A Dive into the Proposals Shaping the Future of U.S. Air Travel

On January 30, 2024, the American Economic Liberties Project in conjunction with the Vanderbilt Policy Accelerator revealed its new proposal for comprehensive reform of air transportation regulation. The event was held at the National Press Club in Washington DC and was heavily attended.

The joint authors of the proposal are William J. McGee, Senior Fellow for Aviation and Travel at the American Economic Liberties Project, and Professor Ganesh Sitaraman, the New York Alumni Chancellor’s Chair at Vanderbilt Law School and Director of the Vanderbilt Policy Accelerator.

The core problems to which their proposals are addressed are likely familiar to travel advisors: Air travel in the United States suffers from serious problems.

For passengers, the flying experience has become a source of frustration — from smaller seats and junk fees to delays and cancellations. Passenger fury is often taken out on airline and airport workers, some of whom are overworked and face unsafe conditions. Meanwhile, the industry itself is unhealthy. Boom-and-bust cycles are common, leading to bankruptcies and bailouts. Competition has become more and more limited, both between carriers and at airports. The many carriers that existed in the 1990s have now consolidated down to a mere handful. Meanwhile, airlines are pulling out of small and even midsized cities, with serious downsides for their economic opportunities.

The authors divided their 22 pages of specific recommendations into four categories:

1. Resilience, Competition, and Geographic Access,

2. Fair and Transparent Pricing,

3. Protecting Passengers and Ensuring Safety, and

4. Oversight and Enforcement.

Within those groups are some dramatic proposals for a radical transformation in how air travel in this country is produced, managed, and regulated. A few highlights will give you the idea:

Congress could place a 30% cap on the percentage of flights an airline can have at the biggest airports.

Limit the sub-leasing of airport slots that control the frequencies carriers can operate at any of the seven slot-controlled airports while aligning slot and gate usage to expand competitive opportunities.

Consider banning, majority-in-interest clauses in airport contracts that allow an airline with more than a certain percent of an airport’s business to block capital expenditures at the airport.

Replace the Essential Air Service program with either (1) a “Draft Pick” system in which Congress would require the biggest airlines to choose the lower-volume cities that they would serve at regulated, affordable rates, OR (2) a “Regional Conference System,” wherein Congress would designate in each region a single carrier as the exclusive provider of scheduled air service to smaller markets with prices on the regional flight regulated to prevent monopolistic exploitation.

Impose limits on the share of airline ownership held by common investors.

Require the biggest airlines and their regional partners to develop crisis management plans that specify how they would operate in the event of a crisis like another pandemic, war, cyberattack, failure of IT systems, terrorist attack, or serious weather event.

Create an Air Innovation Fund to support the research and development of new technologies.

Restore mandatory offering of interline services when seats are available, and passengers are in need.

Ban price discrimination within airplanes; simplify classes of service and set minimum uniform standards for each class; require transparency on fares and fees.

Among the more far-reaching proposals are those related to airline loyalty programs where a tiered set of proposals seeks reform by: (1) banning airline loyalty programs outright and prohibiting airlines from engaging in credit card co-branding systems that detract from their core business, (2) standardizing the terms of points programs, or (3) banning changes to airline programs that have retroactive effects, such that airlines cannot devalue points, (4) mandating a fixed, transparent exchange rate between points and dollars, (5) banning charging more for points than their value, (6) banning charging fees for using or transferring points, and (7) requiring that all seats and other fees (e.g., upgrades, baggage) can be paid via points or dollars, with no blackouts or limits.

One safety-focused recommendation is to direct that all aircraft maintenance work undertaken on behalf of U.S. air carriers occurs in the United States in compliance with FAA regulations and is subject to FAA and TSA oversight.

Congress should fully fund the NextGen Air Traffic Control system and allocate costs between airlines; airports; passengers; and local, state, and federal government agencies.

Establish air passenger protection regulations, which would require mandatory and prompt compensation for flight delays, cancellations, involuntary bumping, and mishandled baggage; mandate convenience rules including for families traveling with children and persons with disabilities.

Require minimum standards for economy-class seat sizes.

Mandate child seats for all passengers under 2.

Direct all U.S. air carriers to maintain 24/7 call center access, including limits for reasonable wait times and access for passengers with disabilities.

Repeal the Trump-era rulemaking that weakened DOT’s ability to protect passengers from unfair and deceptive practices.

Empower state attorneys general with authority over U.S. airlines to address unfair/deceptive practices under state law that the Federal Aviation Act now pre-empts

The one element of these proposals that most surprised me was the absence of a change in the Federal Aviation Act to permit private rights of action by consumers against the airlines. It is early days, however, and this could be added later if the proposal makes its way into federal legislation.

It is obvious that none of this is going to occur quickly, if at all. Historically, the airlines have vigorously resisted ideas like these and can be expected to do so again. That said, change can’t happen if an effort isn’t started. Interesting times are ahead in our industry.