The Airline Regulation Dilemma

Where should airline “free market” competition end and federal government regulation begin? This question has been debated heavily since the Airline Deregulation Act of 1978 was introduced and changed the complexion of air travel in the United States forever.

Well, let’s start with an easier question: should this industry be regulated at all? The answer is absolutely YES. One of this country’s most vital and valuable assets is our airline industry. It is the industry that drives commerce, connects communities, and directly and indirectly generates the majority of tourism dollars. All of these elements are key drivers of our federal, state and local tax revenues.

Government investment, oversight and, yes, regulation have a place in a free market economy. In the case of our airline industry, there are a number of positive areas to regulate and support with our valuable tax dollars. We must enforce very high airline safety and operational standards. We must protect the rights of both passengers and employees that are face-to-face every day in our airports and on our commercial aircraft. It is critical that we make needed new investment in our outdated and inefficient air traffic control system. We also must continuously invest in airport and airline security and risk mitigation to stay ahead of the bad actors in our world.

But misguided government intervention can also have a negative impact. For example, placing undue financial burden on airlines for uncontrollable factors, such as weather disruptions. And anytime regulation creates unfair or unequal competitive market conditions, it is certain to be a bad policy.

In 2015-2016, I had the privilege of working with a number of travel industry colleagues on writing and passing H.R. 636 –the FAA Extension, Safety, and Security Act of 2016 in the 114th Congress. I believe this was an example of positive legislation that was passed into law with bipartisan support in both the House and the Senate. It included such measures as the “three-hour tarmac rule” and “no voice calls on planes,” each of which ensured a better traveling experience while creating fair and equitable standards for all airlines to follow. 

Recently, the Washington Post reported that in a reflection of passengers’ growing dissatisfaction after waves of pandemic-era flight cancellations and delays, the Biden administration wants airlines to compensate passengers for travel disruptions. Led by Secretary Pete Buttigieg, the Transportation Department is launching an effort to set new rules that would guarantee compensation when cancellations or significant delays occur that are under airlines’ control. The proposal would mark a significant shift in how the Transportation Department regulates air travel, providing protections similar to those of European and Canadian travelers. Current aviation rules only require ticket refunds. The proposed changes come amid growing calls for regulators to better protect airline consumers after pandemic-related strains put a spotlight on the industry. However, there is one phrase that is key to this proposal: “under airlines’ control.” The true test will be whether any proposed regulation can clearly define these conditions, all while doing this equitably given the markets and geographies that various airlines serve.

Also reported in the Post, Republicans on the Senate Commerce, Science and Transportation Committee, including the highest-ranking Republican on the committee, Sen. Ted Cruz (R-Texas), blasted the proposal. “Instead of addressing the many pressing challenges facing our aviation system, the Biden administration is making obvious that their goal is to re-regulate every single facet of passenger air travel,” said Christian McMullen, a spokesman for committee Republicans. “These unnecessary regulations will reduce competition, access to certain markets, and drastically increase costs for travel.”

Cruz and his Republican colleagues are right but also wrong. Once and for all, we desperately need to prioritize the development of a comprehensive long-term national aviation policy that includes modernization of our air traffic control system. But to complement that investment, we need to also set better standards for customer remedies appropriate for the U.S. marketplace. We don’t need to necessarily match the EMEA and Canadian policies, but we do need to standardize and require clear information and limited financial support for travelers – and real consequences for airlines who are not properly mitigating service disruptions. It is a small price to pay for the positive impact on consumer confidence in our airline industry.

So, let’s use H.R. 636 and the three-hour tarmac rule as a guide and implement a new round of policies and investments that both fairly reinforce traveler confidence and support the well-being of our country’s valuable airline system.