Major airlines sue Biden administration over fee disclosure rule

[May 14, 2024]  By David Shepardson

WASHINGTON (Reuters) -Major U.S. airlines are suing the U.S. Transportation Department over a new rule requiring upfront disclosure of airline fees, the latest clash between air carriers and the Biden administration.

Lobbying group Airlines for America, along with American Airlines, Delta Air Lines, United Airlines, JetBlue Airways <JBLU.O>, Hawaiian Airlines and Alaska Airlines, filed suit against the department (USDOT) in the U.S. Fifth Circuit Court of Appeals in Louisiana late on Friday, according to a copy of the suit seen by Reuters.

The USDOT issued final rules last month requiring airlines and ticket agents to disclose service fees alongside the airfare, saying it would help consumers avoid unneeded or unexpected fees.

The airline group said in a statement on Monday the department's rule would confuse consumers and that its "attempt to regulate private business operations in a thriving marketplace is beyond its authority."

The airlines' previously unreported lawsuit calls the rule "arbitrary, capricious, an abuse of discretion and otherwise contrary to law."

USDOT said Monday it "will vigorously defend our rule protecting people from hidden junk fees and ensuring travelers can see the full price of a flight before they purchase a ticket." USDOT said last month the new rule would result in many consumers paying less for fees when traveling by air.

The agency says consumers are overpaying $543 million in fees annually, and airlines are getting that additional revenue from consumers who are surprised by fees and "then need to pay a higher fee at the airport to check a bag."

Major airlines charge higher fees to check bags if travelers do not pay in advance or wait until the time of the flight. Earlier this year, many large U.S. airlines boosted fees for checked baggage.

USDOT said fees for baggage or flight changes "must be individually disclosed the first time that fare and schedule information is provided on the airline's online platform, and cannot be displayed through a hyperlink."

A plane takes off as seen from inside the newly completed 1.3 million-square foot $4 billion Delta Airlines Terminal C at LaGuardia Airport in the Queens borough of New York City, New York, U.S., June 1, 2022. REUTERS/Mike Segar/File Photo

USDOT also said the rule will end "bait-and-switch tactics some airlines use to disguise the true cost of discounted flights." It prohibits airlines from advertising promotional discounts off a "low base fare that does not include all mandatory carrier-imposed fees."

The airline group called the rule "a bad solution in search of a problem." It said airlines already provide consumers with complete disclosure of all fees associated with air travel before they purchase a ticket.

Southwest Airlines, which expressed support for provisions in the USDOT proposal, did not join the lawsuit.

U.S. airlines collected nearly $6.8 billion in baggage fees in 2022, and $5.5 billion in the first nine months of 2023.

The rule requires airlines to inform consumers that seats are guaranteed and that they are not required to pay extra. Airlines must provide the following notice: "A seat is included in your fare. You are not required to purchase a seat assignment to travel."

The airlines have not challenged a separate rule finalized last month by USDOT that would require automatic cash refunds for canceled flights when passengers choose not to take a new flight.

"Too often, airlines drag their feet on refunds or rip folks off with junk fees," President Joe Biden said last month, arguing the mandate will protect passengers "from surprise fees."

(Reporting by David Shepardson; Editing by Chizu Nomiyama, Bernadette Baum, Bill Berkrot and Michael Erman)

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