Airline Industry Challenges and Government Response Overview

The airline industry struggles with customer service due to deregulation and prioritizing profits over passenger experience.

### Navigating Airline Challenges: Government Efforts to Improve Passenger Experience
* ✈️  The narrator expresses common fears associated with flying, such as **lost luggage, flight delays, and cancellations**, but notes that the federal government is taking steps to **improve the situation**.
* 📉  In December 2022, Southwest Airlines faced a major breakdown, **canceling 17,000 flights and stranding 2 million passengers** during the holiday season, highlighting ongoing issues in the airline industry.
* 📜  The deregulation of the airline industry in 1978 aimed to **increase competition and lower prices**, but it also led to a **decline in service quality** as a few major airlines now dominate the market, controlling **about 70% of the industry**.
* 🏢  The Biden administration is stepping in to enforce new rules, including **automatic cash refunds** for canceled or significantly delayed flights, which airlines had previously avoided by issuing **vouchers**.
* 💵  A new rule also mandates that airlines must **refund passengers for services not rendered**, such as Wi-Fi or seat selections that were not available, ensuring consumers **receive their money back**.
* 🛑  The Department of Transportation is also addressing "junk fees" by requiring airlines to **disclose all fees upfront**, allowing consumers to make **more informed comparisons** when booking flights.
* 👨‍👧  Proposed regulations include ensuring parents can **sit next to their children under 13 without additional charges**, with a dashboard created to help **compare family-friendly policies across airlines**.
* ⚠️  Despite these efforts, significant challenges remain in the airline industry, such as **staffing shortages and high operational costs**, indicating that while improvements are being made, **more structural changes are still needed**.

Narrator: Whenever I book a flight, I sort of play through a sliding scale of unfortunate scenarios. I worry that my bag will get lost, or that my flight will be delayed, or maybe it'll just be canceled altogether. The good news is that help may be on the way. The federal government is making some decent efforts to make flying suck a little less. Over the past few years, there have been some pretty high-profile airline meltdowns. So in 2022, Southwest had this giant breakdown, and about 17,000 flights were canceled, and 2 million passengers were stranded. And this was in December, during the holiday season. So there's no one reason why airline travel sucks so much. But an important thing to look back on is that the airline industry was deregulated in 1978 under Jimmy Carter. So before that, the government regulated airlines. They thought it was an essential service. They kind of controlled how much airlines could charge.

Then, in the '70s, there was a movement to deregulate the airlines. The idea was that there would be more competition and prices would go down. To some extent, that's true. Once the airlines were deregulated, a bunch of new entrants jumped in. Prices did go down, but also the level of service has really changed. Narrator: Business Insider's Emily Stewart has spoken with airline experts to help uncover the reasons for hiccups in the industry. We've also seen a lot of waves of consolidation of the airlines. So while there may be a lot of airlines, only a handful of airlines really kind of rule the industry. Narrator: And that's Delta, American, United, and Southwest. They control about 70% of the industry. So as much as it feels competitive, it's not. They kind of can do whatever they want in terms of booking, in terms of prices.

They've also created these hubs that make it really hard for airlines to compete. You maybe experienced this in real life, where, let's say you're going to a smaller location, and you have to fly through this hub that's way out of the way. And part of that is because of deregulation. Narrator: When airlines are left to their own devices, they don't always do what's best for their customers. Ultimately, they're for-profit companies. They answer to shareholders, and what that means is that they want to make as much money for their shareholders as they can, not necessarily that they want to provide the best experience for their passengers. We probably need big structural change, I think, to really fix the airlines. But there is some help on the way right now, with the Biden administration really trying to step in here and say, Hey, airlines, you guys have screwed up a little bit too much. Now, we have to be in charge a little bit more.

Narrator: This is sort of an ongoing cycle with airlines throughout their history. They screw up, consumers complain, and finally the government says, OK, we'll hop in and do something. So kind of the biggest thing that the Department of Transportation has done is to implement this new rule around cash refunds. Narrator: What it basically says is, let's say you book a flight and it gets canceled, or it's significantly delayed by many hours, or it's significantly changed by many hours. The airlines have to issue an automatic refund, and they have to do it in cash or credit card. Before, what a lot of them were doing was issuing you a voucher. And that kind of sticks you into a loop with an airline that maybe you're mad at, right? You are on a Delta flight, it gets canceled, you get a voucher, suddenly you have to keep flying Delta. And maybe you saw an American flight

that would get you to your destination, and you can't take that flight without spending more money. Narrator: That rule also has a stipulation about returning money on airline services. So let's say you pay for Wi-Fi and plane Wi-Fi doesn't work, or you pay for a seat and the seat is not available. The airline has to give you your money back. Congress also included this in legislation, specifically on the refunds on flight cancellation or delay. The airline industry honestly says that they're OK with the refunds thing. They say, We actually already do this a lot, and we're on board. Narrator: It's important to note that they are still sometimes issuing vouchers when they can. Over the summer, some of them got caught doing that, and the Secretary of Transportation, Pete Buttigieg, issued a statement saying that they could no longer do that. So another rule that the DOT is trying to put through

is one that is directed at junk fees, which is what the Biden administration calls it. That pertains to stuff like checking baggage or changing your reservation or buying a seat. And they're not saying that airlines can't charge these fees, but what they're saying is that they have to be honest about those fees up front. The reason they're saying that is, if I am booking a flight, and let's be honest, most of us are booking the cheapest flight that we can find, I'm trying to compare prices. Narrator: And when the prices aren't put up front, it's hard to compare prices the right way. Maybe you see a flight for $200, but by the time you get through all the fees, it's $350. You would've been better off booking a different flight. The airline industry does not like this rule. They're actually challenging it in court, and right now, it is caught up in the courts.

What they say is that it's really kind of outside of the jurisdiction of the Department of Transportation, and they also say it will confuse consumers. Narrator: Basically, what their case is, is if a customer is on a travel website and looking at all the fees, they'll be too confused to be able to compare all the prices and understand what's going on. Honestly, you have to figure there's some sort of design fix for this. It can't be that hard, and it can't be that confusing, just to tell me, Hey, this flight does not include a bag even on the flight. And if you want to bring a bag with you, it's going to be an extra $40. So that, again, is kind of caught up in the courts right now. And you also have to remember there are elections coming up. And the Department of Transportation is moving pretty quickly right now to get a lot of rules in place.

But if there is a change in administration, it's not entirely clear where some of this stuff will end up. Narrator: The DOT has also proposed a rule on parents sitting next to their children. Parents won't be charged to sit next to their kids who are 13 and younger. Some airlines already do this, but not all of them. And, you know, I think it's fairly understandable for parents who have a kid who is 5 or 8 or 11 to want to sit next to their kid and not just hope that a kind stranger on the plane will switch seats with them. Narrator: The rule has been proposed, and it hasn't been finalized yet. But the airline industry does point out that some airlines already do this, and all of them say that they make their best effort to seat families together. The DOT put together a dashboard that helps people compare different service fees across airlines. It tells you which companies

let families sit together for free or rebook for free if there's a delay or cancellation that's within the airline's control. This obviously doesn't fix all of flying. Even for people who are super informed about their rights, it doesn't stop airlines from trying to hand over a voucher or charging a bunch of confusing fees. Narrator: There are still plenty of problems with flying. For example, the FAA is short thousands of traffic controllers, and that affects scheduling as well as safety. And then there is a litany of other issues. The airport is super expensive, security lines can be long. You know, a lot of these changes that the Biden administration has made are kind of nice on the margins, right? I don't think anybody will argue with the idea that they'd like to understand fees a little bit better or that they should get their money back if they don't get on a plane. Narrator: At the same time,

We probably need some more structural changes, and that doesn't look like it's on the menu anytime soon.

Air Travel Sucks More Than Ever, Now The Government Is Trying To Fix It | Business Insider Explains

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The narrator expresses common worries about flying, such as lost bags and flight cancellations, and notes the government's efforts to improve the situation.

The airline industry's deregulation in 1978 led to lower prices but also a decline in service quality.

A few major airlines, including Delta, American, United, and Southwest, now dominate the industry, controlling about 70% of it and reducing true competition.

The Impact of Airline Deregulation and Government Intervention

Airline hubs make competition difficult, often forcing travelers to take out-of-the-way routes.

For-profit motives drive airlines to prioritize shareholder profits over customer experience.

The Biden administration is stepping in with new rules for automatic cash refunds for canceled or significantly delayed flights, aiming to hold airlines accountable and improve customer satisfaction.

Airlines are required to refund customers for services not provided, such as Wi-Fi or seat reservations.

The Department of Transportation is pushing for transparency in airline fees, aiming to provide customers with clear upfront pricing.

The airline industry is challenging this rule in court, as it conflicts with their current practices.

Department of Transportation's Proposed Rules for Airlines

The Department of Transportation (DOT) is facing criticism for potentially confusing consumers with travel website fees.

They are proposing a rule to ensure parents sit next to their children under 13 without extra charges.

The DOT has also created a dashboard to help compare service fees across airlines, but the proposed rules have not been finalized yet.

Airlines are now allowing families to sit together for free and rebook without charge in case of delays or cancellations within their control.

Despite these changes, flying still presents numerous problems, including a shortage of traffic controllers, expensive airports, and long security lines.

While the Biden administration's efforts to improve transparency and customer service are appreciated, more significant structural changes are needed, but they don't seem to be on the horizon.