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Shining a light on airfares
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September 18, 1997: 4:36 p.m. ET
Consumers Union presses airlines to improve disclosure on ticket prices
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NEW YORK (CNNfn) - Airlines and travel agents will have to tell you the lowest available airfare on a flight when you buy tickets -- if a consumer advocacy group gets its way.
Consumers Union, publisher of Consumer Reports, is petitioning the Department of Transportation to require the fuller disclosure to open competition and lower prices.
"When the consumer is uninformed, it's to the seller's advantage," said Mark Silbergeld, co-director of the Consumers Union's Washington, D.C., office. "It's like buying rugs in a Morrocan souk."
But some carriers, including Trans World Airlines and American Airlines, argue people can already get the information by simply asking for it - and that a change will raise prices and mislead consumers.
"This is not going to help anybody," said Tim Smith, a spokesman for American. "I understand [Consumers Union] is trying to help people, but this shows they have a lack of understanding of how things work."
Meanwhile, airline analysts doubt the rule change would have a big impact on the industry or pricing.
"It's typical do-gooder work of a consumer group that won't do much," said John Pincavage, senior vice president at Dillon, Read. "It's more of an imagined than a real benefit."
The DOT is asking for comments but hasn't taken any action on Consumers Union's petition. There is no date for a decision, said Bill Mosely, a DOT spokesman. The agency could dismiss the petition or initiate a new rule if it thinks the idea has merit.
Most airlines sell blocks of tickets on a flight at different prices depending on demand and the timing. The price might start out at one level one week and then move to another level.
As a result, Consumers Union argues, ticket prices might vary by hundreds of dollars on a given flight. A study by Consumer Reports showed that callers got price estimates ranging from $504 to $1,324 for one flight between Boston and Houston.
Consumers Union proposes that ticket sellers be required to give the lowest and average prices.
"It's opportunistic pricing," Silbergeld said.
But the airlines contend that information on the lowest prices already exists on the Internet, through services such as Travelocity.com and bestfares.com. The DOT also started making available information on the average quarterly lowest prices on its website, Mosely said.
Smith said the airline industry is one of the few where a person can comparison shop with one phone call.
"By definition of 'Economics 101' it's a perfect marketplace," Smith said. "That's why it's so competitive: it's very easy to compare prices."
Critics argue that average pricing over six months can be misleading. Darryl Jenkins of the Aviation Foundation testified to a House subcommittee that an average price might not come close to real ticket costs. For example, on a flight where some people paid $400 and others paid $100, the average is $190 -- nothing close to the actual fares.
TWA estimates the proposed rule change could raise costs as much as $300 million a year. That increase would inevitably get handed down to customers, the airline said.
Pincavage said it could take the DOT years to wade through the time-consuming, rule-making process.
Timothy Ross, an analyst with S.G. Warburg, said it will be difficult to impose new rules on pricing because ticket availability and demand are so intertwined.
"In theory, it sounds like a good idea, but in practice it's going to be very hard to enforce," Ross said. "The landscape of what is available at what price is continually shifting."
-- Martine Costello
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