01.24.2012 - published in Aviation Daily

DOT's War Against The Airline Industry

By Darryl Jenkins, Chairman, American Aviation Institute

I've watched over a hundred airlines fold or merge since deregulation, and administrations come and go.  But what I see from this DOT is more destructive to the airline industry's viability than anything I have witnessed before.  DOT has become the biggest competitor to the U.S. airline industry.

President Obama's DOT takes credit for aggressive rulemaking, damn the consequences. Its re-regulation of airline sales and operations overturns long-standing policy with little consideration to compliance costs, consumer consequences, and common sense.

Airlines are now deregulated in name only.  DOT exerts growing control over all aspects of airline sales, service and operations.  In the past, government policy nominally weighed the demands of consumer advocates against the economic objectives of travel accessibility and affordability. That balance has disappeared.

Our analysis shows that 80% of airline costs are now regulated.  We estimate that DOT's non-safety regulations drive more than $5 billion in annual cost for the industry, an average of $17 for each round-trip ticket purchased by consumers. Even higher costs are coming with more new costly regulations.

Since 2009, DOT has engaged in a spasm of airline rulemaking, encouraged by a narrow band of consumer advocates.  Deficient economic analysis, ambiguities and about-face changes in enforcement policy have increased consumer harm and jeopardized the industry's health.  DOT aggressively sets timelines, yet stakeholders and regulators soon discover the impossibility of compliance targets.  In some cases, DOT quietly postponed deadlines or withdrew enforcement.  In others, DOT dug in its heels and forced expensive legal challenges.  Last September, the Government Accountability Office identified serious problems in DOT's consumer regulations and enforcement.  And the industry's legal challenges have been encouraged by rejections of DOT's rulings as "arbitrary and capricious" by circuit courts.

DOT's witch-hunt depends on media attention to fuel its ever-growing bureaucracy.  In January 2009, five lawyers comprised DOT's aviation enforcement staff.  Today, more than 45 DOT attorneys scour airline sales and operations for technical violations of rules, handing out fines at a staggering pace without any consideration of actual harm.  More inspectors mean more fines, and DOT claims that more fines justify new regulations. More regulations, in turn, mean more staffing, accelerating a dangerous cycle that continues until Obama and Congress recognize the cost for passengers and the economy.

It's easy to see that negative impact.  Our research, consistent with GAO's independent findings, found that on-board delay rules effective in 2010 caused a sustained 42% increase in bad-weather flight cancellation rates. The industry faces billions in new compliance costs while consumers face higher cancellations, fares and frustration. Last November, we estimated that DOT's new consumer rules cost the industry $1.7 billion annually.  We showed DOT's rules raise fares and reduce demand across all 250 U.S. cities in our analysis.

DOT's actions cause irreparable harm, particularly when airlines already face economic stagnation and rising oil prices.  Airline profitability is critical to maintaining small community links alongside stronger major-market service.  The industry's death by a thousand cuts has profound implications for the public and for small communities.

Consumers benefit when regulators conduct proper analyses, minimize compliance cost and re-evaluate rules over time.  FAA has demonstrated collaborative safety rulemaking with outstanding results. We are experiencing the safest period in aviation history. Yet DOT rejects the FAA's approach of advance consultation, evaluation of alternatives, and information exchange.  Collaboration doesn't generate as many headlines.

With a balanced approach, DOT could meet its consumer objectives without collateral damage.  Minor rule changes - such as increasing the three-hour domestic tarmac rule to four hours - would significantly reduce flight cancellations in bad weather. Even the Department's own economic analysis confirmed a four-hour domestic standard would have higher benefits.

For decades DOT leaders prioritized competition, efficiency and reasonable consumer protection to balance industry, consumer and economic objectives. The industry flourished, with new airlines, new competition and lower costs for consumers.

Now, DOT's rulemaking machine dismantles that progress with negative implications for industry, tourism and the public. In a competitive world, the airlines are not helped when their own government is working against them at every step.