Jetrader - Summer 2014 - (Page 45)

dle... Bun Down Unbundled fees are here to stay By Don Mitchell, Partner, Smith, Gambrell & Russell, LLP R Road warriors rejoice! Unbundled airfares have made travel simpler and cheaper. Now you pay only for what you want. If that's just a seat and the clothes on your back for a weeklong business trip, you should be happy. Indeed, the most unbundled carrier in the U.S. should have the happiest travelers. According to a recent report by the U.S. Public Interest Research Group (PIRG) Education Fund, it doesn't.1 The airline's response is that an uneducated consumer is their worst customer. They intend to teach their customers just how to fly them.2 BloombergBusinessweek reported that the airline declared 2014 its "Year of the Customer." The goal, an airline spokeswoman said, is, "to reduce complaints by helping customers learn about how to fly Spirit to go where they want and keep more money in their pocket." According to the U.S. PIRG report, the majority of complaints to the U.S. Department of Transportation (DOT) from 2009 through 2013 related to "flight problems." These include delays, cancellations and on-time performance. But unbundling has spurred a new wave of complaints and lawsuits attacking ancillary fees-the fees that helped turn the airlines' perennial losses into reliable profits. Earlier Jetrader articles highlighted two lawsuits, one against American concerning baggage fees and a second against Spirit concerning its "Passenger Usage Fee" or PUF.3 Each of the suits sought class action status putting big dollars at risk. There are others. But a recent decision by the U.S. Supreme Court and additional regulation by the U.S. Department of Transportation (DOT) and Congress may signal the beginning of the end of such suits filed in response to the unbundling of airfares. First, a brief primer. The U.S. Constitution makes federal laws the supreme laws of the 50 United States. State laws that conflict with federal law are "preempted." Preemption can be express, in the language of the law, or implied. What the U.S. Congress doesn't regulate is left to the states. The U.S. Airline Deregulation Act (ADA) moved U.S. airlines from protected "public utilities" to independent competitors. The ADA expressly prohibits states from, "enact[ing] or enforc[ing] a law, regulation or other provision having the force and effect of law related to [an air carrier's] price, route or service." Tickets sold in the U.S. are subject to an airline's contract of carriage. This is incorporated into each ticket purchased and is available from each airline, typically on its website. A passenger's rights and an airline's liability in connection with its contractual obligation to provide air services are governed (and limited) by this contract, as ultimately regulated by the DOT. The DOT does not provide a mechanism for direct compensation to passengers-they can only require that it be provided. Customers aren't entirely without recourse for a breach of DOT regulations. They can file a complaint with the DOT but are unable to seek damages for a violation of DOT's regulations.4 In order to recover meaningful compensation for airline customers, lawyers have fashioned creative arguments to avoid preemption. But since preemption is viewed broadly, the courts have resisted allowing claims generally related to what and how an airline charges for its services. Believing that the WorldPerks program rules gave Northwest too much discretion in terminating his membership, a highflying rabbi brought suit under a noncontract state law theory alleging breach of an implied duty of good faith and fair dealing. The U.S. Supreme Court decided in April that the claim was preempted by Jetrader * Summer 2014 45

Table of Contents for the Digital Edition of Jetrader - Summer 2014

Q&A: John Slattery
ISTAT Asia Focuses on Challenges, Opportunities of the Region
State of the Regions: Asia Pacific
Cape Town: Global Treaty Expands Thanks to Benefits Offered, Advanced Information Base
ISTAT Americas 2014
In Memory of Gilbert W. Speed
A Long Overdue Thank You
East Meets West in Istanbul
A Message from the President
ISTAT Foundation
Aviation History
Aircraft Appraisals
Advertiser Index

Jetrader - Summer 2014