Biden Executive Order Mandates Airline Bag Fee Refunds
WASHINGTON—A new executive order from U.S. President Joe Biden will require airlines to refund fees paid to check bags that are significantly delayed, part of a wide-ranging effort to rein in the negative effects of “corporate consolidation” in various industries.
Shortly after the July 9 executive order was announced, the U.S. Transportation Department (DOT) released a notice of proposed rulemaking (NPRM) outlining the specifics of the rule. The DOT said it plans to mandate refunds for bags that are delayed more than 12 hours on U.S. domestic flights and 25 hours on international flights. Currently, DOT requires refunds for lost baggage but not delays.
In addition to bag fees, DOT will also require refunds for ancillary services that were not actually provided, like Wi-Fi or in-flight entertainment that does not work. Currently, DOT’s regulations only require airlines to refund fees charged for optional services that passengers were unable to use because of an oversale situation or flight cancellation.
In a fact sheet accompanying the executive order, the White House described the proposed rules as an effort to combat the effects of consolidation in the U.S. airline industry, noting that four major airlines—American Airlines, Delta Air Lines, Southwest Airlines and United Airlines—control nearly two-thirds of the U.S. domestic market.
The administration criticized how carriers have often raised baggage and ancillary fees “in lockstep,” which it said demonstrates a “lack of meaningful competitive pressure” in the industry. As the number of major airlines contracted over the last few decades, the quality of customer service has declined, the administration alleged, citing DOT data showing that airlines were late delivering at least 2.3 million checked bags in 2019.
Airlines for America (A4A), the trade association representing the largest U.S. carriers, disputed the idea that consolidation in the air travel market has harmed consumers. A4A spokesman Carter Yang said there was an average 3.46 competitors on all domestic U.S. itineraries in 2019, up from 3.33 in 2000. He also pointed out that two brand-new domestic ULCCs—Avelo Airlines and Breeze Airways—have entered the market in 2021 alone, which he said undermines the notion of a lack of competition in the market.
Yang also argued that the evidence shows consumers are not being harmed by higher prices for air travel. U.S. domestic fares have fallen by 24% in the last decade when adjusted for inflation, according to A4A, and fares are currently 16% below their pre-pandemic levels.
“Robust competition in the U.S. airline industry has generated unprecedented levels of affordability and accessibility, benefiting the customer at every level,” Yang said. “There are few industries that match the airline industry’s record when it comes to consumer choice.”
Groups representing consumers applauded the administration for the new proposed rules. Travel Fairness Now Executive Director Kurt Ebenhoch described the effort as “a long-awaited breath of fresh air for the flying public.”
“The airline industry is less competitive than at any time since deregulation and these commonsense consumer protections will start us down the path of restoring fairness for travelers,” Ebenhoch said.