would be huge if airlines could advertise fares without including fees and charges for fuel, insurance, and an assortment of other items that haven't even been thought of yet.

"It is easy, for example, to imagine an eye-catching advertisement touting a coast-to-coast fare of $99, with an additional $150 of airline-imposed `surcharges' buried in the fine print," Southwest said in its submission to the Transportation Department.

Burge of said some airlines in the United Kingdom have drawn attention to low base fares by excluding all sorts of items that most travelers would consider part of a standard air trip. Ryanair, Burge said, has tried to break out charges for using a credit card and even created a levy for passengers who need wheelchairs.

On its website, Ryanair advertises flights "from 38 cents" to an airport near Stockholm from London. In smaller print, Ryanair says its prices are exclusive of taxes, fees, and charges that would not exceed $26.

Ace suit dismissed

An antiscalping lawsuit against ticket reseller Ace Ticket Worldwide was dismissed last week in bizarre fashion.

Just before a judge was scheduled to hear arguments, the parties agreed to dismiss the case. Douglas Brooks, the lawyer who was suing Ace, said he decided to drop the litigation after concluding the ticket reseller was correct in asserting that the state's antiscalping law doesn't cover events in Boston.

Brooks also said his plaintiff, David Kurzman of Sharon, wanted off the case because he had received threatening telephone calls. Brooks said he had another plaintiff lined up but ultimately decided the case wasn't worth pursuing.

"We concluded, at least for Boston events, that the case lacked merit," Brooks said. "The statutes are sort of a mess."

Kurzman sued Ace in November for charging him $375 for a Red Sox ticket with a face value of $40. The state's antiscalping law limits any markup on the resale of tickets to $2, plus certain service charges.

Ace subsequently argued that the antiscalping statute applies only to events licensed under a specific section of the state law. Ace said all events held in Boston, including Red Sox, Bruins, and Celtics games, are licensed by the city under a separate statute, and therefore exempt from the antiscalping law.

Brooks declined to comment on the nature of the threatening phone calls and Kurzman could not be reached for comment. No affidavit was filed with the court about the threatening phone calls. Officials at Ace said they had no knowledge of any threats.

"I'm thrilled with this victory," said Ace's Jim Holzman. "Ace Ticket continues to provide outstanding service to our customers."

Bruce Mohl can be reached at [email protected].

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