February 16, 2011

The Honorable Ray LaHood

Secretary

U.S. Department of Transportation

1200 New Jersey Avenue, S.E.

Washington, DC 20590

Re: Enhancing Airline Passenger Protections ( Consumer Rule II ) Rulemaking Proposal

– Supplementary Comments of Allegiant Air

– Docket DOT

‐ OST

‐ 2010

‐ 0140

Dear Secretary LaHood:

By letter dated September 23, 2010, Allegiant Air submitted general comments in response to the

Department’s Consumer Rule II rulemaking proposal. 1 Allegiant now submits the following supplementary

comments, which are limited to three specific concerns. We first discuss the timing of this submission.

Late

‐ Filed Comments

. Allegiant acknowledges that these supplementary comments are submitted well

after the date by which comments ordinarily should have been filed. Allegiant asks the Department to

consider these comments for the following reasons.

First, at the outset of the NPRM, the Department advised that late

‐ filed comments would be considered to

the extent practicable. 2 Given that the Department does not anticipate issuance of a final rule or other

decision in this matter for at least another several weeks, 3 consideration of these supplementary comments

would appear practicable.

Second, on January 18, 2011, the President issued Executive Order 13563, Improving Regulation and

Regulatory Review

, requiring that by mid

‐ May 2011, each federal agency develop and submit to OMB’s

Office of Information and Regulatory Affairs a preliminary plan under which the agency will periodically

review its existing significant regulations to determine whether any such regulations should be modified,

streamlined, expanded, or repealed. 4 As discussed below, the new Executive Order raises a significant

question of whether the Department should proceed with Consumer Rule II prior to completion of the

required review of existing consumer

‐ protection regulations.

Third, over the past 3

‐ 4 weeks a political crisis has erupted in Egypt. Like previous Middle East crises, the

situation has triggered a substantial run

‐ up in fuel costs, with the ultimate outcome of the events in Egypt

and their regional and global side

‐ effects unknown. This development has underscored the necessity for

DOT to allow carriers to retain the right to price their services flexibly, as discussed below.

1 A copy of our September 2010 comments is appended as Attachment A for convenient reference.

2 75 Fed. Reg. 32318, col. 3 (June 8, 2010).

3 See DOT Regulatory Agenda Semiannual Summary

, 75 Fed. Reg. 79612

‐ 13 (Dec. 20, 2010).

4 See Executive Order 13563, Sec. 6, published at 76 Fed. Reg. 3821, 3822 (Jan. 21, 2011).Executive Order 13563

. In Allegiant’s view, the Executive Order raises a significant question of whether the

Department should proceed with Consumer Rule II prior to completion of the required review of existing

consumer

‐ protection regulations. At the very least, considering the Executive Order’s stated concern with

avoiding excessively burdensome regulation, it would appear inconsistent with the order for DOT to impose

Consumer Rule II’s undeniably greater regulatory burdens on the air transportation industry prior to

analyzing existing regulations under the criteria DOT develops (with public input) in response to the order.

In fact, in the Department’s request for comments on implementation of the new Executive Order, DOT

states specifically that it “plan[s] to allow for comments on candidate rules for review.” 5 The Department

should not preempt Allegiant’s, other carriers’ and the public’s ability to nominate, criticize and/or defend

existing rules

– notably 14 CFR §§ 253.7 and 399.84

– by adopting major revisions to those rules before

they undergo the review prescribed by the Executive Order.

The Department should withdraw Consumer Rule II or defer further action on it until completion of the

process required by Executive Order 13563 vis

‐ à

‐ vis DOT’s consumer

‐ protection regulations. DOT has

declared in the context of the Executive Order, “The Department has long recognized that there should be

no more regulations than necessary and those that are issued should be simple, comprehensible, and

impose as little burden as necessary.” 6 That policy is deserving of more than lip service, and Allegiant urges

DOT to implement it by withdrawing or deferring further action on Consumer Rule II until further notice.

Post

‐ Purchase Price Increases (14 CFR § 253.7)

. In the event DOT proceeds with Consumer Rule II despite

the new Executive Order, Allegiant urges the Department to adopt the second alternative DOT has

proposed in regard to post

‐ purchase price increases; that is, to allow such price increases so long as the

seller conspicuously discloses the potential for such an increase, the maximum amount of the increase, and

that the consumer must affirmatively agree to the potential for such an increase prior to purchase.

Allegiant is considering a new pricing option for use on its website: when making a purchase, consumers

would be able to choose between a traditional “locked in” fare that would not fluctuate, and a lower fare

that could change before the date of travel. That lower fare could be reduced further or could increase (up

to a set maximum that would be clearly disclosed) depending on changes in fuel price between the booking

and travel dates. This would be a non

‐ compulsory alternative for consumers; it would provide them

another option for potential substantial savings on their trip costs and would be clearly disclosed and

explained prior to any purchase.

Under current section 253.7, Allegiant could implement this pricing structure. Unfortunately, however, the

first option stated in the NPRM in this regard would establish a blanket ban on post

‐ purchase price

increases and thus would foreclose the valuable alternative discussed above for consumers. 7

5 76 Fed. Reg. 8940, 8942 col. 1 (Feb. 16, 2011).

6 Id. at 8941 col. 1.

7 In addition to opposing the first option stated in the NPRM, Allegiant opposes the third option (see 75 Fed. Reg. at 32330)

which would allow such increases but only 30 or 60 days in advance of the first flight in the passenger’s itinerary. Such a

time frame would negate essentially all benefits of the concept for consumers and carriers alike.The potential to offer this alternative is especially important for Allegiant. First, even a slight change in fuel

cost has a major financial impact on Allegiant, as it does on other air carriers (as the Department is aware).

Second, Allegiant caters specifically to leisure travelers. This means, among other things, that a high

proportion of Allegiant customers purchase their travel significantly in advance of their travel dates

– in

many cases months in advance

– making it especially difficult for Allegiant to predict what the fuel price

might be at time of travel. Preserving the ability for carriers to offer and consumers to choose between a

locked

‐ in price and a price that may change, within limits, based on the price of fuel, strikes an appropriate

balance between the interests of consumers and the interests of carriers.

To the extent post

‐ purchase price increases are prohibited, carriers are forced to bear all risk of fuel price

volatility and resulting large cost increases, particularly on tickets purchased far in advance. If consumers

wish to lock in a price, they would be free to do so. Others who wish to purchase at a lower rate and key

their ticket price, in part, to fuel price at the time of travel would also be free to do so. This would provide

consumers the ability to receive additional savings in the event the fuel price dropped

– as could very well

be the case for consumers purchasing when fuel prices were high

– and would provide carriers some

measure of protection against unpredictable increases. In Allegiant’s view, fundamental fairness dictates

that both parties to a travel transaction have available a measure of protection. Alternative two indentified

in the NPRM preserves that measure of protection and appropriately balances the interests of consumers

and carriers.

Full

‐ Fare Advertising (14 CFR § 399.84)

. In the event DOT proceeds with Consumer Rule II despite the new

Executive Order, adoption of the Department’s proposal to enforce the full

‐ price advertising rule “as it is

written” (to quote the NPRM) would disserve the public interest. It would do so by fostering confusion

among members of the traveling public, who have been conditioned since the 1980’s, by virtue of the

Department’s policies, to understand that the basis upon which air transportation is advertised and sold is

fundamentally the same as other consumer goods and services. The proposed change in policy would alter

that basis and generate confusion. A byproduct would be weakened demand for air transportation,

harming carriers directly and further disserving the public interest indirectly.

For over a quarter century, the Department has permitted air transportation to be advertised on essentially

the same basis as all other consumer goods and services, that is, with taxes and fees excluded from the

base price. 8 While the Department requires sellers of air transportation (unlike sellers of other goods and

services) to disclose the amount of such taxes and fees by hyperlink or on the same page as the base price,

the fact remains that advertised prices do not include at least $10.70 each way in taxes and government

fees. As a result of 25

‐ plus years of consistent practice in this regard, the public has been conditioned to

understand that an advertised domestic airfare does not include all taxes and fees. This is consistent with

the advertising practice of every retail industry of which Allegiant is aware, and is true regardless of the

advertising medium utilized.

8 In the case of domestic air transportation, the 7.5% federal excise tax is included in the base price as required by law. The

present issue, however, concerns other charges such as segment taxes, passenger facility charges and September 11th

security fees.Under the Department’s proposal, a one

‐ way fare currently advertised at, for example, $39

– which

consumers understand does not include certain additional charges

– will increase, perceptively, over 25%

to become a $49 or $50 advertised fare. This inevitable (albeit inaccurate) consumer perception of a higher

fare will have a dampening effect on sales, as consumers will not understand that air transportation is now

being advertised on a different basis than (a) has been the case for over 25 years, and (b) is the case for all

other goods and services.

It is significant as well that continued unbundling of taxes and fees from the base fare is consistent with

broader industry practice. Virtually all carriers unbundle fees for a variety of services such as checked

baggage, seat assignments, priority boarding and others. The Department has proposed no change to this

practice

– nor should it, as unbundling is pro

‐ consumer in enabling each passenger to assess the relative

value of ancillary services and pay only for the services he or she desires. It would be inconsistent with this

industry pricing reality, however, for the Department to require certain additional charges

– i.e., those

imposed by governmental entities

– to be bundled with the base fare, while allowing other charges to be

separately stated. The mandatory nature of the government charges makes no difference in this context.

The issue is one of consistency with long

‐ established airline practice and retail advertising methodology in

all other industries.

Thank you for your consideration of these supplementary comments.

Sincerely,

Maurice J. Gallagher, Jr.

Chairman and CEOATTACHMENT A

September 23, 2010

The Honorable Ray LaHood

Secretary

U.S. Department of Transportation

1200 New Jersey Avenue, S.E.

Washington, DC 20590

Re: Allegiant Air Comments for DOT

‐ OST

‐ 2010

‐ 0140, Enhancing Airline Passenger Protections

Dear Secretary LaHood,

Allegiant Air appreciates the opportunity to comment on the Department of Transportation’s latest

rulemaking concerning tarmac delays and consumer protection issues. Overall, Allegiant has significant

concerns about nearly all aspects of this latest notice of proposed rulemaking (NPRM).

Allegiant is a Las Vegas

‐ based, full

‐ service travel company that brings travelers from the United States’

small cities to leisure destinations like Las Vegas, Orlando and Ft. Lauderdale. Our airline is low

‐ fare and

offers nonstop, all

‐ jet service that can be bundled with hotel accommodations and other travel

‐ related

services. Recently, we were ranked number one for low

‐ cost carriers in Aviation Week ’s Top Performing

Airline study and ranked 25 on FORTUNE magazine’s Fastest

‐ Growing Companies list.

On December 30, 2009, the Department issued a final rule related to many of the same subjects being

discussed in the most current NPRM. The final rule dating from December had not been in effect for six

months before the Department drafted this new NPRM that claims the new rules are not sufficient and do

not go far enough.

The Department continues to place more and more regulation on a “deregulated” industry, which has been

one of the factors driving costs higher. Allegiant is one of the most successful air carriers, bringing air

service to small, rural communities in many parts of the United States. With the cost of an airline ticket not

being much higher than it was in the 1980s, adding operational costs and additional reporting requirements

only makes providing air service more difficult.

Allegiant has been one of the industry’s leaders in breaking down the cost of air travel and providing

consumers with more choices for travel services. Providing a clear and understandable website is in the

best interest of Allegiant, and frankly all airlines, since an unhappy customer who does not have their

expectations met may be unlikely to fly with our airline again. We oppose the Department’s attempt to

regulate how airline websites should appear and what information must be presented to the consumer.We believe the Department should intervene directly where there are clear efforts underway by an air

carrier to deceive the public when it comes to selling air travel or other deceptive practices. Imposing a

broad rule across the industry to punish a small percentage of bad players is not fair to the rest of the

responsible carriers in the airline industry.

We ask that the Department suspend this proposed rulemaking and let the industry digest and meet the

requirements of the final rule that was issued less than a year ago. Lumping another final rule on the

airline industry will lead to further costs, reduced air service, and confusion for air carriers.

Thank you for consideration of our views.

Sincerely,

Maurice J. Gallagher, Jr.

Allegiant Chairman and CEO