More Airline Regulations?

• Author: Chuang, Shih-Hsien

This summer marked the unofficial end to the travel industry's post-pandemic recovery. Airlines, in particular, carried an all-time-high number of passengers in the summer of 2023, with millions of travelers taking to the skies for the first time in several years.

With a record number of travelers comes heightened public--and political--scrutiny. Recently, there has been a spotlight on airlines' customer service, operations, and performance, with some in Washington calling for new laws and regulations.

In May, the U.S. Department of Transportation announced plans for a new rulemaking that would require airlines to compensate passengers when the airlines are responsible for delays or cancellations. Also, Congress is considering legislation that would address a variety of airline practices that lawmakers deem objectionable. The FAIR Fees Act, introduced by Sens. Richard Blumenthal (D-CT) and Ed Markey (D-MA), would eliminate "unreasonable or disproportionate" cancellation or change fees, all but abolish checked or carry-on baggage fees and seat assignment fees, and implement a process for the government to evaluate whether other fees are "reasonable."

While capping or abolishing the fees that many passengers love to hate might seem like a populist exercise that would be difficult to oppose, such legislation would be a pyrrhic victory for passengers. It would not save them money, and it would almost inevitably engender a more regressive fare structure.

The reality is that deregulation has allowed airlines to become fiercely competitive, driving down the cost of airfares, allowing more people to travel, and encouraging airlines to invest in new technology. Requiring airlines to provide a level of service dictated by the priorities of a few politicians would work against those achievements and result in higher fares for everyone.

Delays and cancellations/ Despite the calls for more compensation for flight delays and cancellations, U.S. airlines currently have plenty of incentive to avoid those nuisances. Delays and cancellations lead to disrupted schedules for fleet and crew members, which cost airlines money and vastly complicate their logistics. Airlines want repeat customers, and delays and cancellations hurt their reputations and customer trust. Minimizing delays or cancellations is the profit-maximizing outcome for airlines.

Airlines actively try to minimize delays that are under their control. They cannot, however, prevent operational...