New Legislation to Eliminate the Airlines’ Liability Shield

The American Economic Liberties Project has announced new legislation to address the issues created by federal preemption of state law and the related lack of a private right of legal action in the original Airline Deregulation Act of 1978. 

The AELP is a non-profit, non-partisan project – essentially a think-tank – working to “combat monopolistic corporations and the systems that entrench their power.”

The legislation was drafted by William J. McGee, Senior Fellow for Aviation and Travel, and Lee Hepner, Legal Counsel for AELP. It follows the issuance of a letter from the National Association of Attorneys General, in which 38 state attorneys general proposed that Congress allow them to enforce state and federal consumer protections for airline passengers.

You may recall that in 1992 the U.S. Supreme Court held that the Airline Deregulation Act preempted enforcement against the airlines of the NAAG fare advertising guidelines. Morales v. Trans World Airlines, Inc., 504 U.S. 374, 378 (1992). Many other court cases have followed as the courts struggled to draw distinctions about the meaning of “related to a price, route, or service of an air carrier,” the statutory phrase that delineated what was preempted.

The language used by Congress was vague and left open to judicial determination a broad range of subjects that would, taken together, leave the airlines free of meaningful discipline by state laws designed to protect consumers. The net result was that the Department of Transportation was left as the sole arbiter of airline consumer protection. It’s fair to say, I believe, that prior to the pandemic and the conflict over refunds due travelers for airline-canceled flights, DOT’s consumer protection performance was uneven at best. In the pandemic-driven context, it was, and remains, abysmal. Billions of dollars in refunds, clearly owed are still outstanding as 2022 draws to a close.

The NAAG proposal would authorize the state AGs to enforce their consumer protection laws against the airlines. It would shift authority for federal enforcement from DOT to either the Department of Justice or the Federal Trade Commission. AELP’s proposal is even more comprehensive. It authorizes private “rights of action,” (the right to sue airlines directly for alleged wrongs), prohibits ownership of multiple airline interests by Wall Street investment groups, and permits state AGs, courts, and legislatures to regulate and enforce to protect consumer rights. The proposed law is endorsed by the Business Travel Coalition, Consumer Action, the Consumer Federation of America, Ed on Travel, the National Consumers League, Public Citizen, the Public Interest Research Group, and the Revolving Door Project at the Center for Economic Policy and Research.

I am not aware of any other industry that enjoys what AELP accurately calls the “airlines’ liability shield.” Certainly, the travel advisor industry has no such protection. Indeed, as you have hopefully read in prior columns, advisors are frequently treated as fiduciaries in relation to their customers, a vastly greater standard than applies to the airlines.

The goal of the Airline Deregulation Act’s preemption provision was to prevent the states from inserting their own comprehensive regulatory systems in lieu of the federal one that Congress was abandoning. The result of the language chosen has been disastrous for consumer interests. DOT’s episodic and complex efforts to adopt pro-consumer regulations take years to achieve and often fall short of their asserted goals. As we saw with the undoing of the predecessor rulemaking to the pending proceeding on airline refunds, political interference can also stymy effective action. AELP is correct that structural change in the statutory scheme is essential to remedy the vacuum that exists in the protection of air travel consumers.

The AELP move is clearly very impactful. For that reason, it will almost certainly face strong opposition from the airline industry. For the same reason, support from travel advisors will be very important as the legislative process unfolds. The text of the proposed legislation can be read here.