Southwest Airlines’ December meltdown opened the door for lawmakers and consumer advocates to push for more regulation and passenger protections. But at what cost?
Paul Hudson, president of advocacy group Flyers Rights, said during a hearing of the U.S. Senate Science, Commerce and Transportation Committee on Thursday that there are simple steps Southwest Airlines, other airlines and the industry’s regulators can take to improve the flying experience, especially when weather or technology problems disrupt travel.
At the top of the list is requiring airlines to provide compensation to travelers delayed by more than three hours — something the European Union requires of its carriers, Hudson said.
“Under the current system, airlines are actually incentivized to provide bad service,” he said. “Good service costs money, and bad service saves money and that money can be used for dividends, and stock buybacks and executive compensation.”
Hudson also suggested going back to what he called a “pre-deregulation reciprocity rule.”
“This rule matched empty seats on other airlines with passengers whose flights were canceled or significantly delayed at no extra charge,” Hudson said. “This mitigates delays and consumer harm, is self-executing and rewards airlines with reliable service while penalizing those without.”
He urged the committee to revisit the Airline Deregulation Act of 1978, a law that allowed airlines to fly wherever they chose and charge what they wanted. The National Air and Space Museum reported that “fierce competition” came as a result, driving down fares and making air travel more accessible.
“Unintended consequences lie behind most current air travel dysfunction,” Hudson said. “This can be done by establishment of a bipartisan commission or select committee to study the current state of air travel and propose needed reforms in the next six to 12 months.”
Airlines for America, a trade association and lobbying group based in Washington, D.C., has argued that many regulations are costly and unnecessary, hurting the industry’s economic growth.
U.S. Sen. Ted Cruz questioned Clifford Winston, a microeconomist at the Brookings Institution, about whether consumers would be better off or worse with additional government regulations. Winston used one of Southwest’s biggest selling points as an example.
“Suppose we say that all checked luggage is free,” he said. “On the face of it, that sounds like a good thing. People want to check their luggage, don’t want to pay extra fees. Well, airlines are going to incur costs from that. This is all airlines, not just Southwest. This is a competitive industry. They can’t incur these costs. They have to pass them on and they will with higher fares.”
Other committee members pressed for Southwest to consider the plight of passengers.
Sen. Tammy Baldwin of Wisconsin pleaded with Southwest Airlines chief operating officer Andrew Watterson to prioritize customers. She said a passenger wrote to her after spending about $700 to drive 23 hours home to Milwaukee from Florida.
She questioned whether Southwest planned to move forward with stock buybacks. Since early 2020, the company has not.
“We did recently declare a dividend,” Watterson said. “We did that after we felt like we had enough funds to properly fund both paying our employees top industry wages or at least accruing to them for funding, giving generous benefits funding the purchase of our aircraft, funding for our IT department and also paying down our debt.”
Hudson pointed out that Southwest chose to be the first airline to restore dividends, paying $428 million to shareholders in December.
Senator Edward Markey, D-Mass., pressured Southwest to provide additional cash payments to inconvenienced travelers, rather than 25,000 frequent flyer miles. He called rewards points an “empty gesture.”
A lobbyist for the airline industry told the committee that what’s really needed is sufficient and stable funding to allow the Federal Aviation Administration to update the nation’s air traffic control technology.
“Carriers are doubling down on our efforts to improve our operational performance,” said Sharon Pinkerton, senior vice president for legislative and regulatory policy for Airlines for America. “But ensuring operational reliability is the most critical action airlines and government can take together for a better customer experience.”