Benjamin Edelman Reply

1 of 16 BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF AVIATION ENFORCEMENT AND PROCEEDINGS

WASHINGTON, D.C.

---------------------------------------------------- -- ) ) Benjamin Edelman, ) third

- party complainant ) )
v. ) Docket DOT

- OST

- 2013

- 0025 ) British Airways Plc ) )

------------------------------------------------------ ) REPLY OF BENJAMIN E DELMAN Comments with respect to this document should be addressed to: Benjamin Edel man 169 Walnut St. Brookline, MA 02445 E

- mail: ben@benedelman.org

Dated: April 19 , 2013Benjamin Edelman Reply

2 of 16 BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF AVIATION ENFORCEMENT AND PROCEEDINGS

WASHINGTON, D.C.

----------------------------------------------------------- ---- ) ) Benjamin Edelman, ) thir d

- party complainant ) )
v. ) Docket DOT

- OST

- 2013

- 0025 ) British Airways Plc ) )

--------------------------------------------------------------- ) REPLY OF BENJAMIN EDELMAN I. British Airways Has Repeatedly, and Yet Again, Failed to Defend Its Fuel Surcharge with Appropriate Estimates

................................ ................................ ................................ . 3 II. Public Sources Indicate that British Airways Fuel Surcharges Are Not a Reasonable Estimate of Per

- Passenger Fuel Costs Above a Baseline

................................ 5 III. Examining the Fuel Surcharge on Low Coach Fares Is An Appropriate Method to Consider the Basis of a Fuel Surcharge

................................ ................................ .............. 8 IV. BA‟s New “Carrier Charges” Surcharges Are Also Impermissible under DOT Rules 9 V. BA‟s OnBusiness Table Continues to Omit Information about Carrier

- Imposed Surcharges, Contrary to DOT Requirements

................................ ................................ .... 10 VI. Any “Tension” Between US and E U Rules Is Easily Addressed

.......................... 12 VII. BA Is Liable for False Statements of “Tax” on Around

- The

- World Tickets that Are Ticketed by B A, No Matter What Agent Quotes the Fare

................................ ......... 13 REPLY OF BENJAMIN EDELMAN
1. My February 4, 2013 C omplaint properly called into question whether British Airways fuel surcharges are a reasonable estimate of per

- passenger fuel costs above a baseline ( p.1 ) including costs implausibly high vis

- à

- vis ordinary paid ticketsBenjamin Edelman Reply

3 of 16 ( p.2 ) and seemingly beyond actual fuel costs ( pp.3

- 4 ). I also noted certain BA award point table s failing to disclose carrier

- imposed surcharges in the manner required by DOT instructions ( p.4 ) and combining government

- imposed taxes with carrier

- imposed fee s, again contrary to DOT instructions ( pp.4

- 5 ). Finally, I showed around

- the

- world fare quotes systematically but falsely characterizing BA carri er - imposed surcharges as “tax” ( p.5 ).
2. BA‟s A nswer argues that my Complaint errs in my precise estimation of fuel surcharge revenue and fuel expense, though tellingly British Airway s never offers a contrary estimation of its own or any affirmative argument that its fuel surcharges reflect a reasonable estimate of per

- passenger fuel costs above a baseline (as specifically required by DOT) . Separately, BA attempts to escape liability for the prohibited statements in award charts and the online around

- the

- world booking tool via mischaracterization of applicable requirements. T hese defenses fall flat. T he DOT should further investigate the scope of the unlawful BA practices I identifie d.

I. British Airways Has Repeatedly, and Yet Again, Failed to Defend Its Fuel Surcharge with Appropriate Estimates 3. The DOT has instructed that “carrier[s] should be prepared to detail the ... costs” of items subject to surcharges in order to allow the DOT and the public to confirm that “amounts listed as charges for particular services ... accurately reflect the actual costs of the service covered” ( February 21, 2 012 Notice, p.3 ). BA has systematically and repeatedly failed to do so.
4. Particularly tellingly, BA‟s Answer confirms BA‟s inability or refusal to provide the required estimation to support its fuel surcharges

. BA‟s Answer to my Complaint would have been a natura l context in which BA could have argued, forBenjamin Edelman Reply

4 of 16 example, that a given flight on a given route entailed costs of $x of fuel on some recent date, compared to $y in some prior year, but BA collected only $z of fuel surcharge. Alternatively, if BA cannot (or dec lines to) associate costs and revenues with individual flights, BA could have made a statement of the form that it spent $x on fuel in 2012, systemwide or on some portion of its route network (e.g. transatlantic sectors ), compared to a b aseline of $y in some prior year, with only $z of fuel surcharge revenue in 2012. BA offered nothing of the kind. In this context, the DOT should conclude that BA has not complied with the DOT requirement to “be prepared to detail” the basis of a surcharge estimation, and has thus violated 14 CFR 399.84

. 5. Nor is BA‟s recent Answer the first opportunity in which BA has failed to defend its fuel surcharges with appropriate calculations. I have offered BA five separate opportunities to provide the basis of its surcharges. Specifically, I sent an online inquiry to British Airways cus tomer relations on June 5, 2012 ( Complaint, Attachment 8 ), I called British Airways telephone representatives ( as instructed by British Airways in the reply to my June 5 inquiry ), I inquired with British Airways Customer Relations by fax on June 7, 2012 and July 23, 2012, and I emailed the British Airways General Counsel, Americas, on November 8, 2012. I received no substantive response to any of these inquiries, including no information whatever as to the costs associated with the surcharge

. 6. BA‟s Answer creates a strawman of “an exact, statistical correlation between fuel surcharge and the actual cost of fuel actually expended on a particular flight” ( Answer p.4 ), claims that I demand this level of precision , and argues that such precision is impossible

. But I sought no such thing . What I actual ly requested , and what DOT rules require, is that any fuel surcharge must be a reasonable estimate of per

-Benjamin Edelman Reply

5 of 16 passenger fuel costs above a baseline. Perfection is not required , nor did my Complaint seek perfection

.
II. Public Sources Indicate that B ritish A irways F uel S urcharges A re N ot a R easonable E stimate of P er - P assenger F ue l C osts A bove a B aseline 7. Without access to BA confidential business records, my initial Complaint used public sources to demonstrate that BA fuel surcharges a re not a reasonable estimate of per

- passenger fuel costs above a baseline. BA ‟s Answer suggests various adjustments to my estimate (pp.7

- 10). The suggested adjustments serve to somewhat reduce fuel surcharge revenue and somewhat increase fuel costs, but they do not alter the conclusion
that BA fuel surcharges are not a reasonable estimate of costs above a baseline.
8. In addition, some of BA‟s suggested adjustments are illogical and inapt. For example, BA suggests calculating fuel costs by considering “the cost of fully fueling” the planes used on transatlantic routes (p.8). But the short flight BOS

- LHR simply does not call f or the full 168,090 liters of fuel a 777 is capable of carrying. BA has no business purpose to load so much fuel, and in the unlikely event that so much fuel were loaded, significant fuel would remain unused at the conclusion of the flight

. Moreover,

m y Complaint used BA‟s own web site statements about fuel consumption ( Complaint p.3 at heading “Sources”, subheading “Fuel consumption”). If BA seeks to argue that fuel consumption is greater than its web site indicates, and that this additional fuel consumption is needed to establish that BA‟s fuel surcharges ar e a reasonable estimate of fuel costs above a baseline, then BA should make this argument in specificity . BA should not conclusorily resort to the full fuel capacity of aircraft.
9. BA‟s reliance on systemwide load factor ( p.8 ) is also inapt. My Complaint considered transatlantic load factors as reported in BA‟s 2012 TrafficBenjamin Edelman Reply

6 of 16 Statistics , cited at Complaint p.3 at heading “Sources”, subheading “ Passenger load factor.” BA instead proposes using its systemwide load factor ( Answer p.8 )

. But I consider fuel surcharge revenue on two specific transatlantic routes. British Airways‟
lower load factors elsewhere in its route network (e.g. its short

- haul domesti c and Europe routes with 74.7% and 75.1% load factor) are irrelevant. For purposes of computing transatlantic fuel surcharge revenue, I used

– and the DOT should use

– the most precise data available, specifically the data BA has published about i ts trans atlantic load factors.
10. BA states that some seats are designated for crew rest (p.10). But BA nowhere indicates how many seats are so designated. I therefore cannot make adjustments accordingly.
11. Below, I recompute my estimates using BA‟s figures for 777 f uel consumption per hour and 777 seating capacity, BA‟s stated salable cargo capacity (per BA‟s Corrected Answer , p.9 ) , and BA‟s proposed additional fuel cost of $0. 25 per gallon ($0.066 per liter) (due to the costs of forward contra c ts) . I also compute these estimates with both configurations of 747, as BA ‟s Answer suggested ( p.10 ) . The results:
BOS

- LHR (777 service) LHR

- LAX (747 service I) LHR

- LAX (747 service II) Fuel surcharge revenue Passengers First Class 14 * $414 =$5,796 14 * $452 = $6,328 14 * $452 = $6,328 Club 48 * $414 = $19,872 52 * $452 = $23,504 70 * $452 = $ 31,640 World Traveler Plus 40 * $229 = $9,160 36 * $229 = $8,244 3 0 * $229 = $ 6,870 World Traveler 122 * $229 = $27,938 243 * $229 = $55,647 185 * $229 = $ 42,365 Total passenger fuel surcharge $62,766 $93,723 $ 87,203
Cargo Capacity 11 , 12 2 kg 8,000 kg 8,000 kg Fuel surcharge $1.16/kg $1.16/kg $1.16/kg Total cargo fuel surcharge $ 11,428 $ 9,280 $9,280
Full fuel surcharge revenue $7 5 , 668 $103,003 $ 96,483
Load

- adjustment 83.7% passenger load factor, 73.9% cargo load factorBenjamin Edelman Reply

7 of 16 Load

- adjusted fuel surcharge revenue $6 1 , 63 0 $85,304 $ 79,846
Fuel expense Scheduled travel time 6:20 10:10 10:10 Fuel consumption per hour 8,290 liters/hour 12,788 liters/hour 12,788 liters/hour Price of jet fuel $0.832/liter $0.832/liter $0.832/liter Total fuel expense $43,683 $ 1 08,169 $1 08,169
12. These results qualitatively match the findings in my initial Complaint

. Specifically, BA‟s BOS

- LHR fuel surcharge revenue still significantly exceeds BOS

LHR fuel expense. Furthermore, BA‟s LHR

- LAX fuel surcharge revenue is approximately 75% of total fuel cost . Neither is a reasonable estimate of increased fuel cost above a baseline.
13. Consistent with the DOT‟s February 21, 2012 Notice , the question is not,

as BA argues (Answer p.7 ) , whether “BA‟s cost of fuel exceed recoverable fuel surcharges.” Rather, the Notice requires that “When a cost component is described as a fuel surcharge, for example, that amount must actually reflect a reasonable estimate of the per

- passenger fuel costs incurred by the carrier above some baseline ” (emphasis added) (p.2). For any reaso nable baseline, consistent with fuel prices over the past decade, even BA‟s LHR

- LAX flight fails the DOT‟s requirement in this regard

. 14. Comments of Mike Borsetti (DOT

- OST

- 2013

- 0025

- 0060) propose an alternative estimation methodology that reaches a similar result. For fuel expense, Mr. Borsetti divides BA‟s total 2012 fuel expense by its total available seat kilometers, obtaining a fuel cost per seat kilometer. According to Mr. Borsetti‟s method, BOS

- LHR fuel expense is $43,423 and LHR

- LAX f uel expense is $93,794 to $108,224. The similarity of Mr. Borsetti‟s result to mine, despite our independent data sources, confirms the reliability of our estimates.Benjamin Edelman Reply

8 of 16 III. Examining the Fuel S urcharge on Low Coach Fares Is a n Appropriate Method to Consider the Basis of a Fuel Surcharge 15. BA says I “cherry picked” data ( Answer p.10 ) in noting that a fuel surcharge exceeds 70% of a round

- trip transatlantic ticket fare ( Complaint p.2 ). But I used a simple and straightforward methodology: On BA‟s own web site, I quoted an ordinary paid restricted coach ticket

– the same kind of ticket that ordinary consumer travelers buy , and indeed the kind of ticket that BA widely promotes in advertising in multiple media ( online banner ad vertisement s, print, etc.) and that BA‟s web site offers by default . I picked a standard, popular nonstop route on which BA now offers f our flights per day , from the city where I live to BA‟ s hub. I chose a standard advance purchase of approximately six week s . This is an entirely reasonable method of obtaining a representative fare quote. Nor is the result unusual: The total price listed in my fare quote is broadly consistent with my personal leisure travels, consistent with restricted tickets I have assisted friends, relatives and colleagues in booking for themselves, consistent with BA‟s advertising in multiple media, and consistent with offerings broadly available in the marketplace

. There simply is nothing “cherry picked” about the example.
16. Quite the contrary, BA‟s counterexamples are by far the more unusual. On information and belief, far more travelers on BA‟s BOS

- LHR service pay fares that approximately match the itinerary I qu oted than the $4500 and $2600 fares that BA quotes ( Answer pp.9

- 10 ). On information and belief, BA‟s advertising (online banner
ad v ertisement s, print, etc.) promotes restricted coach fares similar to what I quoted, but rarely or never the $4500 or $2600 coach fares that BA quotes.
17. Indeed, the DOT has used the same methodology I chose

. See the DOT‟s Notice of February 21, 2012 at p.2 : “In one particular example, the total fare for a U.S.

-Benjamin Edelman Reply

9 of 16 Europe trip ... listed as $769.41 ... includes an amount of $476 described as „fuel surcharge.‟” Like me, the DOT there quoted a restricted coach transatlantic ticket for an arbitrary date, then compared the base fare to the stated fuel surcharge.

IV. BA’s New “Carrier Ch arges” Surcharges Are Also Impermissible under DOT Rules 18. In its Answer , BA describes its shift to “Carrier Charges” rather than “fuel surcharge” (p.13). Indeed, current fare quotes on britishairways.com now present “European fuel surcharge/US ca rrier charge.” See Attachment 1

. But this shift still falls short of DOT requirements.
19. The DOT‟s February 21, 2012 N otice provides that even a vague surcharge must be linked to specific service and assoc iated costs

. Referring to the vaguely

- named “Passenger service charge international” seen at another carrier , the DOT instructs that “the carrier should be prepared to detail the s ervices and costs per passenger” ( Notice at p.3 ).
20. To support its new “Carrier Charges” surcharge, BA must identify what services are associated with the new “carrier charges,” and what those services cost BA to provide (on a per

- passenger basis). BA has not done so, not in its Answer nor on its web site nor, as best I can tell, anywhere else. I contacted B A telephone reservations to request information about the “carrier charges” but was unable to obtain any information about what services are included or why this charge is set at a particular amount

. 21. The screenshot in Attachment 1 also reveals BA claiming, falsely, that the charges itemized in that screenshot are “Tax.” See the top

- most heading of the screenshot, reading “Tax Breakdown.” In fact that screenshot itemizes a mix of actual government taxes and carrier

- imposed surcharges, with fully 67% consisting of the latter

.Benjamin Edelman Reply

10 of 16 It is an unfair and deceptive practice for the window‟s title, “Tax Breakdown,” to falsely indicate that the window presents only taxes.

V. BA’s OnBusiness Tabl e Continues to Omit Information about Carrier
Imposed Surcharges, Contrary to DOT Requirements 22. My Complaint noted that BA‟s OnBusiness points tabl e does not disclose carrier

- imposed surcharges ( p.4 ). In its Answer , BA seeks shelter in the fact that OnBusiness “is a business to business („B2B‟) initiative, intended to provide incentives
and discounts to small and medium

- sized enterprises [pursuant to] terms formally a g re ed to by the SME ” ( p.11 ). My Comp laint suggested nothing contrary. But these facts are irrelevant to DOT rules on point.
23. The DOT‟s revised full fare advertising rule, 14 CFR 399.84 , prohibits any advertising or solicitation for passenger air transportation that does not state the entire price to be paid. By its plain language, t his rule applies equally to all advertising and solicitations for air transportation, whether the adverti sing or solicitations are directed to consumers, businesses, or anyone else.
24. BA cites its contracts with OnBusiness members (“terms formally agreed to by the SME [small and medium sized enterprise]”) ( Answer p.11 ) , but DOT rules offer no protection to a carrier th at seeks advance permission, through a contract or otherwise,
to engage in conduct prohibited by 399.84 . Rather, 399.84 applies equ ally no matter what a carrier might have placed in prior terms. A carrier cannot, through its terms or
other contract ual provisions , escape the requirements of 399.84

. 25. BA‟s Answer seems to seek shelter in the words “by consumers” in the May 17, 2012 Notice

– as if to suggest that, by those words, DOT sought to offer lesser protection to participants in company

- wide travel award programs such as BABenjamin Edelman Reply

11 of 16 OnBusiness. BA reads too much into the word “consumer.” The be st interpretation of the Notice ‟s reference to “consumers” is to encompass anyone red eeming awards through a carrier award program, and businesses and business travelers are among the “consumers” protected by the DOT in this sentence. More generally, in numerous contexts, DOT uses th e term “Consumer” to mean any person purchasing or receiving air travel. Consider e.g. the DOT‟s Aviation Consumer Protection Division (emphasis added), which equally protects business travelers. DOT regulations confirm the broad meaning of “consumer.” Consider 14 CFR 259.5 , using “customer”, “consumer”, and “passenger” interchangeably (requiring a “ customer service plan” which must “notify[]

consumers of known delays, cancellations, and divers ions” and must “identify[] the services [the carrier] provides to mitigate passenger inconvenience”), plainly providing benefits that apply to business passengers as well as consumers traveling for leisure . The reference to “consumers” in the DOT‟s May 17, 2012 Notice does not lessen BA‟s obligations to its OnBusiness customers. BA‟s references to its “small and medium

- sized enterprise” “busi ness” customers do not excuse BA‟s failure to comport its OnBusiness program to the requirements of the DOT‟s May 17, 2012 Notice

. 26. While some sections of the DOT‟ s May 17, 2012 Notice reference “mileage,” the Notice plainly includes award programs denominated in units other than miles. The title of the Not ice specifically covers all “award” travel. S ections of the
Notice discuss “award travel,” “award programs,” “promotions,” and the like

– te rms which are used interchangeably with “mileage award” and other mileage

- specific terms. Furthermore, t he Notice interprets the full fare advertising rule, 14 CFR 399.84 , which broadly covers all advertising p ractices, in no way limited to mileage

- based awardBenjamin Edelman Reply

12 of 16 programs . BA cannot seek shelter in the fact that OnBusines s earnings are measured in “points” rather than “miles.”
27. In short, there exists no proper reason for BA OnBusiness to escape the requirements of t he DOT‟s May 17, 2012 Notice . That Notice plainly requires that when a flight award requires a surcharge, the surcharge must be presented “together with” the points required , and the surcharge must be given the “same prominence” as the points require ments ( p.2 )

. BA erred in mentioning the surcharge only in a footer at the bottom of the table (not “together with” points requir ements) ( as presented in Complaint p.14 )

. In that footer, BA al so erred in its vague reference to “[t]axes, fees, charges and security surcharges”

– exactly omitting the required affirmative statement that these are “carrier

imposed” charges to alert consumers that, unlike bona fide “taxes,” these amounts are set
whol ly by BA. T he DOT‟s May 17, 2012 Notice requires disclosure that is both clearer and more prominent

.
VI. Any “ Tension ” Between US and EU Rules Is Easily Addressed 28. BA seems to seek shelter in EU rules which, it claims, require certain presentation of surcharges. Specifically, BA argues: that “The [EU] rules require that, in addition to specifying the final price payable b y the consumer, a breakdown of the following items must be included; namely, (i) „taxes,‟ (ii) „airport charges,‟ and (iii) „other charges, surcharges or fees, such as those related to security or fuel‟” (p.13). BA
describes “tension” between this EU requ irement and DOT requirements. But BA never identifies the exact inconsistency between EU and DOT rules. If BA believes it is impossible to simultaneously satisfy specific EU and DOT rules, BA should be explicit in specifying the p recise requirements claimed to be irreconcilable.Benjamin Edelman Reply

13 of 16 29. In fact the EU rules are easily reconciled with the DOT‟s requirements. For one, i f BA ceased to impose carrier

- imposed surcharges, BA would have nothing to disclose as such

– hence no need to comply with either EU or DOT rules about carr ier

imposed surcharges. Furthermore, if BA‟s fuel surcharges were a reasonable estimate of
per - passenger fuel costs above a baseline, BA would comply with DOT rules on point and could also easily present such surcharges in the manner required by EU rules. Thus,
t here is no genuine difficulty in complying with both sets of rules

. Rather, BA‟s difficulty comes from attempting to impose a “fuel surcharge” that is not an estimate of
increased fuel cost, and from attempting to impose a “carrier charge” n ot associated with any specific service

– practices which DOT simply does not allow, and which the EU rules neither require nor encourage

. There is no genuine “tension” between these requirements

.
VII. BA Is Liable for False Statements of “Tax” on Around
- The
- W orld Tickets that Are Ticketed by BA, No Matter What Agent Quotes the Fare 30. Under settled DOT authority, BA is equally liable for misstatements on the OneWorld Around the World booking tool. BA argues that that tool “ is a specialized site owned and managed by oneworld Management Company ” ( Answer p. 12 ) , suggesting that BA is not liable for false statements made by that tool. But t he DOT has long held that airlines are responsible for the actions and omissions of their agents, including travel agents acting on their behalf. The DOT most recently restated this principle in its Final Rule for Enhancing Airline Passenger Protections , which at 23143 reaffirms that “airlines have always been legally re sponsible along with their agents for their agents‟ advertising violations and they will continue to be under the revised rule.” BA is jointly andBenjamin Edelman Reply

14 of 16 severally liable for the wrongful actions made by its agent oMC in the course of advertising pricing for BA electronic tickets.
31. BA argues that “the subject matter of the Complaint in this regard [mischaracteriz ing carrier

- imposed surcharge as tax] has been resolved” ( Answer p.13 ). But affected passengers have not received refunds. On information and belief, if an affected passenger requested a refund from BA, BA would deny such a request. BA retains its ill

- gotten gains from the misstat ements at issue. This matter is not “resolved.”

Pursuant to Title 18 United States Code Section 1001, I certify that I have not in any manner knowingly and willfully falsified, concealed or failed to disclose any material fact or made any false, fictitio us, or fraudulent statement or knowingly used any documents which contain such statements in connection with the preparation, filing or prosecution of the pleading. I understand that an individual who is found to have violated the provisions of 18 U.S.C. s ection 1001 shall be fined or imprisoned not more than five years, or both

Respectfully submitted ,

Benjamin EdelmanBenjamin Edelman Reply

15 of 16 Attachment 1Benjamin Edelman Reply

16 of 16 Certificate of Service

I hereby certify that I have, this 19 th day of April , 2013 caused a c opy of the foregoing Reply to be served by electronic mail on the following persons: Don Hainbach dhainbach@ggh

- airlaw.com Vanessa Krasniewicz vkrasniewicz@ggh

- airlaw.com Samuel Podberesky sam.podberesky@dot.gov

_____________________ Benjamin Edelm an