* U.S. appeals court upholds transparency rules for airlines
* Consumer groups, airlines split on what is deceptive
By David Ingram
WASHINGTON, July 24 Airlines can no longer
understate the cost of a plane ticket by leaving taxes and
government fees out of their advertised rates, under new rules
that won U.S. court approval on Tuesday.
The rules are designed to make travel advertising more
transparent by telling customers the total cost of a ticket,
including all mandatory taxes and fees.
A U.S. appeals court turned aside a challenge to the rules
brought by Allegiant Travel Co, Southwest Airlines Co
and Spirit Airlines Inc, and supported by the
industry's trade association.
The rules, which the U.S. Transportation Department
finalized in 2011, say that any price shown in an advertisement
must be "the entire price to be paid by the customer."
Consumer groups supported the idea and wanted to go even
further, taking into account optional but common costs such as
Under the rules, airlines can give a separate breakdown of
taxes and other costs, but it must be in a smaller size than the
total cost and not "displayed prominently."
The companies told the court their preferred practice of
advertising base fares is not deceptive, and that they have the
freedom under U.S. speech rights to tell consumers as
prominently as they wish what the taxes are.
A 2-1 court majority sided with the government.
Evidence in the dispute "sufficiently support the
intuitive conclusion that customers are likely to be deceived by
price quotes significantly lower than the actual cost of
travel," Judge David Tatel of the U.S. Court of Appeals for the
District of Columbia Circuit wrote for the majority.
In a dissenting opinion, Judge Raymond Randolph wrote that
the rules effectively require airlines to bury tax information
in the fine print, with no clear benefit for consumers.
As long as taxes and total cost are labeled, he wrote, "only
a fool would confuse or misunderstand the two."
Taxes and government fees make up about 20 percent of a
ticket's total price, Randolph wrote.
Southwest spokesman Chris Mainz said the company's
advertising has complied with the rules since January, "so while
we're disappointed in the court's decision, it has no further
impact on us."
Spirit spokeswoman Misty Pinson said the airline industry is
"already over-regulated and over-taxed" and that Americans will
pay more for air travel as a result. Spirit has been complying
with the rules, she said.
The airlines had no immediate comment on a possible appeal.
Kate Hanni, director of flyers' rights for FlyersRights.org,
said the new disclosures should have been mandatory all along.
"It's just completely deceptive not to tell people what the full
cost of their ticket is," she said.
The court unanimously upheld two other rule changes that
Allegiant and Spirit, but not Southwest, challenged: a
requirement that customers be able to cancel tickets without
penalty within 24 hours of purchase, if they bought more than a
week in advance; and a prohibition against raising costs like
baggage fees after a customer has bought tickets.
Allegiant and the U.S. Transportation Department did not
immediately respond to requests for a comment on the ruling.
In afternoon trading, Allegiant shares were down about 2.7
percent; Southwest, down some 2.2 percent; and Spirit's shares
fell about 1.7 percent. U.S. markets were lower overall.