The Not So Bad Department of Transportation Rules

By Collin Maessen on 14th September 2011comment

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Video description

I had to drop the projects I'm working on for a responce to statements made by Lee Doren.

On Google+ and YouTube he has made the claim that the new Department of Transportation (DOT) rules are detrimental for airliners and will increase ticket prices for consumers. A claim that is not supported by the regulations and his sources.

Transcript

LEE DOREN:
And again I got the link below to the book. I got the link below to the Department of Transportation. Uh link, hit tap to... Hat tip to uh Collin for uh finding that and the Gawker uh website that originally posted the airline. Take care.

Yes this was Lee Doren giving me a hat tip for a link he included in his video description. Although not really a meaningful reference or link to me, but still nice.

Now you might be wondering why I sent Lee a link, well technically I didn't. I used the link in an exchange we had where I disagreed with his argument and conclusions. So I'm actually one of the critics he mentioned in the video. But lets start from the beginning

It all started when Lee posted the following on his Google+ profile:

Holy crap this is stupid. The DOT will force airlines to reimburse people for delays among other things.

Planes are delayed often b/c of weather (not in their control), the FAA (not in their control) and the Airports (minimally in their control). So now they will be fined for things not in their control, meaning they will have to raise prices on everyone.

Even worse, since you’re statistically more likely to die from a car accident, poor people will avoid flying if prices increase and instead drive long distances. This will increase the statistical likelihood they’ll be in an accident.

Sadly, if you mention this to anyone, they’ll call you anti-consumer. What a joke!

The thing is, these rules don't say anything on reimbursements for delays or cancellations of flights. Which I've pointed out several times to Lee with references to documents from the Department of Transportation. This is where he got the link from.

But still he repeated the same argument in his latest video:

LEE DOREN:
But what they did on top of this, which I completely disagree with and I'll explain why it actually will have really bad negative unintended consequences, was put on excess damages and in fact fines if planes are involved in other sorts of delays. Like delays on the tarmac for a certain number of hours or delays in general.

Let me point you to the page “Fly-Rights - A Consumer Guide to Air Travel” which is hosted on a DOT website, which states the following:

Contrary to popular belief, airlines are not required to compensate passengers whose flights are delayed or canceled. As discussed in the chapter on overbooking, compensation is required by law only when you are "bumped" from a flight that is oversold.

So no, it doesn't say what Lee think it does.

For general delays the DOT doesn't fine, and there is no compensation for the consumer. They only fine in cases where for example airliners do not inform passengers in time, or at all, about a delay.

And the DOT will not fine an airliner for cancellations if it is, in their words, “physically impossible to operate the flight”. This rule isn't even part of the regulation Lee is talking about.
Neither does the consumer get compensation for a tarmac delay. What does apply in all these cases are the normal consumer laws and what is defined in the policies and procedures of the signed contract.

Now with tarmac delays airliners must ensure that passengers stuck on the tarmac are provided with adequate food and water after two hours, as well as working lavatories and any necessary medical treatments. The plane must get to a gate within 3 hours for a domestic flight, and 4 hours for an international flight. If they fail to do so, they will be fined. These rules were a direct response to travellers being stuck in airplanes for periods of 6 to 10 hours.

But there are exceptions to the time limits for safety, security or air traffic control-related reasons. So if it is out of their control they won't be fined, the DOT even says they will take into consideration any mitigating factors.

But Lee has a contention with this:

LEE DOREN:
Here is the problem on a number of levels, but let me go through many of them, is that any time, any time, you put a cost or a burden... Good or bad. You can say you really, really like the consumer protection. So ignore the merits of it. But just say any time you place a burden on a company, in this case an airline, they're going to have a cost and they are going to have to pass it on to the consumer. It's not like they just all, you know, all the companies just decrease the CEO's salary. It doesn't work that way. They increase the price or they look at how much they can reduce costs in other ways if possible. Often if it's not possible simply the consumer will end up just paying higher prices.

That's the way it works. That's the way its always worked. It's simply basic economics. Otherwise they just go bankrupt because they cannot afford the burden that's then placed on them.

So in essence Lee just said we should ignore any benefits a regulation might have, and focus solely on the potential cost for the industry.

This might have something to do with these rules being in effect since December 2009. The current changes are an update. When the first version was put into effect it caused lengthy tarmac delays to drop from 664 to just 16, showing its effectiveness. If the exceptions are as wide as Lee claims them to be

LEE DOREN:
The exceptions are so large that any decent attorney can drive a jumbo jet through it.

Then why are these tarmac delay rules so effective at reducing the amount of incidents? According to his logic this kind of drop shouldn't have happened. And any fines would have been easy to contest.

Now considering these rules have been in effect for a while, we should see the adverse effects Lee claims. So lets take a look at the sources he used to show that this did happen.

For example in his video description he says:

Airlines Raise [Fares] in 2010. Notice it was estimated to cost airlines $100 Million because of delays. Now, that cost might increase in the future

If you read the article you notice it says the following on the price hike:

The airlines posted strong profits in the third quarter, and traffic has been running higher than a year ago as travel demand slowly recovers from the recession. They didn't offer a reason for the fare hikes.

But FareCompare noted that they are facing rising fuel costs. Oil prices have climbed this year and analysts predict they will rise again in 2011 due to strong demand from developing countries such as China and India.

So this price hike had a lot to do with the increasing oil prices at the time, which is corroborated by other sources, something I already pointed out to him. If you look at other articles at the time you will also notice that the increase demand might also have played a role.

But I have the biggest problem with his suggestion that the $100 Million cost has anything to do with these regulations. For one it isn't even a cost, it was a revenue loss due to people cancelling their flights. This happened because of the snow storms at the time, they didn't want to get stranded like the thousands that already were.

Or lets take the second link he posted on google+ and twitter, the article itself says the following:

Jamie Baker, an analyst for J.P. Morgan Chase said the increases of $6 to $10 were applied to last-minute tickets favored by corporate travelers. He said the move, led by US Airways, appeared to back up the company's comments that demand for business travel has held up.

Again nothing to do with these regulations. The very sources he used don't even hint at the possibility that they might have contributed.

So in the end the rules don't even say what Lee claims they do, and the sources he cites don't even agree with him. I've pointed this out to him from the moment I noticed him starting this line of reasoning on Google+. And I wasn't alone, my fellow critic was my friend CSBair. He joined in when he noticed my exchange with Lee and left his own contribution.

Lee's response was to block him and remove the comment. And this was the first time Bair has ever interacted with Lee. So there's not exactly a history between them. Odd response from someone who opened his video with the following message towards the critics of his book:

LEE DOREN:
Because of you I cannot thank you enough and the responses, especially from people who disagree with me politically uh... Have been great. So I can not thank you enough for the responses and simply the fact that people actually took the time to read it. So thank you again, that's all I really have to say is thank you so much I really appreciate it.

Because of all this Lee fails to convince me, or anyone else, who has a similar position. Convincing one of your opponents will only happen if you can state your case effectively with sources that confirm the points you are making. Without that it's just a what if scenario with nothing backing it.