Extraterritoriality vs. Airline Alliances — we need new rules

The Department of Transportation (DOT) proposed rulemaking (NPRM) has stirred up plenty of controversy. Any time an agency of the government takes up the mantel of consumer protection, business is going to cringe. Ultimately, we know what’s good for customers is normally good for business. But these new proposed regulations are crossing a new line — international borders.

Some of the most unified complaints lodged against the DOT NPRM have come from the International Air Transport Association (IATA) and scores of foreign airlines. They claim in their comments to the proposed new rules that the U.S. government is going too far by applying U.S. rules to foreign carriers.

It is important for the Department to consider the implications this NPRM raises in terms of U.S. and international law. As written, the NPRM proposes to apply U.S. laws on foreign airlines’ operations on foreign soil on such matters as fares, reservations, contingency planning, advertising and customer service. On its face, this is an extraterritorial application of U.S. law on foreign carriers that cannot be justified by the Department’s stated broad mandate to ensure safe and adequate transportation and/or to address unfair or deceptive practices by the airlines.

Consumer rights to honesty and freedom from unfair and deceptive practices do not stop at borders, or should not. IATA specifically listed a group of DOT proposed requirements that deal with airline passengers and that strike at the core of confusion created by the airlines’ rush into airline alliances and joint ventures. These are many of the issues that the world of code-sharing and airline alliances have left unanswered.

The [DOT] Proposal as drafted is replete with provisions that appear to be extraterritorial on their face or application. These include:

• Requirement that airlines flying to and from the U.S. adopt a Customer Service Plan complying with minimum DOT requirements (14 CFR Section 259.2;259.5)
• Requirement that airlines flying into and out of the U.S. incorporate their tarmac delay and customer service plan in their contract of carriage (14 CFR 259.6)
• Requirement that carriers flying into and out of the U.S. include notice of baggage fees on their website and on their ticket (14 CFR 399.85)
• Requirement that carriers flying into and out of the U.S. disclose flight information to passengers in a certain manner (14 CFR 234.11)
• Requirement that carriers flying into and out of the U.S. not increase the price of the ticket after purchase (14 CFR 399.87)

None of the the above requirements infringe on the extraterritoriality of any national airline be it from Austria or Australia. Each can have a caveat with a note saying, “applies to flights to, from or within the U.S.A.” Voila! (to be international) Problem solved.

The bigger problem is that of which airline rules apply when and to whom based on whose contract of carriage. If a consumer has a problem during travels on airlines linked by airline alliance agreements and antitrust immunity, what rules apply.

Do the rules of the airline that issued the airline ticket apply?
Or should the rules of the code-share airline whose flight number is on the ticket apply?
Or should the rules of the airline actually providing the aircraft apply?

These questions, while theoretical for readers of this page, are real for passengers caught in this web of no information and the never-never land of airline alliance customer service. While traveling, should there be a single point of customer service with an international toll-free number and translation services required?

European airlines have far different rules than those in the U.S. Carry-on baggage is one of the most obvious. Again, whose rules apply? I think there are general agreements that the rules of the airline that issues the airline ticket applies, but I really don’t know. I do know that, in reality, when faced with a mandate from a foreign “partner” airline to relinquish a carry-on bag with one’s computer or other valuables, there is little choice. The added pressures of connecting flights and a strange language exacerbate the problems.

The airline have created this problem. They are the ones who have been rushing into international alliances and fighting for antitrust immunity that blur national lines. They are now faced with the unintended consequences of trying to unify ticket sales across businesses and borders — the need to unify customer service rules and translate them to passengers.

DOT is right on the money as they hold every airline management’s feet to the fire and insist on the internationality of rules that the new international airline alliance order has created.