[Federal Register Volume 62, Number 179 (Tuesday, September 16, 1997)]
[Proposed Rules]
[Pages 48584-48585]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24567]


-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Part 260

[Docket No. OST-97-2622]


Truth in Airfares

AGENCY: Office of the Secretary, DOT.

ACTION: Request for comments, petition for rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Department is inviting interested persons to comment on a 
petition for rulemaking filed by Consumers Union of U.S., Inc. (``CU'') 
on June 16, 1997. The petition asks the Department to establish a 
``Truth in Airfares'' regulation that would require commercial 
passenger carriers to disclose directly to consumers the most recently 
available average fare and lowest fare charged by the carrier for the 
route and class of service quoted to an inquiring party. CU also 
requests that the Department require the carriers to make this fare 
information available to computer reservations system vendors as well.

DATES: Comments must be submitted on or before November 17, 1997. Reply 
comments must be submitted on or before December 15, 1997.

ADDRESSES: Comments must be filed in Room PL-401, Docket OST-97-2622, 
U.S. Department of Transportation, 400 Seventh Street, SW., Washington, 
DC 20590. Late filed comments will be considered to the extent 
possible. To facilitate consideration of comments, each commenter 
should file eight copies of its comments. Comments filed prior to the 
publication of this notice will also be considered.

FOR FURTHER INFORMATION CONTACT: Jim Craun, Director of the Office of 
Aviation and International Economics, Office of the Assistant Secretary 
for Aviation and International Affairs, Office of the Secretary, U.S. 
Department of Transportation, 400 Seventh St. SW.,

[[Page 48585]]

Washington, DC 20590 at (202) 366-1032 or (202) 366-7638 (FAX).

SUPPLEMENTARY INFORMATION: In its petition, CU stated that airfares 
have dropped during the past 15 years. As measured on an inflation-
adjusted basis, average fares have decreased from 12.7 cents per mile 
in 1981 to eight cents per mile today, according to CU. CU also 
indicated that more than 550 million passengers traveled on commercial 
flights on U.S. airlines in 1996 and many of these trips were made 
possible because of the lower fares. Despite the large number of 
airline passengers and the increase in passenger travel <SUP>1</SUP> 
since airline deregulation, however, CU claims that it is almost 
impossible for passengers to determine whether they are getting a good, 
fair, or poor value, because of the way in which many airlines set 
their ticket prices.
---------------------------------------------------------------------------

    \1\To quantify CU's statement regarding the increase in 
passenger travel, the Department notes that there were approximately 
250 million domestic passengers traveling on U.S. airlines in 1978.
---------------------------------------------------------------------------

    In support of its claim, CU cited a study of more than three 
million discount airline tickets purchased on 34 of the most heavily 
traveled domestic routes in 1996. (CU published an article on the study 
in the July 1997 issue of Consumer Reports and attached a copy of the 
article as part of this petition.) Based on an analysis of the average 
restricted coach class fares on each route, CU concluded that airline 
ticket prices for a given class of service between two points can vary 
by hundreds of dollars depending upon the availability of a wide range 
of fares, with availability determined not so much by the number of 
seats actually physically available but by how many seats the airline--
in its sole discretion--chooses to supply at each price. CU also 
asserts that, at any time, sale fares that are available in limited 
quantities can suddenly appear and disappear. According to CU, these 
constant fare changes confuse customers and effectively remove price 
information that helps consumers assess the value of the 
transportation.
    CU claims that the lack of reliable ``fair market price'' or 
``going rate'' information available to the consumer at the time of 
ticket purchase establishes a barrier to effective comparison shopping 
and price-based bargaining by the ordinary consumer. This barrier gives 
an unfair advantage to a number of airlines (including the very largest 
airlines) in the buyer-seller transaction. The airlines can allegedly 
engage in opportunistic pricing practices because the consumer lacks 
the information needed to counter these practices.
    CU stated that consumers cannot rely on travel agents to solve the 
problem and cited, in support, an unsourced consumer test conducted by 
representatives of several state public interest research groups. In 
the test, fourteen phone calls were made to nine travel agents and 
airlines requesting the ``lowest'' advance-purchase round-trip fare 
from Boston to Houston on specified travel dates and at specified 
times. The requests netted ten different fare quotes ranging from $504 
to $1,323.68 with six of the ten different fare quotes coming from 
travel agents.

CU's Petition

    In order to address these issues, CU has filed a petition that asks 
the Department to adopt a regulation which would require airlines, 
their agents, and computer reservations system (CRS) vendors to 
disclose the average and lowest fares an airline charges for each class 
of service on a route to any person to whom they quote fares for a 
specific class of service on that route. The petitioner also requests 
that the Department require that airlines make this information 
available to CRSs and that the information be based on the latest 
available quarterly fare data in Databank #1 of the Department's 
Origin-Destination Survey of Airline Passenger Traffic. (Presumably, 
CU's petition applies to fares in domestic markets only since the 
Department is prohibited by regulation from publicly disclosing 
international fare data in the Origin-Destination Survey of Airline 
Passenger Traffic.) CU also asks that the Department either supply to 
each carrier the data to be disclosed or allow each carrier to 
calculate the data to be disclosed according to calculation standards 
prescribed by us and based on the information the carrier submits to 
the Department for inclusion in Databank <greek-i>1 of the Origin-
Destination Survey of Airline Passenger Traffic.
    CU states that its petition provides the substance and the elements 
of the rule it is seeking but not a proposed text for a rule. However, 
since the purpose of its request is to give consumers bargaining power 
by increasing consumer information, the petitioner considers it 
important that a final rule cover as many consumer transactions as 
practicable and that neither the scope nor the specific provisions of 
the rule be so narrow as to limit the effectiveness of the rule.
    CU stated that by knowing both the average fare and the lowest fare 
charged by route, by airline, and by class of service, consumers would 
be armed with two key benchmarks of value that are critical to making 
an informed purchase decision. These two pieces of information, used 
together, would show the relevant range of prices with the average fare 
providing a broad indication of the relative value available by airline 
and the lowest fare indicating the market-clearing price. According to 
the petitioner, easy access to this information would enhance 
comparison shopping, informed consumer negotiation, price competition 
and market efficiency.

Request for Comments

    In response to an increasing number of inquiries from consumers 
about domestic airline prices, the Department recently published the 
first edition of a report entitled Domestic Airline Fares Consumer 
Report. This report provides information about average prices being 
paid by consumers in the 1,000 largest domestic city-pair markets for 
the third quarter of 1996. In addition to the Department's commitment 
to provide fare information to consumers in this report, we have 
decided to consider further the issues raised by CU. We invite 
interested persons to comment on all aspects of the petition including, 
but not limited to, whether such a rule should be adopted and, if so, 
should the rule apply only to airlines, or to airlines as well as 
travel agents and discount travel brokers, such as consolidators.
    We will decide after reviewing those comments whether we should 
propose a rule as requested by CU. To the extent that commenters 
provide quantified estimates of the value or cost of implementing such 
a regulation, we ask that they provide specific supporting details 
regarding the methodologies used in determining these benefits and 
costs. We also encourage commenters to provide information on other 
possible alternatives for accomplishing the goals sought by CU in this 
petition.

    Issued in Washington, DC on September 8, 1997.
Charles A. Hunnicutt,
Assistant Secretary for Aviation and International Affairs.
[FR Doc. 97-24567 Filed 9-15-97; 8:45 am]
BILLING CODE 4910-62-P