With various outlets reporting that airlines raked in over $4B in ancillary fees through the third quarter ending in September, 2010, the calls from legislators and consumer advocates are once again reaching a crescendo. Demands for “transparent” pricing and full travel cost disclosure are pervasive both in DoT rulemaking drafts and legislation being pushed by a consortium led by US Senator Robert Menendez, D-NJ. Despite the intentions of lawmakers, rulemakers, and consumer advocates, any regulatory movement is running into stiff opposition from the Air Transport Association (ATA) whose members, according to David Castelveter, vice president of the ATA, claim that ancillary fees are already transparent and that airlines “are working on ways to increase levels of transparency.” Could it be that both sides are right but that the now de rigeur application of the term “transparent” has caused as much confusion as the fees themselves and, unbeknownst to fee disclosure advocates, provided cover to airline executives reluctant to contribute willingly to a repeat of the lessons learned from actual “transparency?”
Case in point, prior to the emergence of on-line travel agencies (OTAs) such as Expedia, Orbitz, and the like, consumers were forced to either go to multiple airline sites to find the best fares, call all of the airlines individually with a calculator, pencil, and pad at the ready, or use a travel agent and rely on the advice and recommendations given without full knowledge of all the choices. OTAs changed the entire travel purchase equation by introducing “transparent” pricing. What OTAs did was allow side-by-side comparisons of fares among several airlines with no need for calculators or multiple phone calls. The result? Consumers could make informed travel choices because of the transparency of side-by-side, apples-to-apples comparisons. The evolution of the OTAs to allow this type of immediate, simple cost comparison did significant damage to many major airlines as I recall then Delta CEO Jerry Grinstein in 2005 lamenting how fare “transparency” driven by the OTAs was allowing consumers to conduct instant on-line comparisons of Delta to the the LCCs (except Southwest who has not used OTAs to distribute tickets thus insulating their brand as the default “low cost” carrier) and other competitors and driving pricing pressures that had not existed prior. So this writer would ask, is what is being proposed actual “transparency” or is it “availability?” And is a simple mistake in nomenclature allowing airlines to respond, honestly, that they are indeed being transparent according to how the term has evolved?
If we look at how efforts have defined “tranparency” in the current context of airline fees, then airlines are absolutely right that they’ve taken steps to reduce the confusion around fees. Most do post their fees on their websites and some have even taken the step of creating whole pages that address nothing but fees (this does little to support the accusation that airlines are “hiding” the fees). So do they make fees available? Yes. And does the availability of fees on their sites in some ways address the way that rules have been worded thus answering the call for greater “transparency” as it has been defined in recent proposals? Yes. And this begs the question: Will proposed rulemaking and legislation change the transparency of fees in any meaningful way? No. Why? Because availability on an airline site falls far short of the transparency offered by making fees available to OTAs who can then allow consumers to make “transparent” side-by-side, apples-to-apples comparisons and nowhere have I read any requirement for airlines to hand over their fee information in a consumable format either to the OTAs or the Global Distribution Systems that feed them. So airlines have cleverly crafted their responses to the outcry about fees by simply co-opting the new definition of “transparency” and saying rightfully that they’re already making progress toward making fees transparent.
In reality, airline fare “transparency” as defined by the OTAs over the last decade taught airline leaders a very difficult and costly lesson that they’ve incorporated into their business model around fees. By keeping their fees out of the hands of the OTAs and travel agents, true transparency is impossible. Once again, the consumer is back to the days of going to each site with a calculator, pen, and pad in hand in figuring in all fees for each available airline. This onerous path to the true cost of an airline ticket has nothing to do with transparency as it was once understood to mean. But it does play right into the carefully crafted responses from the ATA whose words are merely reflective of how the opposition has come to define the term.
If lawmakers, consumers, and advocates want true fee transparency, then redefine the term to reflect the ability to conduct simple, side-by-side comparisons of each and every fee on each and every airline just as can be done today with fares. Much like the word parsing of a former president caught in a war of words and their meaning over a blue dress, nomenclature absolutely matters. The response of the airlines to the outcry around fees makes that important point completely transparent.