Fl FL YERSRIGHTSOR~ 

BEFORE THE SECRETARY OF TRANSPORTATION 

U.S. DEPARTMENT OF TRANSPORTATION 

Anthony Foxx 

Secretary of Transportation 

U.S. Department of Transportation 

1200 New Jersey Ave., SE 

Washington, DC 20590-0001 

PETITION FOR RULEMAKING: 

LIMITATION ON CHANGE FEES FOR INTERNATIONAL FLIGHTS 

SUBMITTED BY: 

FL YERSRIGHTS.ORG 

February 11, 2015 

Pursuant to§ 553(e) ofthe Administrative Procedure Act1 and 49 C.F.R. 5.11, 

FlyersRights.org and the undersigned hereby petition the Department of Transportation (DOT) to 

regulate change fees for foreign air transportation under 49 U.S.C. §§ 41501 and 41509. A 

corollary of the right to petition in§ 553(e) is the right to receive reasons if the petition is denied. 

The Supreme Court recently reaffirmed limited judicial review for the denial of a rulemaking 

petition and for the adequacy of the reasons given? 

1 5 USC§ 553(e). 2 See Massachusetts v. E.P.A., 549 U.S. 497 (2007). 

1 / 
I. Introduction 

FlyersRights.org is the largest nonprofit airline passenger organization with over 50,000 

members and supporters nationwide. It was the principal advocate of the 2009 Three Hour Rule 

ending tarmac confinements, for truth in scheduling regulations by the Department of 

Transportation, and for the 2012 inclusion of airline passenger rights provisions in the 2012 FAA 

Modernization and Reform Act. It publishes a weekly online newsletter, operates a toll free 

hotline for airline passengers, and advocates for their rights and interests. 3 FlyersRights was 

founded by Kate Hanni in 2007 after she, along with thousands of others, was stranded on the 

tarmac for over 9 hours. 

In 1958, Congress enacted the Federal Aviation Act creating the Federal Aviation 

Administration and continuing the Civil Aeronautics Board while redefining their 

responsibilities.4 Congress fully deregulated the domestic airline industry through the Airline 

Deregulation Act of 1978 (ADA). 5 However, the passage of the International Air Transportation 

Competition Act of 1979 (IA TCA) did not fully deregulate foreign air transportation but instead 

left intact regulatory provisions from the Federal Aviation Act. 6 The Civil Aeronautics Board 

was eventually disbanded and its remaining authority and responsibilities transferred to the 

Office of the Secretary within DOT. In 1994, Congress revised and codified existing 

transportation and aviation law.7 Every airline was required to establish and maintain 

"reasonable prices, classifications, rules and practices related to foreign air transportation."8 By 

definition, "price" includes any "fare or charge" for air transportation.9 Every airline that 

engaged in foreign air transportation was required to file tariffs with the DOT. 10 DOT could 

reject any tariff that was not consistent with the statutory requirements or DOT regulations. 11 

DOT could conduct a hearing, either on its own initiative or acting on a complaint, to determine 

3 See www.flyersrights.org. 4 Federal Aviation Act, Pub. L. 85-726,72 Stat. 731 (1958) (codified in scattered titles ofthe U.S.C.). 5 Airline Deregulation Act of 1978, Pub. L. No. 95-504, 92 Stat. 1705 (1978) (codified in scattered titles of the 

U.S.C.) 

6 International Air Transportation Competition Act of 1979, Pub. L. No. 96-192, 94 Stat. 35 (1980). 7 Revision of Title 49, United States Code, Pub. L. 103-272, 109 Stat. 745 (1994). 8 49 U.S.C. § 41501. 9 49 U.S.C. § 40102(a)(39). 10 49 U.S.C. § 41504(a) and (b). 11 49 U.S.C. § 41504(c). 

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whether a tariff was lawful. 12 DOT adopted extensive regulations to implement this 

congressional plan. 13 

In selectively exempting U.S. and foreign air carriers from international passenger tariffs, 

the DOT acknowledged a continuation in the "evolution of a policy where we rely on market 

forces rather than continual government oversight to set prices for air transportation."14 In 

providing international passenger tariff exemptions, DOT affirmed that this would "not 

materially lessen [DOT's] ability to intervene in passenger pricing matters should it be 

necessary." 15 Further, the DOT stated that it "has always had the statutory authority to take 

action directly against unfiled passenger fees and rules." 16 DOT confirmed that under 49 U.S.C. 

§§ 41501 and 41509, air carriers engaged in foreign air transportation must "establish reasonable 

rates and rules" and that DOT has the authority to "cancel a rule that is unreasonable after notice 

and hearing." 17 However, in the more than "34 years since the passage ofthe Airline 

Deregulation Act," DOT has "declined to use this authority to strike down fare rules in foreign 

air transportation." 18 

DOT also has authority under§ 41712 to prohibit any "unfair or deceptive practice or an 

unfair method of competition in air transportation or the sale of air transportation." 19 This has 

been one of DOT's most noteworthy powers and has been used extensively to regulate air 

carriers, ticket agents, and other entities involved in air transportation.2

° FlyersRights would like 

to see DOT take similar actions under the agency's § 41501 authority. 

12 49 U.S.C. § 41509(a). 13 See 14 C.F.R. § 221. 14 Exemption from Passenger Tariff-Filing Requirements in Certain Instances, 62 Fed. Reg. 10758-1078, (Mar. 10, 

1997). 

1s Id. 

16 Id. 

17 Petition for Rulemaking and Third-Party Complaint of Donald L. Pevsner, Esq., Docket OST 2012-0109, Order 

2012-11-4, 5 (November 6, 20 12), available at http://www.dot.gov/sites/dot.gov/files/docs/eo _ 2012-11-4.pdf 

[hereinafter Pevsner DenialJ. 18 Id. 

19 49 U.S.C. § 41712. 20 See Jol Silversmith, United States: DOT Enforcement Of Its Prohibitions on Unfair And Deceptive Practices, 

2013, Zuckert Scoutt & Rasenberger, Jan. 2014, available at http://www.mondaq.com/unitedstates/x/331870/ A viati 

on/DOT +Enforcement+Of+ lts+Prohibitions+On+Unfair+ And+ Deceptive. 

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FlyersRights.org petitions DOT to exercise its statutory authority under § § 41501 and 

41509 to impose reasonable regulations limiting the extent of change fees in foreign air 

transportation. 

IL Massachusetts v. E.P.A. and DOT's Statutory Obligation and Authority 

A. The U.S. Supreme Court in Massachusetts v. E.P.A. held that a federal agency 

cannot refuse to regulate matters within its regulatory mandate for policy or 

political reasons 

In 1999, a group of private organizations filed a rulemaking petition asking the EPA to 

regulate "greenhouse gas emissions from new motor vehicles under§ 202 of the Clean Air 

Act."21 In 2003, EPA entered an order denying the petition stating that: "(1) the Clean Air Act 

does not authorize EPA to issue regulations addressing climate change; and (2) that even if EPA 

had the authority to set greenhouse gas emission standards, it would be unwise to do so at this 

time.'o22 The U.S. Supreme Court rejected these arguments, holding instead that EPA did have 

authority to issue such regulations and that EPA could avoid taking regulatory action only if it 

determined that greenhouse gases do not contribute to climate change or if it provided some 

reasonable explanation as to why it cannot or will not exercise its discretion to determine 

whether they do.23 The Court took the standard EPA was required to use during rulemaking 

proceedings and required it to apply that standard in deciding whether to institute rulemaking 

proceedings in the first place. 24 

The Court disposed of the authority issue first. The Clean Air Act in relevant part 

"provides that EPA 'shall by regulation prescribe ... standards applicable to the emission of any 

air pollutant from any class or classes of new motor vehicles or new motor vehicle engines, 

which in [the Administrator's] judgment cause, or contribute to, air pollution which may 

reasonably be anticipated to endanger public health or welfare. "'25 Since the Clean Air Act 

21 Massachusetts v. E.P.A., 549 U.S. 497, 510 (2007). 22 !d. at 511. 23 !d. at 497. 24 Jeffrey A. Rosen, A Chance for A Second Look: Judicial Review of Rulemaking Petition Denials, Admin. & Reg. 

L. News, Fall2009, at 7-8. 25 Massachusetts v. E.P.A., 549 U.S. at 528 (citing 42 U.S.C. § 7521(a)(l)). 

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defines "air pollutant" as including any substance emitted or entering the atmosphere, the statute 

is unambiguous and EPA possesses authority to regulate greenhouse gas emissions?6 

The Court next disposed of EPA's second reason for denial. The Clean Air Act language 

above does condition the exercise of EPA's authority on the Administrator's judgment. 

However, that judgment only relates to whether an air pollutant "cause[ s], or contribute[ s] to, air 

pollution which may reasonably be anticipated to endanger public health or welfare.'m "Put 

another way, the use of the word 'judgment' is not a roving license to ignore the statutory text. It 

is but a direction to exercise discretion within defined statutory limits."28 

"If EPA makes a finding of endangerment, the Clean Air Act requires the Agency to 

regulate emissions of the deleterious pollutant from new motor vehicles. "

29 EPA has significant 

latitude as the how to go about regulating the pollutant but once it has responded to a rulemaking 

petition, its reasons for action or inaction must conform to the authorizing statute?0 EPA could 

avoid taking further action only if it either determined that greenhouse gases pose no 

endangerment or if it provided a reasonable explanation as to why it would not make that 

determination in the first place.31 To the extent that "this constrains agency discretion ... [it] is 

the congressional design."32 

Instead of complying with its "clear statutory command," EPA instead offered a "laundry 

list of reasons" not to regulate.33 The Court acknowledged that while the judiciary has "neither 

the expertise nor the authority" to evaluate the merits of such policy judgments, it is immaterial 

as "they have nothing to do with whether greenhouse gas emissions contributed to global 

warming."34 For the EPA, the statutory question was whether sufficient information existed to 

make an endangerment finding, not whether policy reasons exist to not make that finding. 35 The 

26 See id. at 528-29. 27 /d. at 532. 28 !d. 29 !d. at 533. 30 See id. 31 !d. 

32 !d. 

33 !d. 

34 /d. at 524. 35 /d. 

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Court suggested that EPA would need to present a reason it "could not" make a statutory 

endangerment finding, rather than rely on policy reasons why it would "prefer not" to do so.

36 

B. DOT's statutory authority and obligations require it to regulate and prohibit 

unreasonable, unfair and deceptive international change fees 

The situation addressed in Massachusetts v. E.P.A. is analogous in many ways to DOT's 

refusal to provide any regulation of prices in foreign air transportation. § 41501 provides that 

every "air carrier and foreign air carrier shall establish, comply with and enforce ... reasonable 

prices, classifications, rules, and practices related to foreign air transportation."37 "Price" 

includes any "rate, fare, or charge."38 The Secretary "may conduct a hearing to decide whether a 

price ... is lawful" and if after the hearing the Secretary "decides that the price ... is or will be 

umeasonable" then the Secretary may "prevent the use of the price."39 The Secretary may also, 

with or without a hearing, "prevent the use of a price ... when the Secretary decides ... [it] is in 

the public interest."40 The combination of§§ 41501 and 41509 creates a similar set of statutory 

authority and obligations as§ 41712, under which DOT has regulated extensively to combat 

unfair and deceptive practices. 

While DOT's regulatory authority over prices is discretionary this it is not a roving 

license to ignore the statutory text. DOT must determine whether or not the price of fares and 

fees charged in foreign air transportation are "reasonable" and exercise its regulatory authority 

when they are not. DOT can only avoid taking regulatory action if it determines that the prices 

are "reasonable" or if it can provide a valid explanation as to why it cannot or will not make that 

determination. The congressional design of the statute was to constrain DOT discretion. It does 

this by imposing a mandate of reasonableness on prices in foreign air transportation. DOT has 

latitude in how to address umeasonable prices and fees, but it must address them. 

36 Rosen, supra note 24, at 7-8. 37 49 U.S.C. § 41501. 38 49 U.S.C. § 40102(a)(39). 39 49 U.S.C. § 41509(a)(l). 40 49 U.S.C. § 41509(a)(2). 

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DOT has offered policy arguments for not regulating,41 but regardless of their merits such 

policy judgments are immaterial as they have nothing to do with whether or not a fare or fee is 

reasonable. For DOT, just as in Massachusetts v. E.P.A., the statutory question is whether 

sufficient information exists to make a reasonableness finding, not whether policy reasons exist 

to ignore their statutory obligations and abdicate their responsibilities. As DOT does not contest 

that it has the authority to regulate ancillary fees for foreign air transportation, it must regulate 

such fees where they are found to be umeasonable. 

Further, in any attempt to avoid making a determination of reasonableness, any argument 

that limiting excessive ancillary fees was not intended by Congress and therefore outside the 

purview of the DOT is incorrect. The U.S. Supreme Court has held that because "a statute can be 

applied in situations not expressly anticipated by Congress does not demonstrate ambiguity. It 

demonstrates breadth."42 

Finally, the Court in Massachusetts reemphasized the broad discretion afforded to 

government agencies under Chevron USA. Inc. v. Natural Resources Defense Council, Inc. in 

choosing how best to marshal their limited resources and personnel to carry out their delegated 

responsibilities.43 However, the Court acknowledged key differences surrounding the denial of a 

rulemaking petition. 44 "Refusals to promulgate rules are thus susceptible to judicial review, 

though such review is 'extremely limited' and 'highly deferential. "'45 

III. Reasonableness 

A. DOT currently lacks any regulatory scheme for regulating or prohibiting 

unreasonable fees for international air travel 

In an antitrust price-fixing case brought against foreign airlines in U.S. District Court, 

neither the district court nor any party could find evidence that the DOT ever disapproved of an 

41 DOT has a general belief in using the "marketplace" and "pro-competitive policies" when dealing with prices, 

reasonable or not, in foreign air transportation. See Pevsner Denial, supra note 17, at 5. 42 Massachusetts v. E.P.A., 549 U.S. 497, 505 (2007) (citing Pennsylvania Dept. of Corrections v. Yeskey, 524 U.S. 

206,212 (1998)). 43 Jd. at 527. 44 See id. 45 Jd. at 527-28. 

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international rate or fare based on its pricing level or reasonableness.46 The court found no 

evidence "that the DOT has ever rejected as umeasonable any international air fare" and that 

with respect to unfiled air fares the agency had "effectively abdicated its authority."47 This lack 

of DOT regulation also extends to additional fees such as fuel charges, with the DOT announcing 

that it "would not 'effectively monitor' fuel surcharges" and the court finding "no evidence of 

any ongoing regulation."48 Finally, DOT has itself stated that in the more than "34 years since 

the passage of the Airline Deregulation Act," it has "declined to use this authority to strike down 

fare rules in foreign air transportation."49 

To compound the harm caused by DOT's abdication of authority and responsibility in 

ensuring reasonable prices and fees in foreign air transportation, there is no private right of 

action in order to enforce the provisions of 49 U.S.C. § 41501. 5° Federal preemption also denies 

consumers state law remedies. 5

1 Therefore, the onus is solely on DOT to act to protect 

consumers. DOT has not previously regulated prices in foreign air transportation. We urge them 

to rectify this mistake. 

B. What is reasonable? 

The hardest question to answer in this petition is defining what exactly is reasonable for 

change and cancellation fees in foreign air transportation. Airlines may argue that any and all 

fees are reasonable at any level and DOT, by declining to regulate at all in this arena, has 

apparently accepted that premise. 

In life there are many eventualities that consumers cannot expect or plan for. They should 

not be left holding the bag while airlines charge exorbitant fees umelated to the actual costs of 

the passengers' actions. Neither should airlines needlessly suffer financially because of their 

passengers' actions. Therefore, reasonableness, for the purposes of§ 41501, should be tied to the 

actual cost or loss incurred by an air carrier when a passenger changes a flight. 

46 In re Transpacific Passenger Air Transp. Antitrust Litig., 2014 WL 4744512, at *5 (N.D. Cal. Sept. 23, 2014). 47 !d. at *10-12. 48 /d. at *13. 49 Pevsner Denial, supra note 17, at 5. 50 See Am. Exp. Travel Related Servs. Co. v. Marco, 611 F. Supp. 938, 942 (S.D.N.Y. 1985). 51 49 U.S.C. § 41713. 

8 
In most instances, the airline bears no burden from passengers changing flights, quite the 

opposite. The passenger typically must pay the differential in price for the new flight along with 

a hefty change fee. As the costs associated with shifting a passenger's electronic reservation 

from one flight to another are minimal, the effect of changing that passenger from what is 

typically a cheaper to a more expensive ticket, coupled with a change fee, amounts to a windfall 

profit for the airline. As a result, such change fees end up being an unfair and umeasonable profit 

source for airlines, not a reasonable charge to cover the actual costs. 

Furthermore, there is no deterrence rationale strong enough for a passenger changing 

flights that would necessitate the exorbitant change fees we currently see. However, airlines have 

made deterrence-based arguments for higher change fees and at least one airline CEO has stated 

that change fees are in fact intended to discourage changes. 52 Airlines have argued that lower 

change fees could lead to consumers speculatively buying tickets far ahead of potential travel, 

but since airlines charge the differential in ticket price along with the change fee this would not 

in fact be a beneficial practice for consumers. Airlines have also argued that another cost 

necessitating high change fees is the loss of revenue airlines will experience if consumers 

purchase regular fares instead of high priced flexible or refundable fares. Once could argue this 

would force airlines to increase regular fares to compensate. However, as we address in the next 

section, refundable/flexible fares are already a minority of tickets purchased and priced so 

comparatively high that a reduction in change fees would have little to no impact on their sale. 

Furthermore, Southwest continues to successfully charge no change fees without succumbing to 

the plethora of negative consequences described by others in the airline industry. 

There is, to some minor extent, an opportunity cost for airlines when a person makes a 

reservation, as it deprives the airline of the opportunity to sell that seat to another. If the 

passenger ultimately returns the seat by changing flights, the airline is free to sell it to someone 

else but now has a smaller window within which to make that sale. However, a passenger who 

changes flights is still flying with that airline, just in a different seat (and after adjusting for the 

difference in fares and a change fee, paying significantly more). When customers make changes 

far in advance, airlines can usually resell their original seat while still charging them the fare 

52 Ted Reed, The Highest Fees in the Airline Business, TheStreet, Jul. 9, 2013, available at 

http://www.thestreet.com/story/11970320/l/the-highest-fees-in-the-airline-business.html. 

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differential and a change fee. 53 When changes are made several weeks or more in advance there 

is really no rationale for a change fee at all. 

In reality, change fees no longer bear any resemblance to a reasonable approximation of 

the cost incurred by the airlines but exist merely as a tool to gouge consumers faced with the 

unpredictable nature of life. The CEO of American Airlines stated that demand is "what we 

should base our pricing on, not our cost structure."54 The standard change fee for the major U.S. 

airlines has progressively gone up in the last 15 years from "$50, then $75, then $100" before 

hitting $150 in 2008. 55 In April of2013, the major U.S. airlines raised their change fees again so 

that the average fee to change international tickets hovered around $300. 56 At the high end, on 

some discounted first class international tickets, American Airlines charged $750. 57 From 2007 

to 2014, airline revenue from cancellation and change fees went from $915 million to over $2.9 

billion, an increase of more than 225 percent. 5

8 Accordingly, current international change and 

cancellation fees (often in excess of $300) should be considered per se unreasonable given that a 

dozen years ago airlines charged fees of $25-50 and there has been no material increase in the 

costs associated with flight change to justify the astronomical growth of these fees. 

C. Refundable fares and travel insurance are not real alternatives 

A common refrain, both within the airline industry and from DOT, 5

9 is that passengers 

concerned with the possibility of having to change or cancel a flight are able to purchase fully 

refundable tickets for a higher fare that allow them to avoid change and cancellation fees. The 

DOT has reiterated "that the lower price for nonrefundable tickets is a trade-off for passengers 

agreeing to a restriction that allows a carrier to manage its inventory and cash flow." 60 However, 

53 Scott McCartney, Why Airlines Reschedule Flights More Often and More Drastically, WSJ, Feb. 5, 2013, 

available at http://www.wsj .com/news/articles/SB 10001424052702303496804579364973804887940. 54 Thomas Frank, Airline profits soar yet no relief for passengers, USA Today, Jan. 27, 2015, available at 

http://www. usatoday .com/story/news/20 15/01/27 /airline-profits-soar-passengers-fuel/223 95 509/. 55 Brad Tuttle, Oof Airline Fees Rise Yet Again, at Least 200 to Change a Flight, Time, Apr. 24, 2013, available at 

http:/ /business. time.com/20 13/04/24/ oof-airline-fees-rise-yet -again-at -least-200-to-change-a-flight/. 56 Reed, supra note 52. 57 Id. 

58 Bureau of Transportation Statistics, Reservation Cancellation/Change Fees by Airline, Dept. of Transportation, 

available at http://www .rita.dot.gov/bts/sites/rita.dot.gov. bts/files/subject_ areas/airline _information! 

reservation_ cancellation_ change _fees/index.html; see also Exhibit 1. 59 See Pevsner Denial, supra note 17, at 5. 

60 Jd. 

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this argument falls apart when presented with the typically wide gulf between standard and 

refundable fares. 

Indeed, DOT acknowledged that by purchasing a standard fare and paying the change fee 

the petitioner in the Pevsner matter "would have saved $1338 over purchasing a fully refundable 

ticket."61 A National Consumer League study of the least expensive refundable and nonrefundable fares available in major U.S. air corridors found that "on average, a refundable ticket 

is 350% more expensive than a non-refundable ticket."62 Since 1993, restricted fare tickets have 

"made up more than 80% of all ticket sales across all fare classes."63 While such data is for 

domestic fares it is instructive for foreign air transportation. The cost is simply prohibitive for the 

majority of consumers. Offering refundable tickets at an unreasonably prohibitive price as a 

realistic option for consumers to avoid change fees is absurd on its face. 

Another common answer from airlines is that passengers should buy travel insurance. 

Unfortunately, travel insurance policies exclude most of the common reasons leading passengers 

to change or cancel and trip and often leave them uncovered. 64 The marketing of travel insurance 

all too often relies on misleading language and dense policy descriptions. 65 Due to such broad 

exclusions, confusing policies and misleading marketing, travel insurance is not a realistic option 

for the majority of passengers. 

D. Change fees in foreign air transportation should be capped 

In looking to change fees in foreign air transportation, there are several potential ways to 

create a reasonable cost cap such as limiting change fees to a percentage of the base or new fare, 

a flat cap, or a tiered fee structure based on chosen flight factors. We ultimately believe a cap of 

$1 00 for change fees, while allowing airlines to charge for the differential in fare values, would 

prove reasonable. However, when changes are made far enough in advance (long enough for 

airlines to resell the seat) the onus should be on the airlines to justify the reasonableness of 

61 !d. 

62 Nat'l Consumers League, $tuff Happens: Airlines Benefit Handsomely From the Unexpected ... and Consumers' 

Fear About It, Sep. 23, 2013, 8-9, available at http://www.nclnet.org/images/PDF/airtravel_insurance _report. pdf; 

see also Exhibit 2. 63 !d. at 7. 64 See id. at 14-20. 65 See id. at 10-17. 

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anything but the most minimal fee. For specific flight circumstances where airlines can 

demonstrate a cost greater than $100, then DOT may approve higher fees. 

IV. Competition and DOT Policy 

A. DOT's policy of relying solely on airline competition is flawed and obsolete 

In 1995, DOT reiterated its unwavering policy since deregulation that "the best way to 

achieve this goal is to rely on the marketplace and unrestricted, fair competition to determine the 

variety, quality, and price of air service."66 This was reaffirmed in 200367 and again in 201268 for 

both domestic and foreign air transportation. DOT applies this logic to change fees. 

Times have changed however, and DOT's policy of relying totally on "market forces" 

with a complete lack of regulation in foreign air transportation pricing no longer makes sense. 

Consolidation has caused the U.S. airline industry to become incredibly concentrated. Now only 

four airlines control 87 percent of domestic flights and control of international flights are 

similarly concentrated. 69 While the public once benefited from lower fares flowing from 

deregulation, the tide has turned in the other direction due to airline consolidation. The industry 

is no longer as competitive as it once was or as it should be. 

A combination of volatile fuel prices, the financial crisis, and the ensuing economic 

recession of 2007-2009 "sparked a wave of consolidation across the airline industry."70 Delta 

acquired Northwest in 2008, United and Continental merged in 2010, Southwest acquired 

AirTran in 2011, and US Airways and American Airlines won merger approval in 2014.71 

American, Delta, Southwest, and United accounted for approximately 85 percent of passenger 

traffic in the United States in 2013.72 Consolidation within the airline industry has "acted like a 

66 Statement ofthe U.S. Inti. Air-Transportation Policy, 60 Fed. Reg. 21841-21845, (May 3, 1995). 67 Petition for Rulemaking of Joel Kaufman, Docket OST 2003-14334, Order 2003-3-11, 2 (March 18, 2003), 

available at http://www.dot.gov/sites/dot.gov/files/docs/2003-3-ll.pdf. 68 Pevsner Denial, supra note 17, at 5. 69 Phil LeBeau, New American Airlines Means 'Big 4' Control US Skies, CNBC, Feb. 14, 2013, available at 

http://www.cnbc.com/id/100461115#. 

70 U.S. GOV'T ACCOUNTABILITY OFFICE, REP. NO. GA0-14-515, AIRLINE COMPETITION 5 (2014) [hereinafter GAO]. 71 See Exhibit 3 (time line of mergers for four remaining major carriers). 72 GAO, supra note 70, at 5. 

12 
rising tide" by boosting airline profits, but it has also managed to "drown consumers with fee and 

fare hikes."73 

Since 2008, airlines have greatly improved their financial positions. 74 Airlines made a 

combined $8 billion in the first three quarters of 2014 75 and have seen their stock prices 

skyrocket.76 The recent strong financial results from U.S. airlines are partially a result of pricing 

power made possible through consolidation within the industry.77 The GAO determined that the 

success of the airline industry was primarily driven by a growth in revenues corning from three 

factors: (1) an increase in passenger traffic; (2) capacity restraint (i.e., limiting the supply of 

available seats in relation to the level of demand); and (3) increased ancillary fees. 78 

Restraint in capacity has contributed significantly to airline profitability since 2007.79 

Until only recently it was "common in the U.S. airline market for any reduction in capacity to be 

quickly replaced."80 This has led to ever higher load factors as planes today fly at over 86 percent 

capacity. 81 Flights were 69 percent full on average in 2003 and 56 percent full in 1991.82 

Between 2007 and 2013, U.S. airlines eliminated about 1.2 million flights. 83 As demand has 

increased, capacity restraint has resulted in higher airfares.84 For example, domestic fares have 

increased not includingfees by about 9 percent for network airlines and 17 percent for low-cost 

airlines between 2007 and 2012. 85 Fares, not includingfees, at the U.S.'s busiest airports are 

rising at double the rate of inflation since 2011.86 Once you include the unbundling of fares and 

the increased use of ancillary fees by airlines, this increase is even higher. Many fees that were 

73 Cyrus Sanati, Delta proves that consolidation drives up ticket fares, Fortune, Oct. 23,2013, available at 

http:/ /fortune. com/20 13 I 1 0/23/ delta-proves-that-consolidation-drives-up-ticket-fares/. 74 See GAO, supra note 70, at 11-12. 75 Frank, supra note 54. 76 !d. (In June, 2009, United's stock traded at $3.17. In January 2015 it was up to $73.62). 77 See Sanati, supra note 73. 78 GAO, supra note 70, at 13. 79 !d. at 14. 

80 !d. 81 Lonnie Shekhtman, Passengers find complaints to airlines can go nowhere fast, Boston Globe, Jan. 25, 2015, 

available at http://www. bostonglobe.com/business/20 15/01 /25/complaints-grow-but-airlines-still-allowed-get -awaywith-poor-service/vuLOn2L6FPPe9b2veyXB21/story.html. 

82 Frank, supra note 54. 

83 !d. 

84 GAO, supra note 70, at 16. 

85 !d. 86 Chico Harlan, The United States is becoming a terrible place for air travel, Wash. Post, Feb. 3, 2015, available at 

http://www. washingtonpost. com/b I ogs/wonkb I og/wp/20 15/02/03 /airfare-is-falling -over-the-world-except-in-theunited-states/?tid=pm_ business __pop. 

13 
previously included in the price of airfare are now "optional" and priced independently. The 

growth in these ancillary fees has significantly supplemented airline revenues. 

87 

Consolidation has made capacity restraint a viable option for the airline industry. 88 It has 

also created opportunities for other collusive behaviors, including parallel price increases. For 

example, in April2013, United, American, Delta and US Airways all raised their domestic 

change fees to $200 within two weeks of each other. 89 

Consumers bear the brunt of the costs associated with consolidation. Airline complaints 

to DOT have risen 30 percent over the past five years.

90 In the past, consumers might have 

balked at such treatment, such as being subjected to exorbitant change fees, and chosen to fly on 

a different airline. They have no such option today. Consolidation has further resulted in leaving 

many routes and destinations directly serviced by only one carrier.91 

The situation is further exacerbated in foreign air transportation by the fact that DOT has 

exercised its statutory authority to grant certain groups of airlines within international alliances 

immunity from U.S. antitrust laws affecting international transportation. 92 This permits the 

participants to coordinate on prices, scheduling, and marketing,93 which has provided the 

impetus for a shift for network airlines as they focus more on international routes that "are more 

profitable" and "face less competition."94 In 2012, the international capacity of U.S. network 

airlines represented 42 percent of their total capacity.95 

B. DOT regulation 

DOT already has promulgated extensive regulations in similar areas.96 There are many 

other examples of successful "government intrusion" into the free market of the airline industry, 

87 See GAO, supra note 70, at 17; see also Exhibit 1. 88 See GAO, supra note 70, at 33. 89 Associated Press, Airline Mergers Have Already Increased Fares, CBS, Aug. 14, 2013, available at 

http:// dfw.cbs1ocal.com/20 13/08/ 14/air1ine-mergers-have-a1ready-increased-fares/. 90 Shekhtman, supra note 81. 91 See Sanati, supra note 73. 92 GAO, supra note 70, at 48-49. 9" "GAO, supra note 70, at 49. 94 GAO, supra note 70, at 17. 95 Id. 

96 See, e.g., 14 C.F.R. 253.7, 14 C.F.R. 259.5(b)(4), and 14 C.F.R. 399.84(a). 

14 
such as the three hour rule for tarmac delays, which penalizes airlines who kept passengers 

waiting on the tarmac for more than three hours. Airline executives complained vociferously 

about the introduction of the tarmac rule, stating it "would create chaos" and describing it as 

"stupid, unreasonable and costly."97 However, carriers quickly learned how to cope and DOT 

stated that the regulations on tarmac delays "have virtually eliminated the long waits aboard 

aircraft that passengers used to experience too frequently."98 In 2009, the last full year before the 

tarmac rule went into effect, airlines reported 868 domestic flights with tarmac delays over three 

hours and 55 international flights with tarmac delays longer than four hours. 99 2014 saw a record 

low with only 30 domestic flights with tarmac delays longer than three hours and nine 

international flights with tarmac delays longer than four hours. 100 In other words, government 

regulation addressing the problem of tarmac delays worked wonders. The exercise of DOT's 

statutory authority to regulate airline change fees would be just as effective. 

While Congress has recognized that "there are differences between international and 

domestic aviation," it has also instructed that even in the foreign sphere reliance will be placed 

"to the maximum extent possible" on competition, rather than on "detailed and burdensome 

government regulation." 101 Nevertheless, in enacting the IATCA Congress tasked DOT with 

"taking account, nevertheless, of material differences ... between interstate ... and foreign air 

transportation." 102 Congress left in place DOT's regulatory authority over prices and rules in 

foreign air transportation for a reason and clearly recognizes that not all government regulation is 

burdensome. Here, with regard to change fees which are clearly unreasonable and have reach 

exorbitant levels, the Secretary of Transportation has the power and duty to act. 

V. Conclusion 

DOT has the statutory authority to regulate fares and fees in foreign air transportation and 

is obligated to do so. While DOT has regulated extensively in analogous areas it has yet to 

promulgate rules concerning change fees in foreign air transportation. We urge DOT to rectify 

97 Tuttle, supra note 55. 

98 !d. 

99 Dept. of Transportation, Lowest Numbers of Tarmac Delays on Record in 2014, Feb. 10, 2015, available at 

http://www. dot. gov /briefing-room/lowest -numbers-tarmac-delays-record-20 14. 100 !d. 

101 H.R. Rep. No. 96-602, at 1-2 (1979). 102 International Air Transportation Competition Act of 1979, Pub. L. No. 96-192, 94 Stat. 35 (1980). 

15 
this situation and prevent unreasonably high fees by imposing caps on change fees. While the use 

of competition to mitigate high fares was the intent of Congress in passing the Airline 

Deregulation Act and has been DOT's policy since, consolidation within the industry and 

antitrust exemptions granted by DOT have thwarted this hands-off approach. Some level of 

governrnent intervention is necessary to protect consumers. Accordingly, we respectfully petition 

DOT to cap change fees at $100 on international routes absent a convincing cost justification by 

airlines. 

16 

Submitted by: 

FlyersRights.org 

218 D St SE, 2nct Floor 

Washington, DC 20003 

Fax: (240) 399-1923 

Paul Hudson 

President 

(800) 662-1859 

paul@flyersrights.org 

Richard Baxle 

Staff Attorney 

(574) 612-7381 

richard@flyersrights.org 
Exhibit 1 

Full year reservation cancellation/change fee revenue for U.S. airlines 

2007 I 2008 I 2009 I 2010 I 2011 I 2012 I 2013 I 2014* 

$915,231,000 J$1,658, 748,ooo 1 $2,373,o19,oooJ $2,297,377,0001$2,380,157,000 l$2,554,658,oool $2,814,o69,ooo 1 $2,982,948,000 

$3,500,000,000 

$3.oo:woo.ooo ~ 

$2,500,000,000 _____.- --~-~--- .. ......--

/ "' 

$2,000,000,000 / ----~-----

$1,500,000,000 

$1,000,000,000 / --- ~ 

$500,000,000 

$0 

2007 2006 2009 2010 2011 2012 2013 2014* 

Source: United States Department of Transportation, Bureau of Transportation Statistics 

•oata not yet available for quarter 4, estimated by average quarters 1 through g_ 

Exhibit 2 

50 

~ B 40 

;:ill 

0 f: 30 

0 

~ 20 

10 

0 

0

/o Differences Between Non-Restricted & 

Restricted Fares on Major U.S. Air Routes 

8 __ l)___ ___ _ 

0-249% 250-499% 500-749% 750-1000% >1000% 

Non-restrirtedfRestricted Fare Difference% 

Source: National Consumers League [2013) 

17 
Exhibit 3 

Figure 1: Selected U.S. Airline Mergers and Acquisitions, 1929-2013 

Aiflfn~ 

American 

De»a 

Southwest 

United 

• 1929 

• 1934 

1953 

Chicago and 

South em Airlines 

~ 

1982 

Capital 

Airlines 

f:') Acquisition or merger 

• Company founded 

) 

1972 

Northeast 

Airlines 

• 1971 

Sources· Calhay Financml and <Hrline company documents 

18 

1990 

Eastern 

Airlines Latin 

American routes 

1987 :3~" 1991 

Western Pan Am transAirlines atianlic routes 

and shuttle 

<l<OI(;t' 

2000 

ASAand 

Comair 

1994 ') ·- Morris 

Air 

1986=1~1991 Pan Am Pan Am Pan Am 

Pacific london Latin American 

mutes routes routes 

""41~ 

2006 

Northwest 

f:')w% 

2011 

AlrTran 

WWV?P'IWEj~ 

2010 

Continental 

••