Regulation of the Day 208: Re-Booking Flights

Four of air travelers’ five biggest complaints are about the TSA. Right up there on the list with everyone’s favorite sexy-searchers has to be airlines’ habit of nickel-and-diming customers for checked baggage, blankets and pillows, and most anything else that isn’t bolted to the cabin floor.

This business practice, called unbundling, does help keep ticket prices low, as I’ve previously explained. But it’s still annoying; people are transaction-averse.

The Department of Transportation, knowing a good PR opportunity when it sees one, recently passed a rule forbidding one type of extra charge. Airlines may no longer charge re-booking fees if passengers re-book their flights within 24 hours of first purchasing them. Many passengers will no doubt welcome the change. The trouble, which the DOT does not acknowledge, is that it isn’t free. CNN’s Aaron Cooper explains:

The airline says the regulation forces them to hold the seat for someone who may or may not want to fly. As a consequence, someone who really does want to fly wouldn’t be able to buy that seat because the airline is holding it for someone who might or might not end up taking it.

In other words, there will be more empty seats, which costs the airline potential revenue. Passengers will also have a harder time finding a seat on nearly-full flights. That’s why Spirit Airlines, a low-fare airline that practices an extreme form of unbundling, is adding a $2 “Department of Transportation Unintended Consequences Fee”. Re-bookers’ gains come at everyone else’s loss.

It isn’t often that businesses stand up to regulators. More and more, they can be seen holding hands and gazing into each others’ eyes while dreams of increased budgets and decreased competition dance through their heads. That’s why Spirit’s pointed sense of humor here is refreshing. The DOT isn’t taking too kindly to Spirit’s Economics 101 lesson, but then again, they’re the ones who forgot about tradeoffs. They’re everywhere.

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One response to “Regulation of the Day 208: Re-Booking Flights

  1. Pingback: On Internet TV – Airline Fees and Unintended Consequences | Inertia Wins!

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