Obama Administration Turning Out To Be Quite Expensive For Airlines

ABCNews has an article that contrasts the Obama administration’s handing of the airlines with the previous one — and one thing is for certain — it’s getting much more expensive to mess with consumers.

ABC says that fines have skyrockted both at the Department of Transportation and at the FAA.

The DOT oversees consumer issues such as airline pricing, advertising, delays on the tarmac and involuntary bumping.

ABC says:

In 2009, after Obama had appointed Ray LaHood as Transportation Secretary, the DOT levied $2.6 million in fines again the airlines. That’s up from $1.2 million during the Bush administration in 2008 and $1.4 million in 2007, according to data requested by ABC News from the DOT

Over at the FAA, which regulates airline safety, the story is similar.

The Federal Aviation Administration, which oversees safety, also saw a spike in penalties during the first year under the leadership of Obama appointee Randy Babbitt. In 2009, the FAA fined the airlines $14.7 million, up from $7.6 million in 2008 and $6.1 million the year before, according to ABC News calculations of FAA data.

Experts say the difference is clear.

“Clearly we have an administration now which believes in more government intervention on behalf of consumers and other constituencies,” Brian F. Havel, a law professor and director of the International Aviation Law Institute at DePaul University in Chicago told ABC [ed note-- Go Blue Demons]. “I think the philosophy of the administration clearly is to be more interventionist.”

The most blatent example of the difference between the two administrations is the way the DOT is handing long tarmac delays. The issue first came to the public attention in 2007, when JetBlue notoriously kept passengers on planes for 10 hours during a snowstorm.

LaHood’s DOT has taken the fines to tarmac-lovin’ airlines:

“The traveling public has the right to expect that their flight will be safe and that the airline will treat them fairly,” LaHood said. “During my watch, the U.S. Department of Transportation has vigorously enforced our aviation regulations governing both safety and consumer protection, and we will continue to do so.

Opponents of the tarmac fines say that it the DOT is giving the impression that it happens all the time, when in fact it does not.

Obama Administration Gets Tough on Airlines [ABCNews]

Comments

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  1. leprechaunshawn says:

    It’s not just airlines, it’s all of us!!

    • ARP says:

      So true. How much higher are your income taxes compared to under Bush? 10%? 15%?

      • NatalieErin says:

        Please tell me you’re being sarcastic.

        • ARP says:

          Don’t worry, I am. If you look at my other comments, I’m a instigator. Just playing into the myth that somehow Obama has already raised taxes, when it fact, they’ve been lowered for most. Allowing the 33 to 39% sunset for those making over $200k is the only exception. People of course, ignore that historical income tax rates are at a record low.

          • leprechaunshawn says:

            I don’t recall my original comment mentioning taxes at all.

            *Reading my original comment now*

            Nope, nothing about taxes.

            My comment was more of a reply to the title of this article. If this administration is turning out to be expensive for airlines (or any business) they will be expensive for us. As the cost of doing business goes up, the cost to consumers will also go up.

            • dadelus says:

              So does that mean the government should just let them get away with flaunting the law?

              • leprechaunshawn says:

                Nope. Just saying that as the cost of business goes up the cost to the consumer goes up. That’s what will make this administration expensive to all of us.

                • dadelus says:

                  Perhaps they could lower their cost of business by renegotiating executive pay for underperformance to make up the shortfall rather then pushing the costs to consumers. Here is an article from about 4-5 months ago showing that in 2008 Southwest was the only airline that turned a profit ($294M), and by their industries standards it looks as though they seriously underpay their executives. $4.8M for the top 5 execs at Southwest as opposed to $11M for their next lowest paid competitor (American). Compare that to Delta who pays $28.5M for their top 5 who collectively lead their company to a $503M loss.

                  http://seekingalpha.com/article/174816-trying-to-understand-airline-executive-compensation

                  A wise PR move on the part of airlines might be to put executives and management on notice that if they cannot execute then the cost of fines will be taken out of their compensation. Do that rather then penalize the customers and you not only build incentive for management to come up with a better plan, but you help build customer loyalty.

            • Dondegroovily says:

              The cost of doing business with airlines that mistreat consumers and compromise safety will go up. The cost of good airlines remains the same.

  2. Naame says:

    If the threat and enforcement using fines increases quality through safety then I am ok with it. If the final result is not doing those things then we need to rethink our strategy. However, just letting the airlines do whatever they please like the Wild West is not the answer imo. We do need regulations for the airlines. We just need to make sure those regulations are working as intended.

    • Kilawat12 says:

      This. I’d rather pay $30 more for a safer more comfortable flight than take a chance. That is the price of safety people.

    • Keavy_Rain says:

      It seems, to me anyways, that corporate America is unable or unwilling to police itself, thus I want the government to step in and protect me.

      Call me crazy, but when I’m a few miles above ground I want the thing keeping me aloft to be as safe as possible and the person controlling said thing to be well-rested, well trained, and relatively pleased with their employer. I’m not saying the employer needs to bend over backwards for them, but just make sure they’ve got what they need to survive (Living wage, medical insurance, job security if they’re competent.)

  3. Loias supports harsher punishments against corporations says:

    Oddly, the article has a tone of negativity towards the consumer advocacy of the administration.

    • adamczar says:

      I noticed that, too.

    • Paladin_11 says:

      Never forget that network news isn’t about news, it’s about selling you something. Sometimes it’s benign, in the form of advertising. (well, maybe not quite benign) Other times it’s an idea. In this case, the Obama administration is invading all areas of our lives by making government bigger and more interventionist. If they could use the “S” word they probably would.

      Is it really a surprise that news organizations run by large corporations like Disney, GE and/or Comcast and Viacom place the interests of other large corporations ahead of individuals?

      Sorry guys. It’s cynical Thursday and I just couldn’t control myself. Carry on…

  4. PanCake BuTT says:

    On the issue of airline fines ‘skyrocketing’, and the amounts listed in quotes above. I saw on the doobToob that airlines had/have been raking in very nice profits on the baggage fees they’ve been charging for while now.

    2.6mil, that penny’s on the dollar for gov & airlines alike.

    • Grungo says:

      Pennies on the dollar? Not even. More like a week’s worth of peanuts pretzels and soda (for airlines that even still give you snacks, like Southwest).

  5. Baelzar says:

    Hmm. I wonder who actually ends up paying.

    • Naame says:

      Yes, but there is no way to completely avoid that. The idea here is not to keep prices down. Market competition is supposed to handle that part when it comes to airlines (whether it does that well or not is a different topic). The idea here is solely to ensure safe travel for passengers. That is the only thing which should be used for evaluation of the effectiveness of the regs and fines.

    • SuperSnackTime says:

      That’s a shaky insinuation at best. In the short-run? Hells yeah, the costs get passed along to the customer. In the long-run? Companies that consistently pass along costs will be a less attractive option, and people will defer to other airlines when available. And even if the airline has a monopoly on a route, the increased costs passed along will increase the appeal of other modes of transportation as a viable alternative. There is also a network effect — large fines get covered in the media, get picked up by consumers, and shift perceptions of the airline.

      Well run airlines will sidestep the fines a majority of the time, and not have to pass these costs along to end consumers, thus keeping profits tidy without having to jack up prices in a desperate attempt to protect margins in the short run.

      So…. your point?

  6. nova3930 says:

    Rising ticket prices in 3, 2…..

    • areaman says:

      I don’t accept the premises that:

      a) fines will change the behavior of airlines
      It maybe too hard for the airlines to change their behavior they could just write off the fines as a cost of doing business
      b) prices will go up because of fines
      There’s too many other factors at play. The dollar is strengthening vs the euro/yen/GBP so it’s cheaper to buy fuel, cost of fuel might outstrip currency gains, they could cram more people on the flights and cut back the number of flights, cut back on ‘rewards’, some airlines will go out of business, some airlines will enter the business, etc etc

      But the bottom line is some times airlines have an absolute contempt for their passengers. No amount of fines, EECBs, etc will change this.

      • areaman says:

        Also see “Airlines Made Nearly $8 Billion From Fees In 2009″. Did the fine total $8 Billion? No

    • ZeGoggles says:

      Too slow, count faster. Destinations I frequently visit have gone up a lot. Some places, double the price.

    • bravohotel01 says:

      Continental + United = more fees for everyone!! Yay!

  7. adamstew says:

    “Opponents of the tarmac fines say that it the DOT is giving the impression that it happens all the time, when in fact it does not.”

    If the tarmac delays happen so infrequently, then it won’t matter if there’s a fine. The fine is just there to make sure the airline does the right thing when faced with a situation where there will be a huge tarmac delay.

  8. Naame says:

    “Opponents of the tarmac fines say that it the DOT is giving the impression that it happens all the time, when in fact it does not. “

    This makes no sense to me. If the opponents are correct and it hardly happens at all then that means that the airlines would hardly be fined at all. There is something missing here…

  9. Southern says:

    Doesn’t matter how much you fine them, we (the consumers) wind up paying the fine in higher ticket costs, added fees, etc. Basically it’s not the AIRLINE that’s paying the penalties, but the people that FLY on the airline.

    *Shrug*

    • OletheaEurystheus says:

      ahh but it does matter because with higher fees comes less commercial non business travel which effect the airlines bottom line which results in them DOING SOMETHING about the fact most delays are the airlines fault and have nothing to do with weather these days, but poor resource management,

    • Geekybiker says:

      Well, if all pay the same amount of fine, that is true. They just pass along the cost to passangers and laugh. However if some airlines are better at avoiding fines, they can price lower and will get more business. So there is incentive to not get fines. In any case, higher flight costs without increased margins just means less fliers and less profit.

  10. Kavatar says:

    “Government intervention” has become an overused loaded phrase these days.

    • dreamfish says:

      … usually by those with an agenda who claim the free market solves all problems and would be near-perfect without Government intervention.

    • cmdr.sass says:

      Well, government intervention itself is overused, so here we are.

  11. Polish Engineer says:

    I don’t see this as the administration changing the nature of business intervention. While I’m not a law expert, don’t believe a lot of new laws have been passed. This simply sounds like the regulatory agencies are actually enforcing the rules on the books, aka doing their jobs.

    Just like the Mineral Management Service hadn’t collected oil leases in years under the previous administration because they were bribed with prostitutes and cocaine and the SEC guys were creating porn libraries.

    There is a major difference between changing the nature of government intervention and enforcing rules already in place.

  12. chulo_allen says:

    The question is, has these fines made it any easier for the consumer and has it worked at ensuring the Airlines dont take advantage of the fliers. NOPE

  13. APFPilot says:

    Randy Babitt is the man, I want to get my license replaced just so I have his signature on it instead of Marion Flakely.

  14. DragonThermo says:

    Well, that’s one way to pay for ObamaCare!

    However, I do agree with the opinion that airlines will just increase baggage fees to pay for fines. And flights will be canceled that probably don’t need to be canceled because of threat of fines, stranding more travelers.

    • Kilawat12 says:

      And then consumers will stay away from airlines with high baggage fees and will make it a point to get a different flight on a competing airline. Consumers win in the end

  15. sufreak says:

    Maybe these fines will work, since the airlines don’t seem to give a crap about their customers. They have a business model where they are in charge, not the paying customer.

    Perhaps the airlines should look at the causes of these delays, the inefficiency, and fix the problem. And stop rewarding the people in charge even if they screw up. Thats why your costs have gone up. Greedy executives.

  16. NeverLetMeDown says:

    Really, it’s pretty trivial $10MM in add’l fines doth not a story make.

  17. conedude13 says:

    but that’s just saying that they got fined. is there a new reason for the extra fines, or are the fines just more expensive because the price went up for the fines? and why are they getting the fines in the first place? i’ll have to come back here when i have some more time. so many questions. :P

    personally, if it makes the airlines do a better job, i’m all for it. but if its going to jack up the cost of flying, then me no likey. i usually use southwest and haven’t heard anything awful about them. yet that is. :P

    note for future me:
    is this for every airline that flies in the us or into the us?
    what rules/laws/regulations are they breaking in order to get these fines?

  18. sickofwhiners says:

    The majority of these fines are safety related, not consumer related. For instance, Southwest got hammered last year for Safety violations to the tune of 10.2m on their aircraft maintenence. Commercial airline travel in the US is worlds ahead of the rest of the planet in terms of safety, which is a good thing. Its been that way for a long time, nothing about it is recent.

  19. crazydavythe1st says:

    “So, $2.6 million in fines? How much would it cost to implement these safety changes?”
    “$2.7 million”
    “Oh, good. Carry on.”

  20. nerble says:

    Thanks Obama! I’m really glad in no way, shape, fashion or form could the airline pass these fines back to me, the consumer, by increasing ticket prices or ridiculous random fees like for having luggage!