CENTRA Technology, Inc.



## Record of Meeting December 2013 May 2012


# Fifth Meeting of the Advisory Committee on Aviation Consumer Protection

Prepared by CENTRA Technology, Inc. Arlington, Virginia 222031 R ECORD OF MEETING F ifth Meeting of the Advisory Committee on Aviation Consumer Protection

Meeting Date: December 16 , 2013

Scheduled Meeting Time: 9:00 a.m. to 4 :00 p.m., Eastern Time

Meeting Location: U

. S

. Department of Transportat ion, 1200 New Jersey Avenue SE. Washington, DC

Public Notice: The Office of the Secretary (OST), Department of Transportation (DOT) informed the public of the Advisory Committee meeting in a Federal Register notice published November 29

, 2013

.

Attendees:
Last Name First Name Affiliation
Ahmed Huma CENTRA Technology, Inc.

Atwood Tristan Kirstein & Young PLLC

Blackston Elizabeth Attorney General Lisa Madigan State of Illinois

Blank Riether Kathleen DOT

Breyault John National Consumers League

Brown Brenda Delta

Chapman, Jr Livaughn DOT

Cornelius Matthew Airports Council International, North America

Derco Drew M. Eckert Seamans Cherin & Mellott, LLC

Dols Jonathan DOT

Donley Charles Squire Sanders LLP

Downey Shane Global Business Travel Association

Gosain Carol Steptoe & Johnson LLP

Graber Kim berly DOT

Greenberg Sally Executive Director, National Consumers League

Gros Simon VP TravelportCENTRA Technology, Inc.

Last Name First Name Affiliation
Hainbach Don Garofalo Goerlich Hainbach PC

Hammond Karla DOT

Harvey Heather Spirit Airlines

Higginbotham Patty Global Business Travel Association

Hubbard Russell American Airlines

Hudson Paul FlyersRights. org

Jansen Bart USA TODAY

Jennings Vaughn Airlines for America

Kass Howard US Airways

Kidd Douglas National Association of Airline Passengers

Kirstein David Kirstein & Young PLLC

Kronon

- Schertz Renee Consumer Travel Alliance

Lavin Douglas International Air Transport Association

Lehman Jr. Dayton Capitol Business S olutions

Lowry Richard Spirit Airlines

Maddux Jason Garofalo Goerlich Hainbach PC.

Markert Alissa United

Mckee Laura Airline Services, Airlines for America

Nguyen Vinh DOT

Norcross Sarah CENTRA Technology, Inc.

Pinkerton Sharon Airlines for America

Peters Cheryl Customs and Border Protection, Office of Field Operations

Przybyla Amy CENTRA Technology, Inc.

Rosenfeld Dana Kelley Drye & Warren LLPCENTRA Technology, Inc.

Last Name First Name Affiliation
Shur Steve The Travel Technology Association

Simmons Kendale Lynora DOT

Strickman Norm DOT

Swafford

- Brooks Lisa DOT

Thomas John L.E.K. Consulting

Thumpston Jim Zuckert, Scoutt & Rasenberger

Weinstein Andrew Open Allies for Airfare Transparency

Workie Blane DOT

Young Joanne Kirstein & Young PLLC

Zimmerman Johnathan FTCCENTRA Technology, Inc. T ABLE OF C ONTENTS

F ifth Meeting of the Advisory Committee on Aviation Consumer Protection

Summary of Meeting Proceedings

................................ ................................ ................................ .. 1
Welcome and Introductory Remarks

................................ ................................ ........................... 1
Update on the Department’s efforts to carry out the Committee’s recommendations as outlined in the Secretary’s report to Congress of March 22, 2013

................................ ............................ 1
Posting consumer rights information at U.S. airports

................................ ................................ . 4
Delays in clearing passengers arriving on international flights through U.S. Customs and Border Protection facilities at U.S. airports

................................ ................................ ................ 7
Privacy and airline customized pricing

................................ ................................ ....................... 9
Streaming CRM for Travel

................................ ................................ ................................ ....... 13
Presentations from the public

................................ ................................ ................................ .... 13
Future recommendations to the Secretary on consumer protection measures

.......................... 16
Closing remarks

................................ ................................ ................................ ......................... 16
Committee Member Biographies

................................ ................................ ................................ .. 171 S UMMARY OF M EETING P ROCEEDINGS Fifth Meeting of the Advisory Committee on Aviation Consumer Protection

Welcome and Introductory Remarks

Lisa Madigan, Attorney General (AG), State of Illinois, Chairperson of the Committee

Chairperson Lisa Madigan called the meeting to order at 9:05 a.m. She welcomed the speakers and the attendees and outlined the agenda for the day, with a focus on evaluating and providing recommendations for improving existing programs to facilitate better travel for passengers.

Committee m ember Charles Leocha

, Director of the Consumer Travel Alliance

, emphasized the important task for the Committee of discussing traveler’s rights. He felt it was important to inform the public about their rights as travelers, and used the example of the European Union to highlight customer service practices. Mr. Leocha noted tha t until recently, if passengers lost their luggage while traveling, they had no way of knowing how much compensation they would receive, who was ultimately responsible for the recovery of the luggage (airlin e or airport), and

, subsequently

, who to contact in case of a loss. He also emphasized the growing trend of personalization in the industry and the need to regulate how the travel industry employs it for business purposes given privacy concerns. Other is sues he identified were long wait times for customs processing and the steps taken by the U

. S

. Customs and Border Protection to curtail delays while ensuring the safety of U

. S

. borders. Mr. Leocha suggested the need for a “Passenger Bill of Rights

, ” which would be a comprehensive catalogue of what travelers should expect when planning and going on a trip.

Mr. Leocha also stated for the record the C ommittee was formed on the premise that the Secretary of Transportation must respond to C ommittee recommendations and submit two annual reports to Congress during the Committee’s tenure

. He noted that t he C ommittee submitted its first set of recommendations to the Secretary in Oct ober 2012, which the Secretary presented to Congress in March 2 013. He further noted that at t he next C ommittee meeting held in May 2013

, the E nforcement O ffice reported on actions taken toward implementation of the initial recommendations and will update C ommittee members on the progress made since May at today’s meeting

.
Committee m ember s Deborah Ale Flint

, Director of Aviation, Port of Oakland

, and David Berg, S enior Vice President, General Counsel

, and Corporate Secretary for Airlines for America

, , added that they looked forward to the day’s proceedings and the Committee’s work in the upcoming year

.
Update on the Department’s efforts to carry out the C ommittee’s recommendations as outlined in the Secretary’s report to Congress of March 22, 2013

Jon athan Dols, Deputy Assistant General Counsel for the Office of Aviation Enforcement and Proceedings (C

- 70)2

Mr. Jonathan Dols began by restating that the mission of t he Advisory Committee on Aviation Consumer Protection is to make recommendations to the Secretary of Transportation for improving aviation consumer protection programs

.

Mr. Dols outlined the DOT’s actions in response to the Committee’s 2012 recommendations. The Committee’s recommendations addressed a variety of subjec ts including: Travelers with Disabilities, Other Forms of Prohibited Discrimination, Understanding Contract Terms, Consumer Air Travel Complaints, Enhanced Information about Passenger Rights, Pricing Transparency, Ticket Agent Disclosures, and On

- time Perf ormance Reporting for all Carriers.

Travelers with Disabilities

To improve the travel experience of travelers with disabilities, t he Committee recommended that DO T encourage airlines and airports to take voluntary steps towards this goal, including

encoura ging airlines and airport personnel to work with TSA in assisting travelers who are unable to sit during lengthy layovers without their customized wheelchairs. In June 2013, the Secretary sent a letter to associations for airports and for U

. S

. and foreign air carriers addressing the obligation to provide nondiscriminatory service and ensure timely return of customized wheelchairs during lengthy airport connections.

The Committee also recommended that the Department work with airlines and airports to make

t heir kiosks an d web sites accessible to disabled persons. In November 2013, DOT issued final rules establishing kiosk and website accessibi lity requirements (78 Fed. Reg. 67882 ( November 12, 2013) ).

Lastly, the Committee recommended that the Department require airports and airlines to ensure appropriate access to service animal relief areas at airports

. N ew requirements governing service animal relief areas at airports were proposed u nder a Notice of Proposed Rulemaking (NPRM) (7 6 Fed. Reg. 6 0426 (Septe mber 29, 2011) ) and the public comment period has closed

.

Other Forms of Prohibited Discrimination

To prevent discrimination based on race, religion, national origin, and gender, the Committee recommended that the Department remind airlines of their legal obligation s and encourage them

to stress the avoidance of such discrimination in their initial and recurrent employee training. In June 2013, the Secretary sent a letter to carrier associations referring to federal statutes that prohibit such discriminati on and stressed the benefits of training.

Understanding Contract Terms

To provide better understanding of terms used in contracts of carriage and customer service plans, the Committee recommended that DOT survey how airlines define certain terms and plac e this information on DOT’s web site. After receiving the Secretary’s letter in June 2013, A4A is working in conjunction with the DOT to develop a glossary of commonly used terms that will be posted on the DOT website once the project is completed.

Consumer Air Travel Complaints3

To address concerns regarding consumer complaints, the Committee recommended that DOT provide complainants with contact information for the analyst handling the complaint, and indicate that this person can be contacted concerning the status of the complaint. Communications a cknowledg ing letters and emails from complainants have been revised to include a c ase number automatically inserted as well as a central email address and phone number and a commitment to reply within one business day, in most cases, by an analyst working on the case.

Additionally, the Committee recommended that DOT explain the complaint handling process to complainants by advising them : 1) whether their complaints are potential violation s , 2) that their complaints will be sent to the carrier s, which will have 30/60 days (depending on the type of complaint) to reply to the consumer, and 3) they should contact DOT if they do not receive a reply within that time frame

. Acknowledgment letters/emails from the Enforcement Office now state that if the subject of the complaint is covered by a DOT rule, the complaint will be sent to the carrier to respond to the consumer within the 30/60

- day legal time frame

. Enhanced Information about Passenger Rights

To enhance information about air travel consumer rights, the Committee recommended that DOT place its guidance on consumer rights and related FAQs in a prominent location on its website. New FAQs have been added on the Aviation Consumer office page ( www.dot.gov/airconsumer ) and new links to that page are available from the home page and “Aviation” page on the DOT public website at www.dot.gov

. Pricing Transparency

The Committee recommended that DOT take steps to ensure transparency in air carrier pricing, including ancillary fees. Consum er Rule II requires airline web sites to disclose fees for optional services and the Department will address the issue of displaying ancillary fees through all sales channels, including Global Distribution Systems (GDS) through its third rulemaking on enhancing airline passenger protections, Consumer Rule III , which is pending)

. Ticket Agent Disclosures

To encourage ticket agent disclosures, the Committee recommended that DOT require all ticket agents, including Online Travel Agencies (OTAs), to disclose if they do not sell tickets for all airlines and, if so, that additional airlines may serve the route being searched. T he Department’s third rulemaking on enhancing airline passenger protections will address the issue of whether ticket agents, including OTAs, should be required to disclose whether they do not sell tickets for all airlines. DOT released an enforcement guidance addressing how , starting August 19, 2013, OTAs should disclose in search results those carriers it does not market, and thus does not consider in its search process, which could have flights meeting the specific parameters entered by the user.

On

- time Performance Reporting for all Carriers

To promote on

- time performance reporting for all airlines, the Committee recommended that DOT require on

- time performance data to be reported by all airlines, not simply those that account for one percent of domestic scheduled passenger revenue, as is curr ently the case. The4

Department’s third rulemaking on enhancing airline passenger protections will also address the issue of expanding the reporting

- carrier pool to include smaller carriers.

Posting consumer rights information at U

. S

. airports

Pedro Garcia

- Graci a, DG MOVE, European Commission

Mr. Garcia

- G ra cia outlined the efforts of the European Commission’s Directorate

- General for Mobility and Transport (DG MOVE) to ensure that passengers benefit from the same basic standards of treatment wherever they tr avel in the European Union. The E uropean U nion is legislating to protect passenger rights on the different modes of public transport.

The European Commission’s Directorate

- General for Mobility and Transport works in concert with the European Union Member States, European industry, citizens and stakeholders. The European Commission works on behalf of the EU’s common interest, the European Parliament on behalf of the EU citizen’s interest

, and the Council of Ministers on behalf of the individual state’s inte rest. DG Move is in charge of developing transport policies for the European Union. Its remit is to ensure mobility in a single European transport area, integrating citizens' needs, environmental policy, and competitiveness.

The E uropean U nion is the firs t and only integ rated area with passenger right rules covering all modes of transport. The first legislation in 1991 on the issue covered air travel , followed by rail travel in 2009, travel by s hip in 2012, and bus and coach travel in 2013. Passengers in the
E uropean U nion enjoy a minimum set of rights: non

- discrimination, information , assistance

, and compensation. There is a clear demand for knowledge of passenger rights : in 2010 each European travelled 12,869 km and Europeans made more than 1 billion trips. However, 66 percent of EU citizens are not aware of their contractual rights when purchasing a transport ticket.

Beginning in June 2013

, a two

- year campaign commenced in which e ye

- catching posters are posted in airports, ports, and bus and train stations across Europe, and leaflets and online information are available in all EU languages. The first passenger rights campaign poster was displayed in 2009. The poster provided information about passenger rights and where to complain in the case of denied boarding, long delays, and cancellation. The first organized campaign on passenger rights took place from 2010

- 2012 and focused on a ir and r ail. Information was displayed through website s , posters, leaflets, vi deos, and a passenger rights ambassador. Graphics in visual posters depicted humorous scenes for travel issues including lost luggage or a canceled flight. There was also an informative poster for passengers with reduced mobility. The n ew campaign build s on the existing one, and will focus particularly on raising awareness of the new maritime passenger rights, and bus and coach passenger rights. The aim is to have 20

, 000 posters displayed in transport hubs until 2015 and 1 million leaflets to be distrib uted until 2015.

Committee Chairperson Madigan opened the question and answer period by asking about the location of posters displayed in the airports

. Mr. Garcia noted that the location is dependent on5

the terminal but in the past 20 years poster display s ha ve moved to more central areas. Th e EU campaign is a voluntary system in which airports decide where posters will be placed.

When asked about the airlines’ reception of this campaign, Mr. Garcia stressed the importance of the campaign ’ s holistic approach to sharing information of passenger’s rights

— including posters, leaflets, smart phone applications, and websites.

Charlie Leocha, ACACP Member

– Update on discussions with the E uropean U nion and with airport managers

.
Mr. Leocha discussed space f or public service posters at Dulles International Airport

. W ith the help of a n airport customer service representative

, Mr. Leocha identified potential locations for consumer rights information

, includ ing monitors mounted over the baggage carousel

. He no ted that one carousel monitor was owned by the airport , which could volunteer to display public service announcements. There are similar monitors owned by the airport throughout the facility. He observed another prospective location for consumer rights information was the space behind the baggage carousel used for advertisements

. Airport a nnouncement monitors in the gate area, next to bathrooms, and in passenger service areas could also include information on co nsumer rights. He noted that the passenger rights poster displays he saw at the Madrid airport in the

summer of 2013 are strategically placed throughout the facility. Lost l uggage information posters are located in the baggage claim area and prominently displayed in the gate area and near bathrooms. Mr. Leocha underscored the importance of making posters displaying passenger rights information more effective by involving airlines and airports in to the po ster design

process

.

Laura McKee, Vice President, Airline Services, Airlines for America

Ms. McKee stated that a recommendation to post consumer rights information at airports is not
necessary. U

. S

. a i rlines are required to report performance and complaint data to DO T monthly in order to provide customers with quality information. The data in 2012 indicate better service within the past five years

— wi th the highest percentage of scheduled domestic departures and the highest on

- time arrival rates. Statistics released in October 2013 sh ow the industry’s ba g

handling performance continues to improve, and is the best showing for cust omer complaints in four years. These facts indicate there is no need for a poster explaining consumer rights.

She further noted that c onsumer rights inform ati on is readily available on U

. S

. a irline websites

, includ ing links to key service elements affecting custo mers including contingency plan s and customer complain t information. Websites also contain a customer service commitment to acknowledge and respond to complaints within a certain time period

. Additionally, the DO T website has a function for entering airline s ervice c omplaints and c omments, as well as information on regulations, travel tips, and assistance in filing a complaint. The reality is that U

. S

. airlines and DOT are already making available a great deal of consumer rights information

.

She observed that since airports a re already complex environments wit h a lot of signage to direct

passengers in navigating the airport, additional signage describi ng passenger rights will likely cause bottlenecks. The European Commission’s consumer rights poster is difficult to read

, does6

not include valuable new information, and often refers consumers to government agencies. If a problem occurs, customer s are mos t likely to seek out a n airline or airport customer service representative or utilize user

- friendly technology. Ms. McKee closed by saying that c arriers are motivated to provide excellent customer service and that over the next three years, $ 32 billion wi ll be invested in the customer experience.

During the question and answer session, Mr. Leocha asked for clarification of the 2012 customer complaints statistics , which were higher than those for prior years

. Ms. McKee explained that the abnormally high number of complaints in 2012 was an anomaly due to the merging of the U nited and C ontinental airlines systems , which resulted in an uptick in consumer complaints. She asserted that t he complaint rate for this year is back down under th e 2008 rate.

Mr. Leocha disagreed with M s . Mc K ee about the proper metrics for measuring the rate of mishandl ed bags , suggesting that the rate for mishandl ed bags has decreased since 2008 due to fees that have influenc ed passengers to check fewer bags. M s. McKee and David Berg

, Senior Vice President, General Counsel and Corporate Secretary for Airlines for America (A4A)

, reiterated that the metrics used properly account ed for this change in the rate for mishandled baggage

.

Matt Cornelius, Senior Director of Air Policy , Airports Council International (ACI)

– N orth A merica

Mr. Cornelius agreed with the view that there is no need to post consumer rights information at airports as the data show that airlines ’ customer relations continue to improve an d are one of their top priorit ies

. Airports would likely have concerns about the implementation of a program to display passenger rights information at airport s , as it could be detrimental to airport revenue
stream s

. Under federal law, airports are respo nsible for the revenue needed for operations, and revenue generated from marketing is significant. The public service advertising space is most often reserved for the least traveled areas. Without th e revenue stream from advertising , airports would need to increase price s in other areas

.
The physical environment of the airport is also very important. It affects consumer satisfaction and overall experience. Stud ies find that the way

- finding method

— providing travelers with situational awareness by offering directions

— is significant to customer satisfaction. Information clutter from consumer rights posters would compromise wa y

- finding, caus ing bottlenecks and confusing passengers

.
European airports are very different from their U

. S

. counterparts. In Europe

, airports provide many of the same services that airlines provide in the United States.

Mr. Leocha noted that U

. S

. airports are funded by the public through the passenger service fees. He stated it is unf

ortunate that in th e U

. S

. system
, airlines do not view passengers a s customers but rather view airlines as customers. Mr. Cornelius made a counterpoint that

, despite the fact that airports are local ly owned an d operated by public entities, passengers are not their only responsibility. Airports have responsibility for employees, advertising, cargo providers, and

passengers. Each facilit y needs to be financial ly self

- sufficient.7

Ms. Ale Flint noted that airport direct or s are very focused on consumers. The issue is not whether the airlines or airport s understand the role of the consumer but rather the effectiveness of supplying services. The concern is that the posters are not the most effective method for informing consumer s and t he panel should thin k about a variety of approaches to convey passenger rights information to consumers

. Mr. Leocha noted that, whether through posters or another medium, it is important to post the information for travelers. Mr. Berg agreed with earlier comments that poste rs are a step backwards in a technological environment of websites and smart phone applications.

Delays in clearing passengers arriving on international flights through U

. S

. Customs and Bo rder Protection facilities at U

. S

. airports

Matthew Cornelius, Managing Director, Air Policy, Airports Council International (AC I )

– N orth A merica

Mr. Cornelius discussed the issues regarding processing passengers into the U nited States

, particularly the persistent and excessive wait times at key international gateway s.
In 2012, the President of the United States wanted to implement new rules and processes to increa se tourism and travel in the United States

. After a presidential order to look into the persistent delays at airports for passengers, the first step for A CI was to identify the problem and bring transparency to the proceedings. In collaboration with Customs and Border Protection (CBP), ACI collected actual and average data for wait times at airports across the country; CBP now has this data on its website. The ACI

- CBP coalition has also been supporting the implementation of Automated Passport Control (APC) kiosks, which help save time for travelers by replicating administrative tasks and allowing CBP officers to do more behavior interviews. After pilot programs implementing the APC kiosks in Vancouver and Chicago have demonstrated the effectiveness of the technology , it is anticipated that ACI and CBP will help more airports implement these kiosks.

The ACI

- CBP alliance has established a set of goals as follows:

Short

- term goals:

 Improve transparency of wait

- time data.

 Place automated kiosks inside prima ry inspection spots to r eplicate many tasks of the officers, allowing them to focus on security and admissibility tasks.

 Treat administrative tasks diff erently, use non

- law enforcement employees or staff during off

- peak hours.

 Preclearance projects such as the pilot program in Abu Dhabi are still under development, so it is not feasible to expand preclearance programs

, as airports cannot send CBP staff o verseas

w hen they are still needed here.

 Expand Global E ntry for U

. S

. citizens. So far over one million travelers have registered for Global E ntry.8

 Increase flexibility and operational agility

.

Medium

- term goals:

 Expand non

- citizen participation in Global E ntry by increasing eligibility so that there are less people sta nding in line waiting to be processed for entry.

 Transparent allocation of resources

.

 Appropriate level of funding from Congress

. Long

- term goals:

 Cost

- based user fee study

– t he aviation sector contributes a lot of funds to the CBP program and wants to ensure that resources are allocated appropriately.

 Multiple options for primary inspection, for example speeding the process for those who do not check bags.

 Increase percentage of trusted travelers

.

 Future facility design reflecting new processes

. During the question and answer session Mr. Leocha highlighted the continuing delays in processing times that many travelers still experience, with an average wait time of tw o to three hours.

An event participant

, Mr. Douglas Kidd , National Association for Airline Passengers shared his recent travel experience to Tokyo to illustrate the difference in customer service provided at airports in the United States and other countri es. He found the Tokyo customs section fully staffed, with officers ready and equipped to handle large flights arriving at the airport. In contrast, he found the Dulles airport to be inadequately staffed, with officers not ready or interested in pr eparing for passenger arrivals.

Cheryl Peters, Customs and Border Protection, Office of Field Operation

Ms. Peters led a presentation on the necessity for better communication between CBP and airport staff, particularly regarding delayed flights and airport rules. Given the limited resources, the more information staff has the sooner they can act.

The followi ng topics were addressed during the question and answer session:

 The Committee understands the need for strong security and at the same time has concerns about the long processing times for clearing customs. Addressing those concerns, Ms. Peters discussed several options, including the installation of APC kiosks in staging areas to facilitate processing. The advanced computer system will enable passengers to go through administrative processing more quick ly and have more face to face time with the customs9

officer. This would also allow officials to focus on security screening rather than handling paperwork. Initial pilots have been successful and have shown great promise for future expansion. Ms. Peters also noted that CBP is facing challenges with staffin g, including high attrition rates and reduced funding for salaries. These setbacks have forced CBP to find different ways to balance existing resources. One way has been partnering with the TSA to increase operational support and handle custo ms screenings more efficiently.

 Ms. Peters stated that t he G l obal E ntry program has been a successful in reducing wait times for passengers. For an application fee of $100, travelers can apply for the program online and

, after being approved, have the oppor tunity to skip waiting lines and check in at self

serve kiosks. The G lobal E ntry application can be processed hypothetically in eight to ten business days in terms of finding out eligibility; being able to use the program is a matter of time, depending on interview times and proximity to enrollment centers. The program has expanded to 44 locations and has been fully operational for six months

.

 Mr. Leocha asked for further details on those who had spearheaded the initiatives to install the kiosks. Ms. Peters explained that t he APC kiosks were originally piloted in Canada. In looking for ways to expedite and streamline customs processing, CBP has invested resources in APC kiosk programming and software but not yet in hardware.

Privacy and airline customized pricing

John Thomas, Managing Director and Partner, L.E.K. Consul ting

Mr. Thomas discussed L.E.K.’s work as a strategy advisor to the world’s airlines. L.E.K. has a strong in

- house research department that provides comprehensive surveys, rigorous analyses, and thus provides clear understanding of U

. S

. travelers. Over the last five years, L.E.K. has surveyed

over 40,000 U

. S

. travelers in the United States using rigorous statistical techniques. This study inclu des : 1) a survey of over 25,000 U

. S

. travelers to assess demand for add

- on products and services; 2) a s ur vey of approximately 16,000 U

. S

. travelers to determine attitudes towards pricing, customer service, and other areas; as w ell as 3) a 90

- question survey of over 2,000 U

. S

. travelers on behaviors, decision

- making, loyalty programs

, and promotions. Mr. Thomas

, not ing that L.E.K. p erformed cluster analyses to understand how customers are segmented and what attributes apply to each customer segment

, reported the following findings:

 T oday’s customer set is more diversified and distinct than when the networ k carriers’ operational model was established forty years ago. Forty y ears ago , there w ere mainly two customer segments

—

business travelers and high

- income leisure travelers

.

 Customer s egments today include road warriors, occasional business, high

- income leisure, package vacationer, retire e s, and young singles

. This set of consumer demands and requirements varied across segments when it comes to air travel. For example

, road warriors demanded high frequency schedules, minimal time at airport, whereas ret ire e s want ed easy access through out the airport.

 By providing consumers with more choice s over the past five years, the U

. S

. airline industry has moved from being operational

- centric to customer

- centric. The vast majority of travelers10

react positively to both enhancement opportunities and to opting out of certain components of their ticket.

 Pricing and personalization are totally distinct

— both in how the airlines manage them as well as how they present them to customers

— pricing is supply driven, persona lization is demand driven.

 Although it seems to be the age of big data, the theory is well ahead of practice. Pricing is supply driven and run by the management revenue department. Personalization is demand driven through the end user.

 The airline industry is late in providing people with choices. Many of the personalization tools being introduced by airlines are long established and well accepted by consumers in other industries. Consumers have come to expect personalization.

 Researc h has shown that customers are willing to share personal info rmation with their providers if it results in a better service or offering; 73 percent pr efer to do business with brands and companies that use information about them to make their experience mor e efficient.

 The United Kingdom’s Office of Fair Trading (OFT) has found that the current use of “personalized pricing” has been a net benefit for customers, focusing on providing discounts rather than selectively raising prices.

Mr. Thom as noted that regarding websites for purchasing tickets

, the majority of consumers will find the cheapest air fare and will then be more open to buy ing additional services and offerings.

Mr. Leocha asked if U.S. travelers prefer to compare prices across airlines to get the best fare. Mr. Thompson responded that a new global survey indicate s that the number of consumers who shop for airfares across airlines i s declining and that m any consumers now have a preferred airline that they trust

.

Mr. Leocha asked if passengers are surprised at the personal information that is collected without their knowledge. Mr. Thomas noted that this specific question has not been studied; however he has observed that many people, specifically young singles, are willing to share information. For example, through Facebook, users are willing to share information if a coupon or trip is offered

. Dana Rosenfeld, Kelley Drye & Warren LLP

Ms. Rosenfeld discussed customized offers, providing an overview of the federal consumer protection framework, the Federal Trade Commission ( FTC ) approach to pricing and consumer protection, and customized offers that can provide a pro

- consumer approach. She made the following observations:

 The Federal Consumer prot ection framework includes t he DO T’s Regulations on Advertising and P ricing that express ly prohibit unfair and deceptive practices of ticket agents and place certain restrictions on price advertisements. Similarly, S ection 5 of the Federal Trade Commission Act prohibits unfair or deceptive acts of practice. However, the FTC Act

express ly exempt s commercial air carriers.11

 The legal standards for unfairness and deception are independent of each other. According to the FTC's deception standard, an act or practice is deceptive if the representation, omission, or practice is

 likely to mislead consumers acting reasonably under the circumstances ; and

 "material"

- that is, important to a consumer's decision to buy or use the product.

 According to the FTC’s Unfairness Standard, an act or practice is unfair if the act or practice is one which :

 causes substantial injury to consumers ;

 consumers cannot reasonably avoid ; and

 is n ot offset by benefits to consumers or competition.

 There is nothing inherently deceptive about offering, marketing, and packaging customized products and services. The issue is that within a particular offer

, any element of deception or unfairness could make the offer itself illegal.

 The FTC is one of the only agencies having both consumer protect ion and competition or antitrust authority. The FTC generally favors procompetitive efforts in a free and competitive open market. If conducted in a fair, transparent, and truthful manner, customized offers can be provided in a manner consistent with tenets of consumer protection and increase benefits to consumers. Furthermore, this type of environment fosters new technologies and innovations.
Ms. Rosenfeld provided three market examples

— energy industry, taxicab deregulation, and loyalty membership programs

— to illustrate the exchange of consumer information to provide more relevant and targeted content or discounts as a common practice consistent with consumer protection values and consumer choice. For example the energy industries focus on dynamic pricing benefits customers through lower costs, increased innovation, and expanded variety of services. Dynamic pricing programs provide customers with the option to manage their electricity costs by shifting their electricity use to times when demand for electri city is lower. Shifting electricity use times when demand for electricity is lower results in lower priced hours and lower bills. The results are pricing for any end use is more efficient and pro

- consumer than uniform flat

- rate pricing. It is therefore recommended that regulators take steps to ensure that dynamic pricing prevails in electricity markets.

Ms. Rosenfeld noted that t he deregulation of the taxi industry is another example in which the FTC has noted that

, with open entry and unregulated fares, radio

- dispatched taxicab services would have an incentive to offer various fare and quality combinations responsive to different groups of customers. She also noted the introduction of Uber as a new entry to the mar ket.

Finally, Ms. Rosenfeld commented that c onsumers make purchase decisions based on Loyalty and Membership Programs that allow them to provide certain information about themselves, including product purchase information, in exchange for reduced prices on certain products and service s

. Airlines have not utilized this program. Despite Upromise’s failure to provide12

appropriate data safeguards in the collection of consumer information, these types of offers are generally pro

- consumer when managed in accorda nce with legal principles.

Ms. Madigan observed that this issue would be evaluated from an enforcement perspective on a

case

- by

- case ba sis

. Blane Workie , Principal Deputy Assistant General Counsel for the Office of Aviation Enforcement and Proceedings, noted the similarities between Section 5 of the Federal Trade Commission Act (FTC Act) (15 U

. S

. C .§ 45) that prohibits unfair methods of competition and the statute prohibiting unfair or deceptive practice s and unfair method s of competition in air transport ation (49 U.S.C. § 41712 ) . She indicat ed that a carrier practice of systematically gather ing non

- public personal information about consumers not provided by passengers m ight be investigated as an unfair and deceptive trade practice

. Andrew Weinstein, Director, Open Allies for Airfare Transparency

Open Allies for Airfare Transparency is a coalition of nearly 400 independent distributors and sellers of air travel, corporate travel departments, travel trade associations

, and consumer organizations that be lieve air travelers should be able to see

, compare , and buy based on the total price of their airfare. That is, that all airline fares and fees should be transparent to, and purchasable by, the traveling public, enabling consumers to comparison shop for t heir fares on an “all

- in” (fares+taxes+fees) basis, “apples

- to

- apples” across airlines.

Director Andrew Weinstein talked about the principles for the future of air travel distribution that Open Allies hoped to achieve: Transparency, Choice, Competition, In novation, and Privacy.

The Privacy principle states that “ travelers should be able to shop anonymously in a setting in which all applicable privacy laws and regulation s are respected. Customization should be at the request of the traveler, not at the dem and of the supplier, and travel suppliers should allow travelers to decide which additional services they would like to receive, if any, whether traveling on business or for leisure with their family.”

Mr. Weinstein also differentiated between the concept of personalization in which the supplier presents a profile of the buyer based on shopping habits (“you tell me what you think I want”) and the idea of customization where the buyer provides a set of preferences (“I tell you what I actually want”).

Open Al lies proposed a consumer

- focused framework for suppliers to provide improved personalized services with the following provisions:

 Transparency

– ancillaries should be fully disclosed and transparent through all channels

.

 Consumer

- driven

– Customization should respond to travelers’ requests, not airline predictions

.

 Anonymity

– Consumers should get broad range of customizable offers without providing personal information and have privacy rights protected

.13

 Competition

– Consumers should be able to compare equivalent fares and ancillary fees across airlines on multiple websites, not limited to apples

- to

- horses comparisons on different airline sites.

Streaming CRM for Travel

Charlie Leocha, ACACP member

Mr. Charlie Leocha presented a short video on Customer Relationship Management (CRM) used by travel companies to leverage and merge online customer data. Travel companies use Streaming CRM to create individual consumer profiles and customize digital advertising in real time. Offers are created for specific users and individuals powered by existing data in loyalty programs, email databases, passenger name records (PNRs), and passenger and revenue management databases. Streaming CRM enables websites to target individuals across al l platforms with tailor

- made advertisements

. The video described how travel marketers assess customer activity and travel preferences against their revenue management information to generate an offer that is specific to each user in an effort to boost t heir booking curve. From a business perspective, this will result in companies offering dynamic fares and pricing advantages

, while boosting incremental revenue, decreasing distribution costs, and increasing customer lifetime value.

Mr. Leocha was critica l of the Streaming CRM model used by companies due to a lack of transparency and accountability regarding how user information is accessed

.
Presentations from the public

Passenger bill of rights

– Paul Hudson, FlyersRights.ORG

Mr. Hudson noted that it has been 35 years since the airline industry was deregulated as to fares, schedules

, and service. He stated the U

. S

. Government needs to review the law s and correct the inefficiencies that have crept into the nation’s public air t ransportation system.

A historic review of customer service indicates that before 1980 air travel got faster, cheaper, safer, and more reliable. However, since 1980 air travel became slower, less reliable, still safer, seat space has shrunk and services have declined. Specifically

, airfares declined about 50 percent from 1980 to 2009, but have increased rapidly since 2010

, especially when fees and taxes are included. Customer service by definition has declined.

Mr. Hudson requested that the DO T recogniz e an Airline Passenger Bill of Rights.

 The right to a ticket we can understand and rely on, with no hidden fees, at a fair price.

 The right to be treated well when our flight is canceled or delayed, with reasonable access to available flights on other airlines and advance notice, a refund and compensation when it's the airline's fault.14

 The right to airline honesty when it comes to the status of our flights and the reasons for delays and cancellations.

 The right to a safe aircraft and a well

- trained, w ell

- rested crew.

 The right to get off the tarmac within three hours at the most.

 The right to have our luggage arrive when we do

- or to compensation if it does not

.

 The right to be treated like human beings onboard aircraft, with food and drink and sea ts and legroom that are safe and comfortable.

 The right to retain basic constitutional rights of privacy, free speech, travel, due process of law, freedom from unreasonable search and seizure when we enter an airport or board an aircraft.

The Airline Pas senger Bill of Rights is s upported by a 33 Point Plan

— 30 Proposals and 3 priorities. The full text is available on flyersrights.org . According to Mr. Hudson, the provisions

mos t desired by passengers include:

 “Airfare” means the price including all taxes and fees for air transportation and ticket and boarding pass issuance from a n originating airport to a final destination airport and includes a seat (at least 18 inches in width with leg room and other specifications and aisle width certified for com fort, safety and health by the FAA), one carry on piece of baggage that will fit in an overhead container not exceeding 40 pounds and one personal item that will fit under a seat, plus one piece of checked baggage under 50 pounds, water, adequate food nutr ition on flights lasting over 2 hours, plus toilet and hand washing facilities.

 Fees not included in the airfare must be conspicuously disclosed in advance of ticket purchase and shall be published and delivered in conventional machine readable form to al l third party ticket sellers the same as airfares.

 Fees not included in airfare shall not be exorbitant, defined as in excess of 200 percent over the cost to the airline of the service or benefit or feature.

 The FAA shall issue minimum standards and specifications for seat width, padding, reclining, size, pitch, leg room, aisle width for passenger comfort, safety and health within 180 days of enactment, in consultation with an advisory committee to be composed of representatives from airline passenger advocacy organizations, Occupational Health and Safety Administration (OSHA), and the Center for Disease Control (CDC), and including at one physician, ergonomic engineer, senior citizen, disabled air traveler, overweight person, disabled person, and at l east six American air travelers representing a cross section of air travelers by age, height, weight, and gender. Until such standards are adopted, there shall be a moratorium on reductions in seat size, width, padding, pitch, and aisle width.15

M r. Hudson also noted a final priority of needing a practical means of recourse for consumers

. He commented on the c urrent legal situation in which

, u nlike consumer claims in other fields, no arbitration is provided for, and airlines have the right to remove any lawsuit filed in local or state courts to U

. S

. District Court where litigation expenses far exceed any recovery

. During the question and answer period

, Blane Workie noted that the Enforcement Office

processes consumer complaints

— including complaints alleging unfair and deceptive practices

.
Change fees and trip cancellation insurance

Sally Greenberg and John Breyault, National Consumers League (NCL)

Ms. Greenberg noted the issues surrounding legacy airlines that are increasing airline ticket expenses in lockstep.

Mr. Brey a ult presented finding s from the National Consumer League’s Report reviewing their findings on airline fees and travel insurance

. The consumer organization was prompted to investigate these issue s due to rising consum er outrage associated with cancellation fees and denial of refund s when life intervenes, as well as anecdotal account s of travel insurance policies failing to live up to consumer expectations.

He noted that u ncertainties can become costly for consumers, a s cancellation and change fees have become a growing revenue source for the airline industry. In 2013

, cancellation and change fees on legacy U

. S

. airlines increased to $200 per ticket for domestic flights. In 2012, more than $2.5 billion was collected i n fees. I n May 2013, USA Today noted that according to the government the airlines took in $159.5 billion in revenue in the previous year and had expenses of $153.6 billion. That 3.7 percent profit margin comes entirely from the baggage and change fees.

He further noted that r efundable ticket sales have never been a popular alternative for most

consumers. Refundable tickets have never made up more than 20 percent of the market because the average price difference is 350 percent between cheapest nonrefund able and refundable.

Mr. Breyault reported that r ising cancellation fees and un af fordable refundable tickets result in a rising consumer desire to manage travel risk. With rising cancellation fees consumers may feel compelled to buy travel insurance. Dat a from the U

. S

. Travel Insurance Association indicate that in 2012, 148 million American purchased some form of travel insurance

— trip cancellation or interruption polic i es accounted for more than 90 percent of travel insurance premiums.

The a ggressive mar keting language of travel insurance gives consumers a false sense of security. NCL reviewed dozen of travel agencies

— including Orbitz and E xpedia

— that included border line deceptive language. Phrases used included “stress free travel insurance, ” “ stress

- free flight protection, ” “ peace of mind is only a click away

, ” and “ peace of mind doesn’t have to cost a lot

. ” He noted that such language is concerning because most consumers will not click through all the detailed information to find that polic i e s have significant exemptions.16

Mr. Breyault presented NCL ’ s reform proposals, which include :

 Congressional oversight hearings

.

 Marketing t ravel insurance in clear, non

- misleading language

.

 Publicly reporting of t ravel insurance loss ratios

.

 Tiered c ancel lation/change fees based on proximity of the travel date

.

 Fee

- free t icket transfers

.

 Eliminat ion of standby fees

. Mr. Leocha began the question and answer period with a comment regarding the legacy airlines ’ simultaneous fee increase s and whether consumers are totally at the mercy of the airlines. Ms. Workie responded by explaining that the airlines cannot deceptively state that a fee is for recouping the cost of the change or cancellation when it is not. Reasons given for airline fe es need to be accurate. Airlines are , however

, allowed to charge any amount they choose

. It is up to the consumer to indicate their preferences by continui ng or stopping the purchase of an airline’s product or service. DO T does not have the authority to regulate the actual price of products and services

. Mr. Breyault further noted that NCL’s paper discusses complaints that suggest a high degree of consumer confusion and anger regarding the limitations of travel insurance.

Future recommendations to the Secretary on consumer protection measures

Lisa Madigan, ACACP Chairperson

The C ommittee debated over recommendations to the Secretary concerning privacy, border protection, and a consumer awareness campaign.

Closing remarks

Lisa Madigan, ACACP Chairperson

Chairperson Madigan thanked everyone for attending and adjourned the meeting at approximately 4:10 PM.17

C OMMITTEE M EMBER B IOGRAPHIES

The Honorable Lisa Madigan Ms. Madigan is Attorney General (AG) of Illinois and officially chairs the Advisory Committee on Aviation Consumer Protection. AG Madigan serves as a representative of state and local governments with the Committee. She was elected the first woman Attorney General of Illinois in 2002 and won a third term in 2010. As Attorney Gene ral, her priorities have included protecting consumers from financial fraud and unsafe products, as well as protecting seniors in nursing homes.

Deborah Ale Flint Ms. Ale Flint serves as a representative of airport operators with the Advisory Committee on Aviation Consumer Protection. She was appointed Oakland International Airport’s Director of Aviation in 2010. Ms. Ale Flint is the primary executive responsible for the operation, management, and development of the airport. She previously served as manage r of the airport’s airside operations where her responsibilities included noise abatement and environmental compliance.

David A. Berg Mr. Berg serves as a representative of air carriers with the Advisory Committee on Aviation Consumer Protection. He was n amed Senior Vice President, General Counsel and Corporate Secretary for Airlines for America (A4A) in 2011. At A4A, Mr. Berg is responsible for the association’s legal affairs and has been involved in a variety of aviation issues, including passengers with disabilities and airport landing fees.

Charles Leocha Mr. Leocha serves as a representative of aviation consumers with the Advisory Committee on Aviation Consumer Protection. He is Director of the Consumer Travel Alliance (CTA) which he formed in 2009, f

ollowing a career in journalism where he specialized in reporting on travelers’ rights. Since beginning CTA, his advocacy for travelers has included meeting government officials, testifying before Congress and developing travel information and resources.