The regulatory difference between airlines and big oil, your lobbying dollars at work
Let us compare:
The oil industry gets to build oil wells in US waters carrying huge risk, without so much as a plan to stop oil spills in the event of an mistake or error in their system.
--At stake: Potentially hundreds of years of environmental stability, irreplaceable damage to the livelihood of millions of people, the destruction of entire ecosystems (need i go on?).
The airline industry, however, must produce and document a detailed plan for how to deal with a 3-hour tarmac delay and can get fined a mind-blowingly disproportionate amount of money (relative to the problem) for violating the rule.
--At stake: Several hours of (admittedly) poor conditions sitting aboard a modern aircraft at a modern airport
Perhaps this is the difference between industries with lots of money, and those without lots of money. The oil industry gets to pay lobbyists to craft laws that benefit them and prevent inconvenient regulation. The airline industry can't even prevent the government from micromanaging customer service! (yes, folks, we're talking about customer service, NOT safety, security, environment, etc.)
In the airline industry, the FAA heavily regulates aircraft operations from a safety standpoint. While there has been some bad press about this in the last couple of years regarding some of the coziness between regulators and airlines such as AA and Southwest, this generally works inasmuch as airlines fly safely and the regulations ensure standards.
This works so well that the FAA/DOT is free to expand their attention to customer service. In oil, it's as if they haven't even gotten the first part right.
As you might be able to tell, I find this pattern egregious. Regulators want to regulate, so it's a constant balance between them trying to tighten control of private industry vs. lobbying groups to prevent it. Somewhere in the middle is the ideal balance for the consumer, sometimes we strike it, sometimes we don't. But it seems which way we swing on that balance is determined by the lobbying dollars the industry can funnel to Washington. In what way does that help the consumer?
With that as the lens, let's discuss how the DOT is significantly upping its regulation of the US airline industries with these so-called "Consumer Protection" laws. I posit that we've moved from the low hanging fruit, to expanding into micro-management by leveraging precedent. Airline screw-ups from 2009 gave the DOT a mandate to begin adding rules. But does that mandate extend into other rules?
I think not, but I'm sure we'll see many different viewpoints on the matter.
Here's the story:
Late in 2009, the DOT issued it's now infamous proclamation mandating certain levels of customer service. The most notable of those mandates is the "3-hour tarmac rule", which fines airlines that keep passengers on planes for more then 3-hours without going anywhere. There were also other parts to that rule, like forcing airlines to display historical delay average data on their shopping screens, fining airlines for flying "chronically delayed flights", and requiring customer service accountability and protocols.
Those rules took effect on April 29 of this year. So far, not much seems to have changed. At first glance, in May of 2010 (it's first month of action), only 3 flights violated the 3-hour tarmac rule (according to the FAA's Aviation System Performance Metrics system for taxi-out times). Two of those flights had 3+ hours taxi-out times at Atlanta, and 1 at LaGuardia. No word from the DOT whether those airlines have been fined.
It didn't take long for the DOT to issue it's next set of rules -- just weeks after the first set took affect. This time, they expand on the first set and add some new ones. We are now in public comment period, so stakeholders have 60 days to submit comments and the DOT will then consider feedback for a final ruling.
Rules:
-Expanding tarmac rule to non-US carriers, and small / non-hub airports
-Requiring airlines to tell pax every 30 min update during tarmac delay
-Customer service plan enhancements
-Contract of carriage must include contingency plans and customer service plans
-Oversales, increase in compensation to 650/1300
-Better airline disclosure of fees for ancillary services on web and through GDS (for ticket agents also?)
-No post-purhcase price increases
-Airlines must notify of delays of 30+ minutes within 30 minutes
-Peanut-free or peanut-buffer zones for nut-allgergic travelers upon request
Fine the full doc here: Regulations.gov Doc: DOT-OST-2010-0140-0002
These rules are currently under a 180 day comment period, and subject to the results of those comments, would take affect on the 180th day from initial posting (June 2). In general, these rules are verging on government micro-management of a private industry.
The last set of rules that recently took effect addressed some very specific concerns about airline customer service -- namely lengthy tarmac delays. Despite public outcry, airlines had demonstrated an inability to fix the problem on their own. It made sense for the DOT to step-in with a program to help them get there and penalties for failing to comply.
This rule set, however, does not reflect any real issue or pent-up demand by the traveling public with some minor exceptions. Sure, expanding the tarmac rule to international fights and carriers makes sense, although perhaps they'd be better off waiting a few months to assess the impact of the first rule before expanding it.
Customer service plans, notifications of delays, ancillary fee disclosure, etc. are all things that either the airlines do well, or aren't mission critical enough for the DOT to get involved (next they're going to mandate that customer service agents "be nice"??)
One exception to that is the peanut rule. The DOT cites US equality law as justification for this mandate. That might be true, but then isn't it up to airlines to comply with an existing law (rather than force another down their throat), and if they're not, wouldn't a lawsuit solve that?
Despite what the DOT might like to think, the US airline industry is unregulated and private. Unlike the oil industry, they do have plans and back-up plans for when things go awry -- and are capable of handling irregular operations on a daily basis. Sure, sometimes they need to step-in and right a listing ship as they did last fall (much to the chagrin of airline executives, but to nobody's surprise). But now they're reaching, trying to make lots of new rules of dubious value for seemingly little other reason than taking advantage of the precedent they recently set.
It's a slippery slope, as they say, and the DOT is sliding down it with reckless abandon. My hunch is that this public comment phase turns out some interesting reflections that hopefully will guide the DOT to nix some, refine others, and implement a softer set of guidelines.
But if the mandate still exists for the DOT to hand down rules -- the damage is done regardless of the details of the text. Perhaps this is what the oil industry can look forward to post-Deepwater Horizon. Funny, I don't feel the least bit remorseful about that.
Posted by Evan
