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ANALYSIS - Frustrated U.S. airlines face new regulation, fees

WASHINGTON (Reuters) - U.S. passenger airlines are exasperated with tougher regulation and fear their nascent recovery could stall as the Obama administration presses consumer, safety and security initiatives.

A Delta Air Lines jet takes off past a Northwest Airline jets parked at gates at the Minneapolis St.Paul International Airport in Minneapolis, Minnesota October 30, 2008. REUTERS/Eric Miller/Files

Although frustrated at times with the more business-friendly Bush administration, the industry believes stepped-up action under President Barack Obama has been downright punitive.

A series of proposed fees, higher safety fines, new consumer mandates, changes in labor law, and regulatory decisions have amplified industry frustrations. Private grumbling and measured disagreement have given way to blunt public criticism.

But regulators’ agenda has been shaped in part by industry lapses, including the crash of a commuter plane in Buffalo last year and a series of delays in which passengers were stranded in planes on the ground for long hours.

Doug Parker, chief executive of US Airways, told an industry group in Washington recently that airlines want little from government other than to be left alone.

He said some in the Obama administration and in Congress seem “hell bent on changing the rules” and are “making it a lot harder” with fees and operational mandates for carriers to cement financial gains.

“It’s a disturbing state of affairs when we’re out working as hard as we are, trying to improve this business, to not be allowed to do it,” Parker said. “The biggest threat to our viability is government intervention.”

Airlines are sensitive to anything that threatens their recovery, especially with the heavy summer travel season in full swing, passenger demand rebounding, oil prices trending lower, and bullish Wall Street analysts slapping “buy” ratings on their stocks.

Airline shares are up more than 10 percent this year and have outperformed the broader market. But the trend has been uneven, as measured by the New York Stock Exchange’s ARCA Airline Index, illustrating the industry’s volatility despite brightening prospects. For a graphic on share comparison, see

With Congress led by Democrats, the industry expected some turbulence on regulatory and labor issues under Obama. But the agenda was shaped further by events that highlighted industry shortcomings.

The commuter plane crash near Buffalo in February 2009 killed 49 people and exposed gaps in pilot training and work schedules. In response, the government’s emphasis on safety oversight stiffened considerably.

Additionally, embarrassing delays in which planes full of passengers sat on the ground for more than six hours sharpened the administration’s focus on consumer issues.


The December attempt to bomb a Delta Air Lines jetliner in Detroit also hardened the administration’s position on increasing aviation security fees by $1 per passenger per flight, or $700 million annually, beginning in 2012. For years, the airlines have been trying to get the government to fully absorb those costs.

The Obama administration has used fines or the threat of civil penalties more than predecessors to highlight its aviation agenda.

Safety fines proposed or paid since 2009 exceed $22 million. Many involved sloppy record-keeping and missed aircraft inspections. In some cases, the violations were relatively minor, easily remedied and brought to the government’s attention by the carrier.

Fines paid and proposed for consumer-related violations total nearly $2 million over the same period, according to government records. These include allegations that carriers failed to properly disclose full-fare prices in advertisements or did not fully compensate passengers for lost bags.

Airlines face fines of up to $27,500 per violation under a new policy aimed at reducing tarmac delays.

The dollar amounts do not appear to dent the industry, but complying with unwelcome mandates and added oversight can add to operating costs.

Airlines are fighting other proposed government changes.

In May, major carriers represented by their trade group, the Air Transport Association, sued the government over a federal labor law ruling that would make it easier for airline workers to organize.

Delta Air Lines, which was mostly non-union before it acquired Northwest, and JetBlue Airways, whose pilots are not affiliated with a labor group, have joined the suit. A judge upheld the rule, but the carriers may appeal.

US Airways and Delta also have threatened legal action over a Transportation Department decision they say squashed their plan to swap takeoff and landing rights in New York and Washington, a plan intended to boost their appeal to business travelers.

Transportation Secretary Ray LaHood says the administration is mindful of the industry’s financial challenges. But with Congress and families of crash victims pushing for tougher safety standards, and airline consumers, including premium paying business travelers, demanding better treatment, he has made it clear that will not back away from an aggressive regulatory agenda.

One proposed regulation would require airlines to more clearly disclose fees for checked bags and other services, and pay more when denying boarding to passengers booked on oversold flights.

The Federal Aviation Administration, which is under LaHood’s authority, is also preparing a long-overdue rule that would tighten standards on pilot duty time. Airlines do not believe pilots are overworked and that additional regulation in this area could increase costs and disrupt schedules.

“Our top priority, however, will always be looking out for airline passengers, and we will continue working to make sure people are safe and their rights are respected,” LaHood said in an emailed statement to Reuters.

Reporting by John Crawley; editing by John Wallace