### $tuff Happens: An Overview of NCL’s Findings on



### Airline Fees and Travel Insurance

Presenter: John Breyault , Vice President of Public Policy,

Telecommunications and Fraud National Consumers League December 16, 2013

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# Who Are We?

• The National Consumers League is the nation ’ s pioneering consumer organization. Founded in 

## 1899, our non

-

profit mission is to advocate for social and economic justice for 

## consumers and workers in the United States and abroad.

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# Why a Report?

• Rising Cancellation Fees Outrage Consumers

• Numerous Media Accounts of Consumers Failing to Get a Refund When Life Intervenes



## • Anecdotal Accounts of Travel Insurance Policies Failing to Live Up to Consumer Expectations

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## Cancellation/Change Fees


## Cost Control Mechanisms or Profit Centers?

0 500000 1000000 1500000 2000000 2500000 3000000

2007 2008 2009 2010 2011 2012

Year U.S. Airline Cancellation/Change Fee Revenue

- Reaches $2.5 Billion in 2012

Revenue (in millions of dollars)

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## Cancellation/Change Fees Are A Significant Profit



## Center for Airline Industry



## • “ The airlines took in $159.5 billion in revenue last year and had expenses of $153.6 billion, according to the government. That 3.7% profit margin comes 

## entirely from the baggage and change fees. ”

• Source: USA Today, May 2013

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## Refundable Ticket Sales Have Never Been A Popular



## Alternative for Most Consumers...

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Restricted

- Fare Tickets Dominate Airline Ticket Sales

Restricted Tickets (% of total passengers) Unrestricted Tickets (% of total passengers) Source: Bureau of Transportation Statistics

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# ... And It’s Not Hard to See Why

56

20

10 8 6

0 10 20 30 40 50 60

0

- 249% 250

- 499% 500

- 749% 750

- 1000% >1000% No. of Routes

Non

- restricted/Restricted Fare Difference % % Differences Between Non

- Restricted & Restricted Fares on Major U.S. Air Routes

Source: National Consumers League Analysis

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# Consumer Desire

Rising Cancellation Fees

+
Unaffordable Refundable Tickets

= Rising Consumer Desire to Affordably Manage Travel Risk

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# Solution? Travel Insurance

Source: U.S. Travel Insurance Association

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## Aggressive Marketing Language of Travel Insurance 

# Gives Consumers False Sense of Security

• “Worry

- free travel insurance”

• “Peace of Mind is Only a Click Away”



## • “ StressFree Flight Protection”

• “Travel is ‘peace of mind’ and doesn’t have to cost a lot.”

Sources: Spirit.com, Delta.com, Expedia.com, AlaskaAir.com

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## Travel Insurance Policies Have Significant



# Exemptions

• Losses Not Covered Include:

• Existing medical conditions affecting the traveller , a travelling companion or a family member;

• Pregnancy and childbirth;



### • Scuba diving without a dive master;

• Participating in or training for any amateur sporting competition;

• Being fired if the termination is the traveller’s or the traveller’s 

### companion’s fault.

Sources: Travel Guard, Allianz, Expedia.com

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# NCL Reform Proposals

1. Congressional oversight hearings

2. Travel insurance should be marketed in clear, non

misleading language

3. Travel insurance loss ratios should be publicly reported

4. Cancellation/change fees should be tiered based on proximity of the travel date

5. Ticket transfers should be fee

- free

6. Eliminate standby fees

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# Questions?

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# Contact

John Breyault E

- mail: johnb@nclnet.org 

# Phone: 202.207.2819 Twitter: @ jammingecono , @ ncl_tweets Blog: savvyconsumer.wordpress.com

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