April 21 (Bloomberg) -- Airlines have found new allies in their fight against a requirement that they include U.S. taxes and fees in their advertised fares: every member of a congressional panel overseeing the agency that created the rule.
Without hearings or debate, the House Transportation and Infrastructure Committee unanimously approved a bill April 9 that would let carriers resume their former practice of most prominently featuring base fares, rather than the total price. Taxes, baggage fees and other costs that can make up a substantial portion of what consumers pay can be displayed through links or pop-ups.
Consumer groups say the “Transparent Airfares Act” would accomplish the opposite, enabling bait-and-switch advertising and making comparison shopping on websites almost impossible. To the groups’ surprise, Democrats on the House panel who usually support legislation they favor voted for the measure.
“Right now prices are more transparent than they’ve ever been,” said Charlie Leocha, director of the consumer group Travelers United. “The price you see in an ad is the price you’re going to pay for a ticket. The airlines have managed to push this thing through. They’ve got a lot of clout, especially with Congress.”
Airlines for America, a Washington-based trade group, is leading a lobbying effort for the legislation after several carriers unsuccessfully fought the rule through its drafting by the Transportation Department, a White House review and a lawsuit that ended at the U.S. Supreme Court. Most of the largest U.S. airlines and unions representing their workers filed letters supporting the bill.
“On its face, full-fare advertising sounds as though it is protecting the consumer, when in reality it is protecting the government, enabling spikes in taxes to be hidden and buried within the price of a ticket,” said Vaughn Jennings, a spokesman for the trade group, which includes American Airlines Group Inc. and Southwest Airlines Co.
The group says U.S. taxes now make up 21 percent of a typical $300 round-trip domestic ticket.
The airlines gained momentum with Democratic lawmakers to undo the rule after a congressional budget agreement reached in December included a $12.6 billion boost over 10 years in the aviation-security fees paid by passengers as part of the ticket price. Airlines in that same deal won a repeal of $380 million a year in their own security fees.
In letters supporting the legislation, airlines including Spirit Airlines Inc. and Dallas-based Southwest said the fee increases would lead to total-price increases that consumers would blame on them, resulting in lost sales.
“I’m just tired of people tossing stuff onto airline passengers,” Representative Peter DeFazio of Oregon, a Democratic co-sponsor of the bill, said in an interview. “I think if the amount of federal tax that people are paying becomes known and the structure of the taxes becomes known, it will be a lot harder in the future for my colleagues to say we need another $1 billion so let’s bump this up or that up.”
In its arguments in the court challenge, filed by Miramar, Florida-based Spirit and Southwest, the Transportation Department pointed to hundreds of complaints received during a comment period before issuing its final rule in 2012. Some consumers said they sometimes didn’t know what they’d paid until after the transaction was completed, the department said.
“Against the weight of all this consumer response and common sense, the airlines marshal no evidence of their own to support the counterintuitive proposition that consumers are somehow better informed when advertisements quote a price that is substantially lower than the amount the consumer will need to pay for air travel,” the government argued.
Spirit was particularly aggressive in criticizing the rule, issuing a news release and an e-mail to customers after it took effect saying airlines are being forced to “hide taxes in consumer’s airfares.” After losing in the lower courts, Spirit appealed to the Supreme Court, which in April 2013 declined to take up the case.
The Transportation Department, while declining to comment on the legislation, still defends its rule.
“Consumers have consistently confirmed that advertising of prices below the total cost of travel causes confusion,” Meghan Keck, a department spokeswoman, said in an e-mail.
Representative Bill Shuster, chairman of the House transportation panel, said advertising should be treated the same for airfares as other consumer products.
“It is only fair that consumers know what they’re paying for,” Shuster, a Pennsylvania Republican, said April 9. “Essentially, as I said, all consumer products are advertised at base price with taxes added at the point of purchase.”
That’s off base, say consumer groups including the Business Travel Coalition, which represents companies whose workers travel extensively. Prices for goods subjected to federal excise taxes, like cigarettes and gasoline, are advertised to consumers with those levies included, said Kevin Mitchell, chairman of the group.
Airlines for America has increased its influence and spending under Chief Executive Officer Nicholas Calio, former President George W. Bush’s top White House lobbyist, who came to the group in 2011. It spent a record $7.92 million in 2013 on in-house lobbyists and for representatives from five K Street firms, including Patton Boggs LLP.
Last year, it had 26 lobbyists, according to the nonpartisan Center for Responsive Politics in Washington. It also diversified the Republican lean of its in-house team by recruiting Sean D. Kennedy, President Barack Obama’s former top lobbyist.
With Congress home on recess, the airline industry is lobbying senators and their aides to find sponsors for a companion measure in the Senate, which would also have to pass a bill for the measure to become law.
Victoria Day, a spokeswoman for Airlines for America, noted that Calio recently testified to the Senate’s commerce committee about the need “for restoring customer transparency in airline taxes.”
“We will continue to work with members of the committee and their colleagues to deliver the transparency airline customers deserve,” she said.
Consumer groups have created a coalition that includes the American Society of Travel Agents and the Travel Technology Association, which represents online travel companies like Priceline Group Inc., Orbitz Worldwide Inc. and Sabre Corp.’s Travelocity.
“We’ve formed a powerful group that is descending on the Senate right now,” Leocha said.
House Republican leaders have yet to decide when and whether to put the measure on the floor for a vote in the full chamber, said Rory Cooper, a spokesman for House Majority Leader Eric Cantor, a Virginia Republican.
Ray LaHood, who was transportation secretary when the rules were drafted and who served as a House lawmaker from 1995 to 2009, said the debate will probably slow and give consumer groups more time to make their case.
“I’ve been around long enough to know that these things take a long time,” LaHood said in an interview. “I don’t know that there’s any strong support for this in the Senate. Democrats who control the Senate may have different ideas about how to approach this.”
The bill is H.R. 4156.
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