DOT Adopts Final Rules Governing Ancillary Fee Disclosures

After an almost three-year process, the DOT has adopted a final rule governing ancillary fee disclosures by airlines and advisors. (called “ticket agents” in the statutes).

Like the ancillary fee arrays to which they apply, the new rules are very complicated. Note that the present rule does not apply to metasearch sites that do not sell airline tickets but display airline flight search options directly to consumers. DOT will decide whether such systems are ticket agents that must disclose ancillary fee information required by this rule, or otherwise, in a future rulemaking. DoT also adopted a final rule governing refunds; we will discuss that rule in a subsequent article.

Most of the new ancillary fee rules also do not apply to “corporate travel agents,” defined by DOT as a “ticket agent engaged in providing travel services to the employees of a business entity under a written contract with that entity for the business travel of its employees.” Advisors handling corporate travel without a written contract are subject to the new rules when they become effective.

Compliance deadlines for travel advisors
Advisors may not welcome all these complex requirements, but there is considerable time when the industry can adapt. To understand what that means, it is necessary to understand some important definitions:

Ancillary Service Fee: the fee charged for any optional service related to air travel that a U.S. or foreign air carrier provides beyond passenger air transportation. Such fees may include but are not limited to, fees for checked or carry-on baggage, advance seat selection, access to in-flight entertainment programs, in-flight beverages, lounge access, snacks and meals, pillows and blankets, and seat upgrades. 

Critical Ancillary Fee: any ancillary service critical to consumers’ purchasing decisions. 

For now, DOT has determined that Critical Ancillary Fees are only fees for:

•    transporting the first checked bag, the second checked bag, or a carry-on bag, and 
•    the ability for a consumer to cancel or change a reservation.

The rule text indicates that the Ancillary Fees deemed “Critical” by DOT will be expanded through future rulemaking.

A further indication of the complexity of the rules, driven by the underlying complexity of the fare structure and the associated ancillary fees that airlines have adopted, is that:

Policies for critical ancillary services must be disclosed before ticket purchase when a search is conducted online, but are not required to be disclosed with the fare and schedule. 

The information disclosed must be accurate, clear, and conspicuous. Fees cannot be displayed through a hyperlink, but disclosure is permitted using pop-ups, expandable text, or other means. 

The final rule requires that: 

(1) airlines must provide required Critical Ancillary Fee data to advisors not later than six months after the rule’s publication date [in the Federal Register] or by October 24, 2024, at the latest; 

(2) airlines must comply with all the other rules within 12 months of publication or April 30, 2025; and 

(3) travel advisors that are not “small entities” under the Small Business Administration rules (those with annual commission/fee revenues of at least $25 million) must be in full compliance by 18 months after Federal Register publication, and, finally, 

(4) travel advisors that are SBA small entities (the vast majority with less than $25 million in annual commissions/fees) must comply by 24 months after publication.

Of course, it’s not quite that simple. Once possessed of the airlines’ fee data, there may be competitive implications for advisors who choose to defer their disclosures until the outer limit of what is permitted by DOT’s regulation (two years). The scheme set up by the regulation seems likely to generate much confusion among consumers during the multi-phase implementation process. 

If I were the airlines, I would seek an immediate Business Review Letter from the Department of Justice to permit cooperation among all interested industry parties such that the implementation process is consistent across carriers and for all advisors. This seems like a subject most ill-suited for competitive maneuvering among the airlines and the thousands of travel advisors. 

Opting out – maybe
DOT has made it clear that disclosure of the Critical Ancillary Fees may only be omitted from online platforms (including mobile applications) if, in response to an inquiry, the consumer “affirmatively indicates that no one in the party intends to travel with bags. The rules do not allow online platform omissions of change and cancellation fee disclosures in any circumstances.

What the rules cover
As before, the pricing rules apply to “any advertising or solicitation … for passenger air transportation, a tour (i.e., a combination of air transportation and ground or cruise accommodations) or tour component (e.g., a hotel stay) that must be purchased with air transportation that states a price for such air transportation, tour, or tour component.”

Under the new rules, the stated price must include all “mandatory charges,” meaning,

all taxes and fees that are required to purchase air transportation on the channel where the advertising or solicitation occurs (e.g., if a fare is advertised online for $100 then that means the fare must be available for the consumer to purchase for $100 online)

As before, the included “mandatory charges” may also “be stated separately or through links or “pop-ups” on online platforms that display the total price, but such separately stated charges “may not be false or misleading, may not be displayed prominently, may not be presented in the same or larger size as the total price, and must provide cost information on a per passenger basis that accurately reflects the cost of the item covered by the mandatory charge.”

But under the new rules, the displayed price may include all mandatory charges and one or more ancillary service fees (i.e., fees charged for any optional service related to air travel beyond passenger air transportation) “in place of or more prominently than a price that only includes all mandatory charges.”

I don’t know how often the advertising technique of percentage-off a base price is used these days, but the new rules say that in such cases any offer of a percentage-off discount for passenger air transportation or for a tour …  or tour component … that must be purchased with air transportation … must make clear at the outset the terms and conditions of the offer, including how the discount is calculated. 

The term “base fare” refers to an amount that includes all mandatory carrier-imposed charges and the terms “flight,” “ticket,” or “fare” must refer to an amount that includes all mandatory carrier-imposed and government charges. “

Thus, percentage-off discounts referring to the “flight, ticket, or fare” must apply the discount to the full fare including all mandatory carrier charges and all mandatory government taxes/fees. The inclusion of government taxes/fees can be avoided by advertising the percentage-off as applicable only to the “base fare.” 

I am speculating here but it seems likely that the distinction between a general percentage off and one limited to the “base fare” is not going to be understood by many consumers.

More definitions
Passenger-specific itinerary search means a search that takes into account information specific to the passenger (e.g., the passenger’s status in the airline’s frequent flyer program, the passenger’s military status, or the passenger’s status as a holder of a particular credit card) that was affirmatively provided by that passenger and information specific to the itinerary (e.g., geography, travel dates, cabin class, and ticketed fare class) that may impact the critical ancillary service fees to be charged or policies to be applied. 

The new rule requires that all advertising/selling of air transportation marketed to U.S. consumers “must offer consumers both the option to conduct a passenger-specific itinerary search and the option to conduct an anonymous itinerary search.”

Details on the use of online platforms
With those principles in mind, the new rules address the use of an online platform (both websites and mobile applications) marketed to U.S. consumers to advertise or sell air travel.

A travel advisor using an online platform “must disclose the standalone fee for each critical ancillary service … when fare and schedule information is provided.” However, an advisor is also free to offer an ancillary service package (a bundle of one or more ancillary services) that includes Critical Ancillary Services. Further, the platform 

must clearly and conspicuously disclose … the accurate fee that applies, if any, for all critical ancillary services. The fee cannot be designated as $0 in circumstances where a critical ancillary service is not available to the consumer but rather must state “not available” or a similar notation. The fee information must be provided the first time that fare and schedule information is disclosed after a consumer conducts a passenger-specific itinerary search or an anonymous itinerary search. The fees cannot be displayed through a hyperlink.

Curiously, the new rules do not prevent the disclosure of non-Critical Ancillary at the same time as Critical Ancillary Service fees. 

There are separate rules for “air tour packages” sold through online platforms: 

when offering a package fare and the carrier providing air transportation is not known, they must “clearly and conspicuously disclose, for a specific itinerary selected by a consumer, that additional baggage fees may apply and that those fees may be reduced or waived based on the passenger’s frequent flyer status, method of payment, or other consumer characteristic.

When the carrier providing air transportation for an air-tour package is known, that ticket agent must provide baggage fee information at the time that the ticket agent discloses the name of the carrier to the consumer.

The standalone fee for each critical ancillary service at the same time fare and schedule information is provided, but an ancillary service package may also be disclosed that includes critical ancillary services if the seller chooses to do so. 

There is a separate rule for U.S. and foreign airlines using websites to market to U.S. consumers that I fear will lead to massive confusion: such websites:

must clearly and conspicuously disclose on its website accurate information on ancillary service fees available to a passenger purchasing air transportation with a clear and conspicuous link from the carrier’s homepage directly to a page or a place on a page where all such ancillary services and related fees are disclosed. In general, fees for particular services may be expressed as a range; however, baggage fees must be expressed as specific charges taking into account any factors (e.g., frequent flyer status, early purchase) that affect those charges. 

Separate rules apply to baggage
All online platforms:

must clearly and conspicuously disclose … before ticket purchase, the accurate weight and dimension limitations that the carrier imposes for a first and second checked bag and a carry-on bag after a consumer conducts a passenger-specific itinerary search or an anonymous itinerary search. 

may clearly and conspicuously solicit information from a consumer before the consumer conducting a passenger-specific itinerary or an anonymous itinerary search for air transportation regarding the consumer’s intention to travel with a carry-on bag, a first checked bag, or a second checked bag. If the consumer affirmatively takes action to indicate that the consumer and all others in the booking party do not intend to travel with a carry-on bag, a first checked bag, or a second checked bag, then the carrier or ticket agent may forego disclosing the fees for that bag with the fare and schedule information …. 

must disclose the baggage policies before ticket purchase … and must disclose information regarding the passenger’s free baggage allowance and fee information for a carry-on bag, a first checked bag, and a second checked bag on e-ticket confirmations … even if a consumer indicates an intention not to travel with a bag. 

must accurately, clearly, and conspicuously … before ticket purchase, the components of change and cancellation policies [ identified in the regulation].

 The change/cancellation policies that must be disclosed are:

(1)    summary of the applicable restrictions and prohibitions to change or cancel a ticket, including any prohibitions or restrictions to obtaining a refund of the full amount paid; 

(2)    summary of the applicable policy regarding the form of the refund for a change or cancellation (e.g., a credit to the original form of payment, airline credits, or voucher) 
(3)    summary of the applicable policy regarding a consumer’s right to, or responsibility for, any fare differential, including whether the consumer is entitled to a refund in fare difference if the consumer changes to a lower-cost replacement flight; and

(4)    if the reservation is made one week or more before a flight’s departure, a statement disclosed clearly and conspicuously on the last page of the booking process on allowing the reservation to be held at the quoted fare without payment, or canceled without penalty, for at least twenty-four hours after the reservation is made, consistent with a carrier’s customer service plan and consistent with a ticket agent’s policy.

NOTE: If the advisor has a policy of not allowing a 24-hour hold or cancellation, that policy must be disclosed clearly and conspicuously on the last page of the booking process. 

NOTE: if the advisor’s online platform accepts a redirect of consumers to its online platform to complete the booking, it must ensure that the required critical ancillary service fee information … is accurately, clearly, and conspicuously displayed on the first page of the online platform to which the consumer has been directed unless the consumer was provided accurate fee information of critical ancillary services on the directing entity’s online platform. 

The advisor’s platform must also clearly and conspicuously disclose the following notice on any page or step of the booking process in which a consumer is offered a seat selection for a fee: “A seat is included in your fare. You are not required to purchase a seat assignment to travel. If you decide to purchase a ticket and do not select a seat before purchase, a seat will be provided to you without additional charge when you travel.” 

Finally, online platforms must state the free baggage allowance (including personal items) and the applicable fee for a carry-on bag and the first and second checked bag in text form on all e-ticket confirmations for air transportation within, to, or from the United States, including on the summary page after an online purchase and in a post-purchase email confirmation. That information must reflect the passenger-specific factors on which those charges are based.

Rules for non-online interactions
The same principles apply to in-person and phone interactions with prospective travelers. Advisors “must disclose to consumers, at the time a fare is quoted for an itinerary, that baggage fees (for a first checked, second checked, or carry-on bag), change fees, and cancellation fees apply if that is the case.” The advisor must then ask the consumer if they wish to hear more about the specific baggage fees, change fees, cancellation fees, and any other critical ancillary service fees that apply. 

The information provided must then take into account the passenger-specific information provided by the consumer.

Post-purchase price increases
You are likely aware of the current DOT rule that forbids post-purchase price increases in the fare and other major travel components. DOT has extended that principle to Critical Ancillary Services after the air transportation has been purchased by the consumer, except in the case of an increase in a government-imposed tax or fee. A “purchase” is completed when the full amount agreed upon has been paid by the consumer.

Word to the wise
Advisors in personal and phone interactions with travelers about ancillary fees would be well-advised to keep meticulous records of conversations, particularly if dealing with unknown or infrequent clients.

Additional observations
You may be wondering where all this ancillary fee information is going to be sourced. The answer is that DOT is specifically requiring the airlines to “provide useable, current, and accurate information regarding fees for these critical ancillary services to any entity that is required to disclose critical ancillary service fee information to consumers.” That includes travel advisors. How this will work in practice remains to be seen.

It was predictable that the new disclosure rules governing ancillary fees would, like the fees themselves, be complex. A lengthy period of experimentation and confusion is almost certain to result from this profound change in the rules governing the disclosure of ancillary fee details to consumers.