FULL HEARING: Airline Executives Testify About Consumer Fees To Senate Homeland Security Committee

[0:00] shows they have no connection to actual costs that the airlines are bearing fee revenue in [0:11] fact is skyrocketing and these consumers feel it passengers now are forced to pay extra for [0:19] almost everything if you want to reserve a seat there's a fee for that if you want to change or [0:26] cancel your reservation there's a fee for that if you want to travel with a bag there's a fee for [0:33] that too the five airlines here today generated twenty five point three billion dollars in check [0:43] bag fees over the past six years in fact airlines have forced parents to choose between sitting [0:53] apart from their minor children and paying an extra fee we passed a law last may prohibiting those kinds [1:02] of fees the comment period closed in may and the dot has yet to issue a final rule that implements [1:14] that new law but in the meantime the airlines should have respected the intent of congress [1:21] eliminating it and frankly the department of transportation ought to issue that final rule [1:28] right now get it done no more delay now i know the airlines say that they offer lower fares and more [1:42] choices but the fact of the matter is that those lower fares the so-called economy class are basically [1:48] for people who travel with no more than the shirt on their back and the underwear and socks they have [1:57] on and the fees that they inevitably occur when they have to carry a bag on are often confused complicated [2:08] and inconsistent and they are concealed in a way that defeat efforts to do comparison shopping which is [2:18] the essence of competition airlines often conceal these fees making that kind of comparison shopping [2:27] difficult if not impossible and more travelers are searching for tickets without knowing what the final [2:35] price will be until they pay it and some are surprised by concealed charges at the moment they [2:43] are about to board at the gate airlines call the practice of separating separately charging for every [2:51] little thing unbundling frustrated passengers have a different word for it they call it junk sometimes they [3:04] use another four-letter word and understandably they feel that sense of frustration and anger for the past [3:13] year our subcommittee the permit subcommittee on investigation has been investigating how five of [3:19] the most prominent airlines have used these fees to change the way americans travel american delta and united [3:28] are together responsible for a majority of all domestic air travel i think it's about 60 percent with [3:37] southwest that figure that figure is close to 70 percent and frontier and spirit while smaller have pioneered [3:45] new methods of charging their customers some of their latest practices like targeting individual passengers [3:53] with pricing algorithms are likely spreading to other airlines which is the pattern in the industry the [4:01] smaller airlines experiment with a new tactic and it's then mimic or adopted by the larger ones our investigation [4:12] found that in 2023 alone american delta united frontier and spirit collected more than three billion dollars in [4:23] seat fees only seat fees that's not airfare that's just fees for booking a specific seat in advance or selecting a [4:39] slightly better seat and that's an increase of 50 percent from 2018 just six years ago in fact we found [4:49] that over the past six years the five airlines we investigated made more than 12.4 million dollars [4:57] from the many seat fees that they charge now i know they're going to be claims in your testimony of rising costs [5:07] but we found that for check bags the fees are unconnected to any costs in transporting them and it's obvious [5:18] that assigning paid seats is pure profit you don't have to create new seats on a specific flight when you [5:28] charge more we obtained internal documents showing that frontier paid ten dollars to its gate agents every time [5:37] you identify or they identify a passenger whose free personal item is large enough to qualify as a carry-on bag [5:49] requiring a fee up to ninety nine dollars in other words a bounty bag program ten dollars an incentive payment [6:03] so that the consumer would pay up to ninety nine dollars to carry on a bag i call it a bounty bag program [6:10] and spirit has one too when we asked frontier about this program they accused customers who don't pay for [6:19] carry-on bags of quote stealing stealing from the airline it's not surprising given frontiers that frontier [6:31] has estimated this program would generate 40 million dollars in extra revenue in just its first year [6:38] this hostile view of their customers certainly leaves no doubt why complaints are surging our investigation [6:51] also found that airlines benefit by making information about the fees they charge obscure and confusing one [6:58] airline even admitted in our investigation that they hide seat fees from customers until late in the booking [7:07] process because doing so leads to more customers completing their purchase keeping this information hidden from [7:16] customers is working out very well for the airlines not so much the customers last year seat fees accounted [7:24] for 1.3 billion dollars in revenue for united even more than the 1.2 billion dollars they earned from charging [7:35] for bags travelers are quite simply fed up with hidden sky high fees and they are right to worry about [7:45] the future our investigation found that airlines are exploring new ways to charge customized fees to [7:56] each passenger using algorithms and maybe even ai this time of this type of consumer specific pricing [8:05] will make it much easier for airlines to discriminate against particular passengers and to raise fares [8:12] and fees for those airlines that the con that the consumers are suspected to be able to pay more [8:25] once again the airlines are racing to put profits above all else let me conclude [8:34] um by talking a little bit about what has to be done first of all more must be done to address the rising costs of air [8:41] travel and to empower passengers beginning with greater transparency the billions of dollars that [8:49] airlines make in seat fees and other unreported fees must be disclosed to the public the department [8:55] of transportation must swiftly implement congress's mandate that parents be allowed to sit next to their [9:02] children without extra fees attached there's no excuse for additional delay it ought to be done by the [9:11] the end of this year we have to pass legislation including the airline passenger bill of rights [9:18] and the fair fees act which the airline industry has spent millions to lobby against [9:26] and on the issue of transparency i want to know from these witnesses why they are in court [9:32] blocking a bill that was passed by congress a law that we approve that requires greater transparency the fifth [9:42] circuit united states court has blocked implementation because of that lawsuit brought by [9:52] your airline companies if you're in favor of transparency why go to court blocking a transparency law [10:02] it makes no sense and i hope that our witnesses will address those efforts and in fact commit to [10:11] to lift the lawsuit's injunction we also have to continue to investigate the deceptive and potentially [10:22] illegal conduct that our investigation has revealed and i hope that we'll have a prompt response from the [10:30] secretaries of treasury and transportation to my request for investigation finally at the root of the problem [10:40] is a lack of competition i've opposed some of these consolidations the acquisitions and mergers that have occurred [10:48] airlines charge these fees because they can consolidation has enabled for airlines to control [10:55] nearly 70 percent of the market major carriers march in lockstep on these fees and [11:04] we need a review of whether something has to be done to provide for more competition among airlines in [11:13] this industry so thank you to the witnesses for being here today frankly i hope that your responses to [11:20] our questions will be comprehensive and forthright because each of your airlines unfortunately engaged in some [11:29] measure of stonewalling our investigation and i hope that you understand the public deserves answers and [11:36] i hope that you will provide them thank you and i'll turn to senator marshall well thank you chairman [11:43] blumenthal i appreciate you holding this hearing and once again your efforts to protect hard-working [11:48] americans i'm going to save my remarks till after i hear the testimony and get on with this hearing [11:53] thank you i will now introduce the witnesses and swear them in we have with us steven johnson of american [12:09] airlines he is the vice chair and chief strategy office officer there he's been at the airline since [12:18] 1995 and currently oversees american eagle and american airlines cargo robert schroeder of frontier airlines [12:28] is the senior vice president and chief commercial officer he is responsible for frontier's commercial teams [12:35] including pricing and revenue management and network planning and marketing peter carter of [12:43] delta airlines is the chief external affairs officer he oversees international legal regulatory [12:50] governmental affairs and he served as delta's chief legal officer since 2015. matthew klein of spirit [13:00] air airlines is the executive vice president chief commercial officer he oversees the airlines marketing [13:07] pricing and revenue management network planning and scheduling and commercial and operational [13:13] analytics andrew nocella of united airlines is the executive vice president chief commercial officer among his [13:24] responsibilities he oversees commercial strategies product design revenue management and my mileage plus [13:32] it is our custom as you no doubt know to swear in the witnesses before their testimony i'd ask you [13:39] please to please rise and raise your right hand you swear that the testimony you're about to give is the truth the whole [13:46] truth and nothing but the truth so help you god thank you i'll ask the witnesses now to give their testimony uh hopefully within [13:58] approximately a five minute limit thank you mr johnson thank you mr chairman chairman blumenthal [14:07] ranking member marshall members of the subcommittee thank you for the opportunity to testify my name is [14:13] steven johnson and i'm the vice chair and chief strategy officer at american airlines i'm pleased to be here today [14:19] at the request of the subcommittee and i will answer your questions to the best of my ability this hearing [14:26] occurs at a very important time in the airline industry when we are more focused than ever on gaining [14:31] the long-term loyalty of our customers and it has never been more affordable to fly over time overall [14:38] airline airfares have gone down both in inflation adjusted terms and since the pandemic in nominal terms [14:45] it's especially noteworthy that flying has become more affordable because that is in stark contrast to [14:50] the higher prices consumers have been paying on so many other goods and services over the last few [14:56] years also the airline industry is competing on customer experience in a way that we never have before [15:03] indeed and uh the chairman mentioned this we're proud of the service that american in the industry [15:08] provided over thanksgiving and we look forward to providing our customers with the same level of [15:12] excellence over the winter holidays and into the new year our mission at american is to provide safe [15:19] reliable customer friendly air travel supported by a broad range of products and services options for [15:26] our customers that they value and use every day our ultimate goal is to serve our customers every one of [15:33] them and our business benefits when our customers feel valued informed and supported to that end american [15:40] airlines flies to 350 destinations around the world that includes 228 airports in the united states [15:47] almost half of which are in small communities last year we served 211 million passengers so it's no [15:55] surprise that not every passenger wants exactly the same thing in response we have very deliberately [16:03] designed product offerings and pricing to offer choices to our customers so they can decide what is [16:09] valuable to them for our most price sensitive customers we offer low fares very low fares fares [16:15] fares that offer air travel at the lowest possible cost and those fares allow us to compete with for [16:21] those customers business with airlines that have much lower cost structures than ours at the same time [16:28] other customers expect a wider variety of services so we offer that too our approach maximizes customer [16:34] choice while offering historically low prices for air travel today's hearing topic is about airline [16:41] ancillary fees we are proud of the customer friendly transparent and voluntary nature of our fee [16:48] structure any american passenger can fly on any of our flights at any time without paying any fees at all [16:57] also american customers don't have to pay some of the fees that are the subject of the subcommittee's inquiry [17:02] for instance american does not charge for carrying on a bag or a personal item we don't charge customers for sitting next to their children [17:11] or with their families and we don't charge customers for changing a reservation originating in the united [17:16] states more than 24 hours in advance of a flight if passengers do select an ancillary product we clearly [17:24] disclose any fees in advance of booking our website and app where the vast majority of our customers book [17:31] their flights are clear and easily navigable that is by design everyone wins when our customers know exactly [17:38] what we are offering and exactly what they are buying the fact that air travel has become more affordable [17:44] has democratized flying more americans than ever before are able to travel by air we believe that [17:52] our strategy for unbundling our products presenting customers with a wide variety of choices and offering [17:58] our customers the lowest possible fares has contributed significantly to that important result again thank you for [18:05] the opportunity to testify today i welcome your any questions that you may have thanks mr johnson mr schroeder [18:12] chairman blumenthal ranking member marshall and distinguished members of the subcommittee [18:19] my name is bobby schroeder and i am the senior vice president and chief commercial officer [18:23] at frontier airlines frontier airlines is an ultra low fare carrier or ulfc that caters to price sensitive customers [18:31] and offers unbundled services enabling customers to pay only for the services they use [18:37] this transparent model enables frontier to keep its base airfares extremely low for the benefit of [18:42] consumers 77 percent lower on average than the legacy carriers and 64 percent lower even when ancillary [18:49] fees are included providing significant benefits for consumers every day frontier works to make air [18:56] travel more accessible in addition to our ultra low fares and unbundled optional services [19:01] we are one of only four major u.s airlines to commit to fee-free family seating and one of three [19:08] acknowledged to significant support of service members and their families as recognized by the [19:13] department of transportation frontier's unbundled model has democratized air travel and made flying [19:19] affordable for millions of families individuals and small businesses who might have not otherwise been [19:25] able to travel it has also driven competition prompting other airlines to lower fares and create new [19:31] cost-effective options ulfc innovation benefits not only customers but competition as well [19:37] aligning with the intent of the airline deregulation act it is indisputable that unbundling has lowered [19:44] the cost of flying for customers without unbundling frontier could not sustain its ultra low fares [19:50] for example frontier's 2022 fair revenue per passenger excluding optional services was just 54 [19:57] dollars and for the first nine months of 2024 fair revenue per passenger is only 41 [20:05] customers who don't need baggage or specific seat assignments aren't forced to pay for them [20:10] this ensures affordability and choice for passengers with more than 70 percent choosing not to check a [20:16] bag more than 80 percent choosing not to bring a carry-on and nearly half spending nothing on bags or seat [20:23] assignments if frontier had to include a check bag or a seat assignment as part of its fair fairs would [20:28] go up and certain consumers would either be unable to fly or charge for products and services they may not [20:34] want or need by contrast on a bundled carrier every customer pays for the true cost of so-called free [20:41] checked bags regardless of whether they check a bag or not albeit with such costs baked into the airfare [20:46] as the department of justice explained in its complaint against the jet blue spirit merger for [20:52] travel on airlines that offer a bundled all-inclusive price quote passengers were forced to pay for these [20:58] features regardless of how much they used or valued them the complaint also highlighted that the [21:04] significant benefits of ulfc sees on fares for price sensitive consumers and the significant consumer [21:10] friendly innovation in passenger air transportation that ulfc's have brought to the industry among other [21:16] things the department of justice noted the carriers that have unbundled these features quote empower [21:21] cost-conscious travelers to prioritize the aspects of the flying experience they valued the most and [21:27] have enabled such carriers to offer low fares that are particularly attractive to cost conscious [21:32] cost-conscious travelers who want the least expensive way to get to their destination our ancillary [21:39] fees support the availability of optional services and ensure that customers who don't need these [21:44] services aren't subsidizing others frontier is transparent clearly disclosing all products [21:50] service and price options throughout the booking process consistent with dot regulations to this point [21:56] dot data shows that complaints about baggage fees are extremely rare just one per 2.5 million passengers [22:04] one final topic i would like to address much has been made and distorted about frontier's program to offer [22:09] customer service agents commissions for certain ancillary products such as gate checks bags this [22:15] program is meant to enhance compliance by passengers with frontier's carry-on bag policy this in turn [22:21] enhances cabin safety and boarding efficiency and ensures that all passengers are treated equally in [22:27] some frontier's unbundled services model enables customers to pay only for the ancillary services and [22:33] products they want or need and those services and products as their associated fees are transparently disclosed [22:39] along with respective prices to the consumers well before and at the time of ticket purchase i look [22:45] forward to our discussion this morning and answering any questions you have thank you thanks mr schroeder [22:50] mr carter good morning chairman blumenthal ranking member marshall and members of the subcommittee [22:58] thank you for the opportunity to appear before you today my name is peter carter and i am the chief [23:03] external affairs officer at delta airlines delta is a global airlines that each year flies nearly [23:11] 200 million customers to 275 destinations in over 50 countries with thousands of departures every day [23:21] at delta our genuine and enduring motivation is to make sure every customer feels welcomed and respected [23:29] across every point of their journey by providing an elevated and caring experience which is safe clean [23:38] and on time with bags delta's commitments to these bedrock principles is one of the reasons why delta is america's [23:47] most awarded airline our approach to optional products and services is rooted in the fact that we serve a [23:56] variety of customers who have different needs and who want options in order to make choices when they travel [24:05] while we do charge ancillary fees for a limited number of products or services many of our customers do not pay [24:14] any ancillary fee whatsoever for example all customers are permitted to bring a free carry-on bag and personal [24:23] item with no exception and fewer than 20 percent of our customers even pay a bag fee also we do not charge [24:34] to seat families together under any circumstance our fare structure which we do not consider as an ancillary fee [24:47] reflects the notion that not all customers travel the same our goal remains to provide options and value for [24:56] for every customer from the student traveling uh with only a backpack to the family vacationing to europe [25:04] for a honeymoon celebration to the corporate executive this means customers can tailor their experience by [25:13] choosing to purchase optional products and services that matter to them our commitment to choice is the [25:21] reason why delta offers a wide suite of products and services we believe that allowing customers to [25:27] choose those services that meet their individual needs provides them an opportunity to forego those services [25:34] that they do not see we have especially focused on premium products because after covid there is a growing [25:42] demand for these products from customers who want more out of their travel experience we also take our [25:49] commitment to transparency seriously we aim to make the booking process seamless and transparent by disclosing key [25:59] information at various points throughout the booking process and before purchase there are no hidden fees [26:08] when you purchase a ticket from delta airlines as a company operating in a competitive market our ability to [26:15] compete hinges on the ability to design and execute a business model consistent with market demands like other [26:23] airlines our costs have risen dramatically over the last several years for example delta has been committed [26:32] to investing in its people as a result our labor costs have naturally increased this year this year alone we made an [26:42] investment of 500 million dollars in our people in the form of a pay increase in the last 15 years delta [26:50] front line employees have received 12 base pay increases totaling an 85 percent increase in base pay [26:58] which is more than double the rate of inflation we also paid out 1.4 billion dollars of our 2023 profits [27:07] as part of our industry-leading profit sharing program as costs rise the cost of providing optional [27:14] products and services has also increased over the years delta has continued to innovate and invest in [27:21] the customer experience across all fair classes we have led the industry with fast and free wi-fi access [27:28] which underscores our dedication to the in-flight experience for all our customers we know our customers value [27:35] connection and flexibility to spend their time in a way that suits them and we're proud to offer [27:41] industry-leading experiences no matter their choice of fair product delta is in the customer service [27:48] business not the ancillary fee business ancillary fee practices that erode the trust and loyalty of our [27:56] customers are not in our best interest thank you senator blumenthal and i look forward to answering your [28:04] questions thanks mr carter mr klein mr chairman ranking member marshall and members of the subcommittee [28:13] thank you for the opportunity to appear today my name is matt klein and i am the executive vice president [28:20] and chief commercial officer for spirit airlines i've been at spirit for over eight years and have [28:26] worked in the airline and travel industry for nearly 30 years spirit has been a pioneer in democratizing air [28:34] travel by providing travelers the most transparent and customer choice centered experience at the most [28:41] effective cost there is no standard way to travel and as we see with our own guests these decisions are [28:49] varied and very personal ones some guests want to check a bag others want wi-fi premium snacks or the option [29:00] to select their seat a large percentage of our guests want something simpler basic travel and a [29:07] personal item at the lowest possible price our model ensures that customers only pay for the services they [29:16] want not what others want optional services by definition are not so-called junk fees as optional services [29:26] are not required to travel indeed unlike many other industries airlines already must advertise the [29:34] complete price including taxes and fees of any fair or optional service what travelers see advertised is [29:42] what they pay to be clear spirit does not engage in so-called drip pricing spirit does not set any price [29:53] based on an individual's personally identifiable information and spirit's goal has always been providing [30:02] our guests the greatest level of self customization prior to the airline deregulation act of 1978 airfares [30:11] typically included one or two checked bags and perhaps a carry-on bag if room permitted whether the passenger [30:18] wanted them or not flying was very expensive and few people could take advantage of it the airline deregulation act [30:27] permitted spirit to offer passengers the opportunity to fly for a lot less money by separately purchasing [30:34] only what the passenger wanted for a trip spirit originally called these low fares bear fares [30:41] and the public loved them today virtually everyone who flies knows how to book a ticket online [30:49] either directly or on an airline website app or through an online travel agent the general public [30:55] absolutely knows they have choices in terms of what service options are available to them spirit can [31:02] confidently say that the american public is smart in some months spirit can have over 40 percent of [31:09] its guests travel without a check bag carry-on bag or pre-selected seat the concept of the unbundled [31:17] base fare quickly became so popular that all three legacy airlines implemented a basic economy product [31:25] which mirrors spirit's basic go travel option as referenced in the majority report delta was the first to [31:33] introduce these fairs in 2012 specifically on routes operated by spirit if the subcommittee wants to [31:41] investigate industry issues that directly affect what customers pay here are three suggestions review [31:48] hub and slot dominance review legacy pricing dominance review legacy dominant loyalty and bank co-branded [31:58] credit card programs those areas are by far the most impactful to consumers by maintaining [32:06] dominant positions in these three areas legacy carriers can squeeze pricing that would otherwise be [32:12] unsustainable against low fare airlines international and business travel fares also help subsidize [32:19] temporary low prices that legacy carriers use to compete against low cost competition i am pleased that the [32:28] subcommittee report correctly delves into how legacy carriers generate billions of dollars billions of dollars [32:36] from loyalty programs and use these programs to capture customers who pay higher fares if carriers [32:43] like spirit cannot thrive and grow then airfares with or without optional ancillary services will [32:51] significantly increase for all travelers thank you very much and i look forward to your questions [32:58] thanks mr klein mr nocella good morning chairman blumenthal ranking member marshall and the members of the [33:05] subcommittee my name is andrew nacella and i'm the chief commercial officer at united airlines i appreciate the [33:10] opportunity to be here today to begin with i'd like to take a moment to thank the over 140 million customers [33:17] who traveled to nearly 350 destinations on united each year i'd also like to recognize our more than 100 000 [33:24] employees including 80 000 plus union members who work hard every day to ensure our customers reach their [33:31] destinations safely at united we're proud to connect people and unite the world riding customers with [33:38] choices has been a driving factor as we design new products that meet the range of travel needs and [33:43] budgets our customers who prioritize affordability have the option to choose a lower fare product and in [33:50] doing so opt out of paying for additional services they do not need nor want but we also have customers who [33:57] seek more services and they retain the ability to choose a service they value for an incremental fee [34:03] like a seat with extra legroom or checked bags there's a strong customer demand for a diverse array of [34:08] bookends and service options in our view a one-size-fits-all travel model would deny lower cost options to [34:15] our customers for example our basic economy product is designed to promote affordability by allowing customers [34:22] to select the lowest airfare and opt out of paying for services they don't intend to use consider a [34:28] student on a limited budget who travels from chicago to boston or to visit her parents for the weekend [34:35] she may decide that she is able to easily fit her belongings in a backpack and would prefer a lower fare [34:41] option a basic economy fare allows that student to take her trip at the lowest possible fare without [34:47] having to pay more to subsidize services that she does not want fees for services like [34:53] check baggage or season should never be a surprise and no matter what air travel options a customer [34:59] select united provides them with transparent readily accessible price and information and product [35:04] description descriptions that information is available at several points during the ticket and [35:10] booking process is accessible to all customers through united's website and mobile app and is provided [35:16] directly to all third-party sites and travel agencies who book customers on united flights [35:22] full sum disclosure allow our customers to make informed choices about which products and services [35:27] they want for example on our website and app our customers will see a pop-up disclosure [35:33] that compares the services included in a basic economy fare with those included in a standard economy [35:38] fair before they can actually purchase the basic economy ticket when pricing our optional services we take a [35:45] holistic approach aviation is a very complex industry with significant investments in planes [35:51] people and technology that support all aspects of air travel while we don't ordinarily track the cost [35:57] for each optional service we do track many fixed and variable costs incurred by our operation which [36:03] continue to increase each year so when determining our prices we try to account for the competitive [36:08] market for air travel and the value to consumers providing the most value to consumers is what produces the [36:14] best result for our business like any business i'd like to highlight two examples united recent [36:19] and that's investments in customer experience in 2023 we amended our seat and policy to waive the fee [36:25] for preferred seats when a party includes a child under 12 no matter the fair type and in 2025 we'll [36:31] discontinue the fee for in-flight high-speed internet as we transition our fleet to starlink connectivity [36:37] these changes will not maximize united's ancillary revenue just the opposite they will reduce those [36:42] revenues by hundreds of millions of dollars indeed our ancillary revenues from the optional services addressed by the [36:49] subcommittee inquiry were lower in 2023 than in 2018 these investments will yield a great customer [36:56] experience elevate our brand and thus benefit united's business overall i'd also like to clear up another [37:03] very important point about united's pricing the subcommittee report erroneously concluded that united does [37:08] not pay federal taxes on seat fees apparently based on its review of the booking path on our website [37:15] in fact united has always paid the seven and a half percent transportation tax on all seat fees but [37:21] it's not displayed in the booking path because united pays this directly to the treasury we united are [37:27] proud to provide safe on-time affordable air travel options the federal government is an important [37:33] partner in that endeavor as the operator of the air traffic control system and i'd like to say the single [37:38] most consequential thing anyone can do to improve the experience for our customers is to fully staff the faa [37:45] thank you again and i'd like to please i'd be pleased to answer any questions you may have [37:49] thank you very much mr nocella i'll begin the questioning we're going to have seven minute rounds [37:56] and we're going to try to stick to the seven minutes and then have a second round if uh our members want [38:04] to do so you know i'm not going to go into all of the specific statements that you've made i suspect we're [38:10] going to be hearing from airline passengers who say they've heard you testify here and they're [38:17] their experience has been different we'll incorporate their versions of their experiences in our next [38:25] report but i want to begin with the easy questions because i think you've all made representations about [38:33] family seating american airlines and frontier do guarantee family seating without an extra fee [38:42] mr carter you just said that delta charges no fee for family seating my understanding is that your website [38:57] says only if you can't obtain seats together quote contact reservations which then says they will strive [39:08] to put families together but not necessarily on the flight that they want is that correct senator i appreciate [39:17] the question um we do everything in our power to seat families together i i think the length i'm not [39:26] familiar with the precise language that you're referring to but i think one of the things that can happen [39:32] when you're operating an airline and does if you have a weather event or some other kind of irregular [39:39] operation that results in a change of an aircraft you may be in a situation where it's impossible to seat a [39:47] family together well let me ask you we do everything we can because time is limited and i apologize for [39:53] interrupting does your standard or practice in any way differ from the rule that is hopefully going to [40:03] be issued by the department of transportation i don't believe it i don't believe it does senator uh mr johnson [40:10] let me ask you the same question uh does your practice differ in any way from the rule or standard [40:19] that will be set because my understanding is that you don't necessarily guarantee the same [40:26] flight for families wanting to sit together just i have not compared our uh our practice to [40:37] the legislation however i know that we have a practice of um in virtually every case allowing [40:43] families to sit together without an extra charge i would appreciate your providing a written follow-up [40:50] let me ask all of you uh you know we've had a lot of commitments this morning to transparency [40:56] but you're all in court seeking to block the department of transportation's rule in the enhancing [41:06] transparency of airlines ancillary service fees act i apologize for the cumbersome title to the bill [41:16] but basically it is pretty simple it requires airlines to disclose certain important fees like carry-on bags [41:27] and baggage checks and changing or canceling reservation whenever you show customers price and schedule [41:36] information uh mr carter you're the chief legal officer at delta will you commit to drop that lawsuit [41:46] senator i'm not prepared to make that commitment here today the deal why not the dot is an important [41:52] partner and i will tell you that many of the things in that rule we already do at delta but i would [41:58] also say that the rule is overly prescriptive so it's not so much the spirit of transparency which we [42:05] embrace and we execute but it's more the the detail of how it is it's prescriptive because it tells you [42:13] what to do it tells you that you must disclose that's prescriptive we we do just won't you allow [42:22] it to take effect we we do disclose it senator and i can tell you that i'm not prepared to make that [42:29] commitment here today are any of your airlines willing to make the commitment that you'll drop [42:35] efforts to block a simple straightforward disclosure requirement that's now in the fifth circuit [42:42] court of appeals because you have sought an injunction successfully mr johnson will american [42:54] airlines drop this unfounded legal effort we won't uh will frontier drop your effort mr schroeder [43:04] i'm not prepared to make that commitment mr klein mr nocella we're also not willing to make that [43:13] i think i think that this very simple testimony speaks volumes let me go on uh to ask uh spirit and [43:24] frontier about the bounty bag program uh mr schroeder uh isn't it true that frontier estimated in 2022 [43:39] that it would earn about 40 million dollars that year in additional fees because you were paying gate [43:47] attendance ten dollars per bag if they found that a fee would be charged first i wouldn't characterize [43:58] it as a bounty program that's not what it is um and the the the 40 million dollars that was in a a [44:06] document you're referring to um this this program isn't about um revenue this program is about creating [44:12] a fair and equitable um setup for our customers we are in the business of attracting customers back [44:19] and being treated fairly and everybody fairly um and equitably is part of doing that and that's what [44:25] this program is about well it treats everyone fairly in the eyes of the gate attendant or agent who is [44:34] paid when an additional fee is charged that seems like a bounty i'll call it an incentive payment as well [44:42] but one way or the other travelers pay more because it's a reward system for charging them more [44:53] is uh is there uh any kind of uh disciplinary measure if the gate agents fail to charge fees um what we do have [45:08] is um first of all we don't have um we have very low complaints as i've said in fact the dot in terms of bag [45:14] complaints overall around bag fees is one and 2.5 million passengers for the industry um as it pertains [45:21] to um what we have in place as well again we're about attracting customers back ensuring that they [45:27] have a great customer experience we do have um uh rules in place if uh a gate agent has a higher level [45:37] of complaints um we have the ability to remove the incentive program from them i'm going to finish my [45:42] first round of questioning by playing a seven second i think it's seven second video move that forward [45:52] this is at a a uh frontier airlines gate it's a badge airport it's gonna be done ma'am the bag fits [46:07] you're recording me now just to pop to the side sir the bag fits ma'am it's nothing you force it [46:12] i'm not forcing anything yeah it's recorded for you putting your backpack down there you go that's why [46:17] it fits thank you no that's the popular side you're not boarding the flight ma'am it clearly fits [46:23] sir can you see popular side you're making the line waiting uh i'll just close by saying uh you know [46:31] the frustration in that passenger's voice is felt every day by countless passengers arriving at the [46:39] gate with basically no choice their flight is leaving in minutes they have no appeal and it's [46:47] the gate agent whether it's that kind of fee or another who is the final arbiter uh senator marshall [46:55] great thank you mr chairman uh you mentioned in your opening remarks that there seems to be a lack [46:59] of a fair competition among the airlines and i want to focus on the incestuous relationship [47:05] between the legacy airlines and the credit card industry where there's also a lack of competition [47:10] i'll start with united airlines mr nocella how much money did you all gross how much did united gross [47:16] from your rewards program last year from the entire awards program i i don't i didn't prepare that [47:23] number for today well i'll give it to you it's over three billion dollars mr johnson from american [47:27] airlines how much did you all gross from your rewards program 2023 senator about five billion [47:33] dollars five billion dollars is is correct i want to make sure that that i understand this and the [47:38] american public understands how these reward programs work and i'll stick with united airlines and [47:43] american uh as well so mr johnson american airlines do you all focus are you the bank in in this or do you [47:51] have a bank or which bank do you use senator thanks very much for the question and thanks for bringing [47:55] up the topic um we have uh two really good partner banks uh barclays and city who uh um and a great [48:03] partner in mastercard great great and mr nocella united are you all the banker do you have a bank [48:09] relationship thank senator uh we use jp morgan chase and we partner with visa okay so uh one of your [48:17] customers has your credit card united airlines credit card american airlines credit card they go [48:22] to the retailer and they use your your credit card uh do you have any idea how much the retailer is [48:28] being charged for that swipe fee either american airlines or united i do not so it's over you know [48:36] it's around three percent it's seven times more than what folks get uh charged in the european union [48:41] and now do you all just you make three billion five million dollars off of this is just is this a kickback [48:47] from the swipe fee or did the banks give you money in in addition to that how does that how does that [48:52] part of this work mr nocella well senator we don't make three billion dollars off that we've taken three [48:58] billion dollars in revenue but there are costs associated with transporting the passengers so in [49:02] this case the passenger spends money they earn miles and they later redeem those miles for travel on [49:07] united airlines okay i'm still confused so you gross three billion dollars from from this so that's not [49:12] cash we've taken three billion dollars in revenue it doesn't represent the profit okay i understand [49:18] that okay so you're taking three billion dollars is that a kickback from the swipe fee or is the bank [49:23] giving you extra money in your order to entice people with the voodoo miles that you're giving them [49:28] uh it's neither a kickback and they're not voodoo miles the miles are used to travel all over the [49:33] world so you you just come up with a a percentage of a fee that you're going to get uh to in order to [49:40] have this relationship with them senator we have a long-standing relationship with jp morgan chase [49:45] on this and it's a contractual relationship that governs how miles are uh awarded to passengers and [49:52] what jp morgan chase pays united airlines to do that and then we travel those passengers all over the [49:57] world uh wherever they'd like to go with those miles okay mr johnson american airlines is it a rebate [50:02] is it a kickback how do you what's how do you get money back from from this real this relationship [50:06] senator maybe let me help help you by framing the question a little bit i don't need the question [50:12] reframed i i think i asked it very simply simply well virtually um well credit card use in the united [50:20] states is ubiquitous a huge percentage of personal consumption expenditures are made by credit cards [50:26] um almost you know a huge majority of the credit cards in the united states are associated with a [50:31] rewards program um the rewards programs that we're talking about here are like those um we're extremely [50:39] proud of the the benefits that we pride we provide to our customers who choose to hold the american [50:45] airlines credit card um they are uh very excited about and find great value in those benefits but i [50:51] just have to stop interrupt you so you're not going to answer my question but what i hear from customers [50:55] is that there's a constant change and they they were promised one thing on this rewards and they're being [51:00] given another that there's a constant change going on with with your rewards program and no one can [51:07] seem to understand it mr klein i want to come to you you've kind of opened this door from spirit airlines [51:13] how do these legacy airlines use this credit card system to to box you out and to to maximize their [51:20] monopoly thank you for the question um senator marshall well what what ends up happening is if you look [51:28] at the um operating statements financial statements of any of the legacy carriers you'll see that the [51:33] remuneration they receive from their banks on these programs is more than their actual operating profit in [51:40] any given year they use these programs uh very effectively to compete um and what they end up doing [51:46] then is be able to basically operate their airlines at losses and then they make their profit off of these [51:52] relationships it affects competition and it all starts really from the way they dominate their hubs and they [51:58] control all the real estate and the hubs and because they can do that then they have such a large [52:03] dominance with their with their uh with the passenger base there the the public that's there and then [52:08] that's basically how the programs work it's a it's a circle and i think they have they compete very [52:13] effectively by using uh the rules of these games this way and that's how it affects competition so i want [52:20] to emphasize one thing that you you said and come back to that and uh you said that these legacy airlines [52:27] operate a loss but they use the profits from the credit card programs to to to really fund fund [52:35] their their stock uh profit is 5.6 billion dollars and also proudly announced how they receive over [52:50] seven billion dollars from american express um in the same presentation so um i'm not faulting them for [52:56] doing it by the way they're just playing by the rules of the game that are out there today but they're [53:00] very effective at doing it right i want to emphasize that americans spend about 300 billion dollars [53:05] annually on these swipe fees um that amounts to over two thousand dollars per american family [53:13] um as well i'm going to also with mr johnson with american airlines um your industry is working with [53:24] the credit card industry to run attack ads on our credit card competition bill attacking senator durbin's [53:31] my credit card competition bill do you have any idea how much money american airlines has contributed [53:36] to that marketing game i don't center but i'd be happy to get back to you with that mr nocella you've [53:42] also been a big contributor to that uh attack ad on this legislation you know how much y'all spending [53:47] on that i'm not aware i'm going to tell you all that uh your industry working with the credit card [53:53] industry spent 80 million dollars 80 million dollars way more than a united states senate campaign cost in [53:59] kansas attacking us on this uh legislation that all it does is increase competition it's good for [54:05] consumers and yeah i'm just saying that we're over the target here mr chairman i think we're absolutely [54:10] over the target here that we need more competition both in the airline industry i think the credit card [54:15] scheme is a big part of this and i hope that we kind of open up the doors to that part of your [54:19] investigation as well and with that i yield back thank you thanks very much senator marshall senator [54:24] assen well thank you very much mr chairman and i want to thank you and the ranking member and [54:29] senator marshall in his stead for this hearing and thanks uh for to all of you uh for coming today uh to [54:37] have this hearing i want to follow up on a line of questioning that senator blumenthal started uh [54:43] concerning fee-free family seating um obviously uh this upcoming holiday season millions of americans are [54:50] going to travel across the country and around the world on your airlines um some airlines do in [54:56] fact guarantee that children can sit next to their parent at no additional cost as long as their tickets [55:01] are booked on the same reservation and according to the department of transportation's tracker [55:07] both american airlines and frontier airlines meet their standard for what that guarantee should mean [55:13] however the department of transportation tracker tells us that uh delta united and spirit do not [55:20] meet their standards and if anybody wants to check that it's right here so i'm going to just start [55:25] with you mr carter can you explain your family's seating policy and will you guarantee that parents [55:31] can sit with their children without having to pay extra senator thank you for the question i think you are [55:37] specifically referring to the dot dashboard that's right and you're correct that we declined to provide [55:43] the the check and we we thought it was important not because we don't do everything we can every day [55:51] um our our our people are amazing at seating families together and we never charge to seat families [55:58] together so that's important so how come you won't make the guarantee then according to the dot standards [56:03] that include some exceptions yeah senator because the guarantee was was so unconditional in our view [56:11] that we thought it was really an unfair thing for us to do because consumers if they look at that at that [56:18] dashboard will rely on that what's more important is not whether or not we have an x on that dashboard but [56:24] what we do each and every day and i assure you that at the airports our res centers each and every day [56:31] they're accommodating families to sit together well i am sure they are but for those of us who travel [56:36] a lot and everybody up here does uh we witness on a daily basis on airlines uh families having to ask [56:43] people to switch seats uh so that they can sit with their kids and passengers are usually quite accommodating [56:48] but american and frontier have both guaranteed and meet the dot standards your airline does not mr [56:55] klein how about yours thank you for the question um senator uh so we we do also on the on the dashboard [57:04] you're referencing we do not have the the green check marks on there um i would echo what my colleague [57:09] just said over here which is we do everything in our power to make sure families can sit together [57:14] um we do abide by the spirit of of all of those um uh check boxes so to speak and we felt it was we felt [57:22] that we would not necessarily be able to always 100 guarantee everything on there we felt to be [57:28] disingenuous to try to get green check marks on something that we're already accommodating and we're [57:33] afraid that we would like be be in violation by trying to say always well let let me be clear that [57:39] there the comment period uh on the rule that dot is putting into place in response to legislation from [57:46] this body from congress um that rule i hope is going to be finalized and then you guys are going to [57:51] have to follow it so you would like to be able to rely on um trust me when i say that when you are [58:05] argue or uh look at an interpretation of a rule uh with an airline uh agent or a flight attendant um [58:22] other airlines are figuring out how to do this uh and for much of the history of flying in this country [58:28] airlines did this um so i think you're going to need to figure out how to comply with the rule [58:34] mr nacella thank you senator um first of all i have an eight-year-old and a 10-year-old so this [58:40] is very important to me and my kids don't want to sit alone um i i think united goes above and beyond [58:46] what that rule says and you know first of all i'll say we implemented new technology recently where [58:51] if the seat is adjacent is not available our computer continues to look at seats as they become [58:56] available on the aircraft as you get closer to departure so even if it's not available on the day you [59:00] make the purchase for your ticket we continue to look and again we do that without a fee uh we too [59:05] have an issue with the absolute guarantee uh that seemed to have a lot of exceptions to it that i think [59:11] could lead a consumer to the wrong conclusion so here's the thing i'm i'm going to move on to a [59:17] different topic but when the consumer goes to the dashboard it explains very carefully right on that [59:21] page this is a printout of it what the exceptions are so on the one hand you're all telling me how smart [59:28] american consumers are and they are and on the other hand you're saying they're not smart enough [59:32] to understand this dashboard i think you guys should really focus on complying with the rule [59:37] now let me move on to another issue uh to mr klein and mr schroeder as you know airlines are required [59:43] to clearly advertise the prices for tickets and to clearly list all mandatory ticket fees these [59:49] transparency requirements enable customers to understand what options are best for them and to [59:54] make informed decisions so according to this subcommittee's investigative report your two [59:59] airlines charge some fees to customers that are not immediately apparent for example according to the [1:00:05] report your airlines do not initially tell a customer the cost of the additional fees that they [1:00:10] could face instead you require that a customer first provide you with their personal information [1:00:17] such as their zip code before revealing the total cost of their bag and seat fees and i know mr klein you [1:00:24] say that you're not using the personal information to set the price but it begs the question why are [1:00:29] you asking for the personal information first so um i'll start with mr schroeder and then move on to mr [1:00:35] klein but could you please explain your fee transparency policy and will you commit to transparently listing all [1:00:41] possible fees for customers up front so that they can make informed flying decisions thank you senator [1:00:48] um today we we um take transparency and customer experience very seriously um we actually do have [1:00:55] the ability on the flight availability page so when you do make a search um there is a link that allows [1:01:00] you to go and see um quite a few of the fees that exist on that all of the fees are quite a few of the fees [1:01:05] all except for seat fees um on it and so you can get your bag fee right there you can find out [1:01:12] any of the other fees that exist as well except for the see why not the seat fees it's it's something [1:01:17] that just um we we would have to go and build um what we haven't done yet but frankly it's it's well [1:01:23] if your commitment is to transparency i suggest you do it mr klein yeah so our booking path has been in [1:01:30] place for um quite some time now and in fact we used to collect a little bit less information during [1:01:36] covet 19 at the request of department of homeland security for covet tracking we actually added some [1:01:41] more information um on that page um but i must i must say however we have and i let the subcommittee [1:01:47] know over the summer during our interview that we are always reviewing our booking paths in fact for [1:01:52] three of our four travel options everything is now straight and for up front and the only reason why [1:01:58] we haven't reviewed that fourth path which is which is what you're referencing right now is because we [1:02:03] are it's going to be a little technical but right now we're we're in a freeze on some of our [1:02:08] development right now until we get um into the new year and a part of this is all part of our [1:02:13] transformation that we're doing at spirit airlines right now we value guest experience we value [1:02:18] transparency that is that is exactly what we want and that and we will be we are reviewing that and we [1:02:23] expect to be making some adjustments to that early next year well i appreciate that and i also [1:02:28] appreciate that i'm over time but i'm going to just suggest that in a world in which uh consumers [1:02:35] rightly wonder why large companies are collecting their personal information uh there is reason for [1:02:42] consumers to worry that their prices are being set according to their zip code or according to an [1:02:49] algorithm that estimates because of their personal information how much they could pay now you're shaking [1:02:55] your head mr schroeder and i'm sure mr klein you're going to tell us that that's not the case [1:03:00] and i hope it's not um but that's why transparency is so important and it is hard to listen to people [1:03:07] talk about their commitment to transparency and then have them give you a bunch of different reasons [1:03:11] why they can't be transparent thank you mr chair thanks senator hassan senator holley thank you very much [1:03:16] mr chairman can we just come back to this bounty issue mr schroeder mr klein because i didn't i have to say [1:03:22] i didn't understand your answers i thought you said to the chairman earlier that this well you did [1:03:26] say in your opening statement that there was a lot of misinformation about this out there mr schroeder [1:03:31] and i thought you said mr klein that you don't charge bounties so let's just can we just clear this [1:03:35] up once and for all we're all here we're all under oath so mr schroeder let's start with you do you [1:03:41] charge a bounty do you pay employees bounties on carry-on bags to identify them well that's a that's a [1:03:49] it's simple that's a real that's a yes or no i wouldn't characterize it as a bounty do you charge [1:03:55] them do you pay your employees a fee do you incentivize them to go pick out bags from people [1:04:01] getting on planes and kick them off the flight just yes or no we charge them and then okay that's a yes [1:04:07] mr klein oh we do not senator holly we you don't you don't wait you don't pay your employees we do that [1:04:14] we have previously uh sir but we we actually suspended that on september 30th of this year and [1:04:19] now what in order to be able to treat all of our guests fairly and equitably we've actually just [1:04:24] put more staff and supervisors out at the gate area and they're the ones that are still making sure [1:04:29] that everyone's treated fairly and equitably which is the point behind these kinds of programs but we [1:04:33] have removed that program as of september 30th oh interesting so let's let's come back to you though [1:04:40] mr schroeder so how much have you paid your gate agents to enforce your carry-on bag policy to pick [1:04:47] people out of the line like the chairman's video show i mean you guys do appreciate that flying on [1:04:51] your airlines is a disaster don't you i'm slightly amazed by the general attitude of all of you here [1:04:56] flying on your airlines is horrible it's terrible experience i mean i say this as a father of three [1:05:03] young children but i can't tell you nobody enjoys flying in your airlines it's a it's a disaster [1:05:09] you charge people fees that they know nothing about you harass them to death i'll never forget mr [1:05:14] johnson during covid when a attendant on your airline threatened my wife because our then five-year-old [1:05:20] son his mask had slipped this is back when we all had to wear those ridiculous masks his mask could [1:05:24] slip below his nose this flight attendant came up to my wife and said if she didn't keep that mask over [1:05:29] his nose at all points on this four-hour flight she would personally see that my wife was banned from [1:05:35] flying this has happened over and over to families it's terrible it's absolutely terrible and your your [1:05:43] attitude here today seems to be well devil may care there's nothing we can do about it well i think [1:05:47] we are going to do something about it so how much have you paid people to pull out customers who are [1:05:53] in line with a bag that's two centimeters too big mr schroeder well we recognize this is a hard job um [1:05:59] and so therefore we incentivize them to do that how much it's ten dollars per bag wow ten dollars per bag [1:06:06] and i think mr klein you and mr schroeder your your airlines cumulatively have spent 26 million dollars [1:06:13] paying gate agents between 2022 and 2023 to catch passengers whose bags are a little bit too big 26 [1:06:21] million dollars i mean if people want to know why it's such a terrible experience to fly this is news [1:06:26] for them today your airlines are paying millions of dollars to your employees to harass people who've [1:06:31] already paid they're there in line because they've already paid it's unbelievable by the way let me just [1:06:37] ask you this while i have you here why is it that you charge different people different fees for [1:06:42] carry-on bags why is that mr client why is it why isn't it just a flat fee why is it that i might [1:06:50] get charged one fee but uh my wife might get charged a different fee why is that so overall our job is [1:06:57] to generate uh the most revenue we can so we can be profitable as an airline if we're not if we're not [1:07:02] profitable isn't well actually we have we have costs and there's costs out there and we have to make [1:07:07] sure that we're above the cost line in order to make sure that we can run a profitable entity yeah i got [1:07:12] it no i got it it's i got it money's the answer so your your your in last year your carry-on bag [1:07:19] fees range between 15 and 99 that that's extraordinary one person might pay 15 somebody [1:07:28] else might pay 99 how do you determine it is it based on personal characteristics it's never women [1:07:33] more it's never based on personal characteristics charge of miners more we we do not sir what just [1:07:39] people who are suckers i mean how do you how do you how do you do it well there there is a cost to [1:07:43] carry any any kind of bag yeah but why do you charge some people more i understand the cost and [1:07:48] you make clear money's your bottom line i get that but but why is it that you're charging some people [1:07:53] what triple quadruple the amount well the length of the flight should matter in this in this as well so [1:07:59] yeah yeah but that's not this is that's not the data the data shows is we're talking about the same [1:08:03] people on the same flight might get charged radically different prices for a one carry-on bag you do the [1:08:08] same thing for check bags why is that right so just just for the record the 99 charge has been reduced [1:08:14] to 79 dollars and uh what ends up happening here is we want to make sure that we can get the best price [1:08:22] to the best people at the right time the best people who would they be the sorry let me rephrase [1:08:27] the right price are those the people who what i mean no explain it to me i'm interested who are the [1:08:32] best people without that was the misstatement sir what we're trying to do is get is get the right [1:08:37] price at the right time and what that also means is making sure that if someone is if someone's on [1:08:42] a flight that's now full filling up and we have a lot of as we talked about unbundled pricing and [1:08:48] they get screwed so like if you if you have the misfortune of of having to book your flight at the [1:08:52] end because maybe something's been canceled then you're going to get screwed is that what you're [1:08:56] telling me are you're not one of the best are you referencing just fair i'm just i'm just responding [1:09:00] to your testimony i'm listening to you and you just said as a flight's filling up you're going [1:09:04] to get charged more not always sometimes you'll get charged less exactly right sometimes right but [1:09:09] you'll never know right that's the beauty of it it's like russian roulette flying on the airline is i [1:09:14] would disagree no idea in the world i would disagree wait no you just said it it's very transparent [1:09:20] we'll have it listen there'll be a transfer generated and i'll send it to you with a bow on it [1:09:23] you can read your own testimony just now you have no idea what the fee is going to be ever [1:09:28] mr schroeder what about you your airline charges sometimes it's zero dollars for a bag check [1:09:33] sometimes it's 99 dollars for a bag checked on a first sorry that's carry-on excuse me carry-on [1:09:39] for check bag it could go from zero to 138 bucks who knows what it's going to be why do you vary it so [1:09:46] much is that fair to the to the consumer um so it depends again on on on routes uh and and so there's [1:09:54] just demand around no that's not true we're talking about people on the same flights their [1:10:01] prices may vary by huge astronomical percentages what why is that well that happens on airfare as [1:10:08] well and all it does i don't want to talk about that next i'll explain the model on how we think [1:10:12] about things so increasing ancillary historically has brought the fare down and i brought up earlier that [1:10:19] nearly 50 of people are not paying for a bag or a seat we are providing options that people are [1:10:24] deciding whether they want that or not that is increasing um the ability for people listen my [1:10:31] time is limited and i know the chairman senator has i want to ask more questions i just want to point [1:10:35] out to you that you are charging people for this the same thing one checked bag or one carry-on bag on [1:10:42] the same flight people are paying wildly different prices for it they have no idea what it's going to be i [1:10:47] think i think people will be amazed to learn today that if they fly on your airline or yours mr klein [1:10:54] heck the guy next to him may be paying 15 bucks for the carry-on bag and they may be paying 80. [1:10:59] last thing because i last thing mr chairman i know you're you're indulging me i'll be really quick on [1:11:03] this but mr charter you just mentioned that you also use the so-called dynamic pricing for seats for [1:11:10] seat fees why do you make people enter in their age and their geographic location and their gender [1:11:17] before they can even see the cost of the seat why is that um that's been in place since 2014. [1:11:23] yeah but why i it's because you're using those personal characteristics to generate the fees [1:11:28] no to generate the prices well then why else do you require it mr klein you do the same thing well [1:11:32] why is it why is the gender relevant to what the seat is this is all information that's needed in order [1:11:37] to complete the transaction no it's not delta doesn't do it united doesn't do it you don't need somebody's [1:11:43] gender in order to do it you use it clearly you're using it to generate the prices right [1:11:47] we do not sir it's not based on personal characteristics not at all you don't use [1:11:50] algorithms to set the price of seats that's a different question so you do use an algorithm [1:11:55] and you do make them enter all their personal information what's your definition of algorithms [1:11:58] sir oh for heaven's sake well because algorithms algorithms are ways for people to be able to be [1:12:08] able to come up with calculations which is a faster way it's more efficient than than a human being [1:12:12] doing the same exact work so yeah i'm trying to answer your question sir in all sincerity and um i [1:12:18] don't i don't know how else to answer it thanks senator holley uh we'll begin a second round of [1:12:26] questioning but before we do i have to say i hope your takeaway when you go back to your ceos is [1:12:33] that there is bipartisan frustration and even fury about the current practices they simply won't fly [1:12:44] anymore forgive the pun they won't fly anymore because they conflict with the reality of what our [1:12:53] constituents see in their everyday lives and what they consider fair including the use of personal [1:13:01] information to set fees or fares that differ one to another same flight same time different people [1:13:11] different fees or fares that's the net result so uh let me just go into a an area of questioning that [1:13:20] i think is is on everyone's minds uh is there any connection between these fees and again the reality of [1:13:30] your costs that would seem to be the justification for them based on your saying that your costs are [1:13:39] increasing uh in 2017 uh scott kirby uh the ceo of united testified to congress that quote in 2016 at united [1:13:54] we spent about 1.9 billion dollars carrying checked bags now when this subcommittee asked united to [1:14:04] provide an estimate of how much it spent to carry check bags in the years since united claimed it couldn't [1:14:11] produce an estimate and they even refused to provide the subcommittee with the number of bags you transport [1:14:19] every year this refusal to provide basic data about the costs of checked bags is common to every one of [1:14:30] the airlines here today mr nacella wouldn't you agree from mr kirby's previous testimony that united is [1:14:37] clearly capable of calculating how much it costs to transport checked bags in one year he testified under [1:14:44] oath to a congressional committee he had a number then why can't you provide a number now uh thank you [1:14:50] senator uh i think it's a interesting question we we just don't routinely look at the direct cost of [1:14:57] doing that because it's a large cost allocation that could have multi answers so i i haven't discussed [1:15:03] where that number came from mr kirby but i have not seen that report and i'm unaware of that i do believe [1:15:09] it costs a lot of money to transport luggage i'll give you an example we're putting in a new baggage [1:15:13] system in houston that baggage system alone cost 360 million dollars to install well if it costs so much [1:15:20] money you must be able to provide a number this is not just some minor you know uh negligible amount [1:15:30] to the bottom line it's a big number why can't you provide it to the committee we just don't we [1:15:35] routinely do not look at it that way you don't look at the number we look at our profitability very [1:15:41] carefully by flight and by market and by region but we do not look at our profitability by baggage it [1:15:47] we defies imagination it defies common sense it would defy a business school first day in class [1:15:58] to say that united can't provide a number for the total cost of checked bags let me ask you the same [1:16:06] question mr johnson wouldn't you agree that american is capable of estimating the costs of checked bags [1:16:15] uh but in fact it's refused to provide this information to us uh we have a six-year-old estimate [1:16:27] of its cost your airline's cost to transport checked bags uh we can show it to you i think we may have a [1:16:35] a slide of it uh it says that americans spent about 28 to move each checked bags and that the cost has [1:16:44] risen about 16 since 2016. this is an american airlines cost estimate and yet your airline refused to [1:16:56] provide this data to us for the most recent year senator i uh we uh we have not uh we've not provided [1:17:08] it to you because we we haven't calculated it it's not a critical calculation for us you provided this [1:17:14] document to us it's an example it's simply an example of what you do and understandably it's good [1:17:21] business practice to know how much you're spending on checked bags we've heard it's in the hundreds of [1:17:28] millions of dollars potentially to other big airlines you must keep track of it as well senator i i i'm [1:17:37] sorry i misspoke i i was aware that we had provided that information for 2018 i was responding to your [1:17:42] question uh about the current year um and we just haven't calculated it the reason that we haven't [1:17:48] calculated is that we know the cost of bags of transporting bags is considerably higher than what [1:17:54] we charge for transporting bags um our that you you mentioned a figure in the hundreds of millions of [1:17:59] dollars our figures you know certainly this is not kind of an abstract obtuse question what we're [1:18:05] trying to do here is basically get the total cost the number of bags so we can calculate how much per [1:18:13] bag it costs you and then compare that to what you charge to consumers consumers should have a [1:18:20] right to that information i'm just a country lawyer from connecticut i'm not a business school graduate [1:18:26] but common sense tells me that's a calculation that ought to be done and yet and forgive me for using this [1:18:35] word you've stonewalled this subcommittee by refusing to provide this basic information mr carter [1:18:41] let me ask you about seat assignment uh delta told the subcommittee that charges as much as 264 [1:18:50] dollars and 99 cents for certain economy economy seat classes how much does it cost delta to assign [1:19:00] someone to that seat senator if you're referring to our main cabin fare uh we don't charge [1:19:13] that person anything for a seat assignment well how much does it uh how much do you charge then for [1:19:21] seat assignments your your airline told us 264.99 that's incorrect no senator i was just uh trying [1:19:30] to respond i i think you may be referring to our basic economy uh fare class which is the product for the [1:19:38] college student who simply has a backpack who is um i would say flexible about having a seat assignment [1:19:46] before uh they travel and again they're not charged for that seat assignment they will receive that seat [1:19:52] assignment before they you know either at the airport or before they get to the airport it's just they [1:19:58] won't be able to pick that seat when they buy the ticket you're you're saying that for economy class [1:20:04] there's there's no charge for preferred seating assignment for for for our main cabin there is no [1:20:11] charge what about extra leg room at all extra leg room for that college student who is just carrying [1:20:18] a backpack we we don't that's the charge isn't it 264.99 now senator if if a customer would like to [1:20:26] book in comfort plus that would be the product for somebody who would want additional leg room okay [1:20:34] here's my question how much does it cost you you know we can go back and forth the intricacies are [1:20:42] overwhelming and you win at that game but the question is how much does it cost you when a customer [1:20:50] wants a extra leg room senator i it's actually a question i i cannot answer except to say they answer [1:20:58] is pretty simple zero well that would not be the case i mean well that is the case except maybe the [1:21:03] charge for the information technology which is spread across a zillion different transactions and it's [1:21:11] close to zero maybe it's not zero exactly but to reassign someone to a different seat cost is zero senator [1:21:22] in fact we unfortunately as an airline industry and delta certainly has experienced this [1:21:28] hat we are dealing with the inflation that this country's been you dispute that almost all of [1:21:36] that 264.99 is profit absolutely you do absolutely well that claim really is mind-boggling i'm going to [1:21:53] yield to my colleague senator hassen because i know she has to go uh so uh i'm not done with my [1:22:02] second or third round but i'll yield to her i appreciate that mr chair and look i just want to [1:22:08] start by following up on what senator blumenthal uh was just really trying i think to get at [1:22:16] you all run airlines you have a unique product it's an airplane that can fly us to where we want to go [1:22:23] we hope as the most efficient uh form of travel for relatively long distances [1:22:31] most americans cannot afford their own plane they are dependent on you to be able to go to a family [1:22:37] funeral across the country or to a business meeting halfway across the country uh when they are planning [1:22:44] their trip they want to be able to look up a fee how much is the ticket going to cost me uh if i need [1:22:51] to check a bag how much will that cost i need to know that on monday for my thursday flight so i can [1:22:56] decide whether to pack a bag to check or whether to ship a bag ahead of time which is sometimes less [1:23:05] costly in this market we want to know what it is going to cost and what the dialogue that you just [1:23:12] engaged in with the chair reflects to me is we're all captives on your airplanes at a certain point [1:23:21] and you just say up you want to pick a seat we're just going to charge you some random amount more [1:23:27] and what we're trying to get at is why and how much does it actually cost you and why can't some of [1:23:36] your airlines tell people ahead of time how much this is going to cost the basic premise of consumer [1:23:44] choice is that we get to price different products from competitors make a comparison put in our [1:23:51] needs and figure out what the best deal is and what we have not been able to get at in this hearing [1:23:58] with you is why it is so hard for you all to be transparent about the product americans don't [1:24:10] generally love their flying experience unless perhaps they're wealthy enough to always fly first [1:24:16] class or business and so it would be good if you guys could be transparent about what you do and why [1:24:27] now mr schroeder mr klein the reason i decided to ask a second round of questions was because when i [1:24:35] asked you both why there was per you required people to input personal information before they could get [1:24:42] some of the pricing for your products you both assured me very quickly uh with a nod of the head [1:24:51] or with a verbal answer that you didn't use the personal information for pricing purposes but then when [1:24:56] senator holly asked you a little bit more in depth about that you both equivocated or essentially said you did [1:25:04] so i would like to understand mr schroeder i think it's seeding that you said you still have to enter [1:25:10] the information why do people have to put in personal information before they can get a price on your [1:25:16] seating um so that i i stated before first of all we do not use personally identifiable information to [1:25:25] price at all well then why do people why are you requiring people to put it in before they can get a [1:25:31] price this is something that was built in 2014 i was not here for it however we look at the ways that [1:25:37] we can best set up for customer experience and have a great customer experience and that starts from [1:25:41] the moment people are thinking about travel to the time that they're booking on our website to the time [1:25:46] that they're flying and beyond and so we we continuously review what what the best opportunity so are you [1:25:52] going to give a different experience to maggie hassen who's 66 years old from new fields new hampshire [1:25:58] than you are from uh josh hawley who's younger and from missouri i mean what's the deal here what [1:26:05] the i go on airplanes all the time you telling me that uh you're personalizing my experience [1:26:12] because of that personal information i gave you no what i was trying to say um and i apologize if it [1:26:18] didn't come across this way i was trying to say that we care about customer experience and so we review [1:26:25] that this is something that the website hadn't been updated since 2014 around this particular [1:26:30] place all right so but let's can you commit to me today that your airline will stop requiring people [1:26:37] to input personal information before they can get a price you can ask them all you want and you can [1:26:43] make it optional or you can give them an incentive for providing their personal information to you [1:26:48] they might get a little bit back for that but could you will you commit to ending the practice of [1:26:55] requiring people to enter their personal information before they can even understand how much the [1:26:59] flight is going to cost them i will commit to you and this is what we always do that we will [1:27:04] review and look at what is the best customer experience for folks um and and do what that [1:27:10] look at what that is i'm looking at transparency because you said you're committed to it you said your [1:27:15] airline is committed to it that is the foundation for a good customer experience mr klein do you use [1:27:24] why do people have to input personal information before they can get a full account of the prices [1:27:30] that they will need to pay yes senator i appreciate your question uh we do not use as i've stated a [1:27:35] number of times personal identifiable information for any pricing whatsoever there is one exception when [1:27:41] our members of the military are flying we do ask them if they're members of the military so when [1:27:46] they're flying and when their families fly with them they get they get benefits and we want to make [1:27:49] sure that we're aware of that and give them the right price for transparency up front so we want to [1:27:54] make sure that they're aware of that so that is to be fair that is one example where okay but that is [1:27:59] putting aside uh the members of the military and i'm very glad that um the airline community honors our [1:28:06] service men and women uh with preferred boarding and special pricing that's very appropriate and i'm [1:28:12] glad you all do that but i am talking about why people have to enter personal information before they [1:28:19] can get at some of the prices that you are going to add on to their baseline ticket on your airline why [1:28:26] well i mentioned earlier that we've we have re we have already um reconstructed uh our booking [1:28:32] path for three of our four booking paths and the fourth booking path i'd said earlier we're in the [1:28:36] middle of a code freeze right now meaning we just can't do that development work we have we have [1:28:41] costed it we're looking at it for early next year but we still do need to get some information for [1:28:47] example are you a member of the military things of that nature we do not use i'll say it again we [1:28:52] do not use anybody's personal information about any pricing whatsoever at any time how about this [1:28:58] i am a member of the military or i'm not a member of the military i go onto your website i say how [1:29:04] much is it going to cost to fly from manchester new hampshire to chicago illinois i don't know [1:29:09] whether you guys fly that route but let's take that route and you give me an answer and you say base [1:29:16] price is this for an economy seat uh by the way if you check a bag it's this much more and by the way [1:29:24] uh if you want uh early seating it's this much more you give a base price and then you say and by the [1:29:30] way are you a member of the military because in that case we're going to give you a discount and here [1:29:35] it is why not tell people the price up front before you ask for personal information that um in an answer [1:29:45] to senator holly you began to argue about well maybe there is an algorithm that uses that personal [1:29:51] information no i did not say that senator all right well you did start arguing about the definition [1:29:55] of an algorithm i did ask what his definition was because algorithms are simply ways to do things [1:30:01] faster that humans already do it's it's an efficiency it actually that's not true but but let's let's get [1:30:08] back to my question why not just tell people what the price is up front and then give them an incentive [1:30:16] to share the information with you if there's a value to you of that information why not do that [1:30:21] so so the public benefits from the way that we've unbundled prices over time and to your point [1:30:26] there then is additional charges if if a customer wants those charges so i must state first of all [1:30:33] that the unbundling model has gen has benefited the public i'm not i i i get your unbundled model [1:30:38] the question is whether people should be able to understand what the cost of each separately um identified [1:30:45] prices before they give you personal information that should not impact whether they're going to be [1:30:51] charge fifteen dollars or a hundred dollars for a carry-on and and somebody can see their bag price [1:30:56] straight away i think you're referencing here pre-reserve seats because bag prices you can see [1:31:00] straight away it's right on the website you can you can actually search to see what your bag prices are [1:31:04] before you even search for your flight if if you wish if you wish to do that so i'm going to ask you [1:31:09] for the same commitment that i asked mr schroeder from which is to commit to making sure that all of the [1:31:16] prices that you charge unbundled prices can be identified on your website by a consumer before [1:31:25] they enter any personal information senator i i i can i can say that we will like i've just said [1:31:32] previously we are reviewing all of our booking pass we've changed three out of the four the fourth one [1:31:37] the fourth one is under review which is the one that you're referencing i cannot commit to that today [1:31:41] for one reason is because i don't know if there's other kinds of reasons we have a lot of regulation that [1:31:47] we have to look out for and i don't know if we're collecting information for other kinds of reasons [1:31:51] before we get to that answer i just can't commit to that today well thank you and thank you mr chair [1:31:55] for your indulgence i am considerably over my time um let me just suggest to all of you that um it would [1:32:02] have been nice if you had done more homework before you came here you knew what this hearing was about [1:32:09] you have been engaged with this committee on this investigation and to hear some of your answers [1:32:15] um it it's really troubling to me that you don't have as this kind of specific information that we [1:32:21] would expect you to have thank you thanks senator hassan uh i would agree about the homework but i'm [1:32:30] even more focused on the information that you failed to provide during the course of our year-long [1:32:37] investigation and the refusal to be more forthcoming about for example the cost of transporting checked bags i [1:32:46] just want to make clear on the line of questioning that senator hassan was just pursuing she was [1:32:51] focusing on spirit and frontier but the fact is american told us that they require name gender date of [1:33:03] birth state and country of residence email address and phone number before any consumer can see uh seat fee [1:33:14] prices that's correct isn't it mr john that's correct senator and united requires name [1:33:20] gender and date of birth correct mr nacella that's what united told us i believe that's correct [1:33:26] spirit according to what we were told requires name gender date of birth street address state and [1:33:34] country of residence zip code email address and phone number uh delta requires none of this information [1:33:47] which tells me none of this information is really necessary except for some other purpose if delta [1:33:57] doesn't need it the other airlines shouldn't need it either unless they're using it for some purpose [1:34:06] unrelated to charging fee prices what do you say to that point mr johnson center we uh the information [1:34:17] that we collect is a combination of information that's required that we are required to collect by law [1:34:23] by the government um the government's request but you collect it before anyone can even see what the [1:34:31] prices are going to be before they even know whether they're interested in making the purchase you want [1:34:37] this information from them right correct senator well at some point in time during the booking process [1:34:42] we're going to need to collect that information so that we can give it if they're a customer but [1:34:46] they haven't made a decision even whether they're interested in your airline exactly um so we have [1:34:54] placed the request for the information um at the point in the at the point in the booking path just [1:34:59] before seat selection because some of let me just ask you will you commit to stop collecting this information [1:35:06] as delta apparently does not do senator we're required by law to collect the information you're saying [1:35:11] delta is breaking the law you'd have to ask mr carter that question well no i don't have to [1:35:17] to ask him that question because he's not collecting that information well mr carter are you breaking [1:35:25] the law by not requiring this information senator of course not uh mr nocella will you commit to stop [1:35:33] collecting this information uh just like my colleague on the far side i do think the information is [1:35:39] required to complete the book in process you say you're required by law to collect it i'm not saying [1:35:43] it's required for to complete the book in process you know the the danger here is that [1:35:50] you're collecting this information without a need for it obviously for some other purpose and we all [1:35:57] know what that other purpose is so you can market to them or monetize that information in some other [1:36:05] way information and data are the coin of the realm in our modern marketing and technology society and [1:36:14] collecting this information is potentially profoundly dangerous if there's no real need for it let me [1:36:25] send us for the record senator i if i could i did yes i didn't get a chance to answer your question um we [1:36:30] collect the information and we we have thought about collecting it to it you know designing our booking [1:36:36] process in a way that where it's most convenient time for the uh the customer to put the information in [1:36:40] and as you said there are circumstances when the customers don't buy it all and don't want to put the [1:36:45] booking information ours we collect it we collect the booking information at the point we do because [1:36:50] it determines um uh the cost of the seat if uh the passenger chooses to select a preferred seat um and [1:36:57] some of our best customers are entitled to discounts um and the only way we can apply those discounts is to [1:37:03] know who they are that's the only use we that's the only thing we use the information for with respect to [1:37:08] booking but you don't need it at that point before someone has made a decision even to inquire about [1:37:19] seat price senator if we didn't get it at that point we wouldn't be able to offer the discounts to [1:37:24] some of our customers that they're entitled to with respect to seat purchases well apparently delta [1:37:31] is able to do it without this information and the information may be required by law at some point [1:37:38] but not then and that's the the point of the questioning let me just point out for the record on [1:37:47] the family seating rule during the comment period you were were represented by the industry association [1:37:58] uh amerilah airlines for america which essentially was i would say equivocal it called the rule a [1:38:09] possible quote trojan horse uh spirit i understand opposed the rule united said that the family seating [1:38:23] rule was quote needless overreach so i would suggest respectfully that you are being dragged kicking if not [1:38:34] screaming into compliance with this basic standard and i hope this rule will be implemented and issued as i've [1:38:43] mentioned as quickly as possible uh mr klein i think you've raised the elephant in the room and senator marshall [1:38:55] was asking about it to some extent which is the lack of competition or the barriers to entry and to [1:39:05] competition that exists right now and i'm just going to give you an opportunity to talk a little bit more [1:39:11] about the problems that spirit has faced in the access to hubs and other kinds of obstacles [1:39:26] that you've encountered in trying to compete more fully against some of the legacy airlines certainly [1:39:36] chairman mr chairman i appreciate um the question and the ability to to talk on this uh topic so [1:39:42] um for for a very long time uh we've been dealing with um the lack of access to to certain airports [1:39:51] or when we do get some access it is limited and frequently we will be given gates but there may be [1:39:58] on far ends of the airport which make it very difficult for us to provide a good guest experience [1:40:02] makes it very difficult for us to be able to operate efficiently and effectively it raises our costs [1:40:08] which then of course makes it harder for us to be profitable and without being profitable we [1:40:12] certainly can't grow um as it's very is very public right now um some of the dealings that we have [1:40:18] uh by filing for chapter 11 reorganization right now and we're in this process uh today um one of [1:40:24] one of the things that occurred um as we came out of covid was there is sort of a manufactured pilot [1:40:31] shortage of sorts where some of our legacy carrier competitors um basically paid uh their most senior [1:40:39] pilots to retire early that in that in fact caused a pilot shortage um in the industry and then they [1:40:45] turned around and hired um went after and hired all of our pilots um a lot of our pilots i should say [1:40:51] and these are pilots that are professionals and they do a great job and they do a phenomenal job every [1:40:56] day um but when they're being offered a lot more money to go work for somebody else um then that then [1:41:01] they go move to that and it's not that they're offered a lot more money straight away it's that [1:41:06] they get poached so to speak with these statements that are very public uh very public today about um [1:41:13] some ceos have said how they they're they're gunning for us they're trying to put us out of business [1:41:18] they just can't wait for that to happen um look it's a competitive industry and we all know that [1:41:23] we join this industry because it's competitive and we're competitive um by nature um but some of [1:41:28] but some of the rules of the game um have really changed especially coming out of covid and it's [1:41:33] made it very difficult to compete um you you've heard you've heard today and there's been testimony [1:41:39] on this um and and and in other public hearings as well about how um other airlines are are they really [1:41:48] like the model that we've created but they've also created rules and barriers around how they get to [1:41:53] control the game and the rules can change whenever they want them and we're trying to play the game [1:41:58] and we do our best to play the game um and it's just been it's been difficult at times and certainly [1:42:02] in the last couple of years it's been very difficult if i may if i have one more thing is we were [1:42:07] we were um in it in a merger situation um that was ultimately challenged by the department of justice [1:42:13] and then um and then we lost that case and that prevented us from from really reacting and being able [1:42:20] to do a lot of things for a couple of years now we're trying we're trying to improve our guest [1:42:24] experience i appreciate today's hearing and i appreciate um all of all of the um the abilities [1:42:30] to to ask these questions because transparency is critical if the guests or the or the public [1:42:37] doesn't have trust then what do we have so so we do agree with with transparency we do agree with all [1:42:43] of that and we do agree with with enhanced guest experience everything in this industry is about [1:42:48] supply and demand it's a very powerful driver of price it is in fact the most powerful driver of [1:42:53] price is supply and demand if our supply um is is reduced or lessened then prices go up and that's [1:43:01] the last thing that we want to see for the american public we we believe that having a vibrant healthy [1:43:07] fair system is is the best way to move forward and that includes access to slots as well [1:43:13] at very important airports you know you you mentioned the hub difficulty and i think everybody in this [1:43:20] room understands what you mean by that term and the difficulty of access um essentially when the gates [1:43:31] are blocked and there are no takeoff or landing slots at those hubs atlanta chicago some of the busiest [1:43:42] and most popular airports you are a block from competing is that fair to say yes it is fair to [1:43:51] say in terms of being able to have enough critical mass having one gate or two gates allows for some [1:43:58] access but in order to have critical mass and truly be able to compete for the for the general public [1:44:04] um in those cities is very difficult if you don't have enough critical mass and i think there's been [1:44:09] some mention about the use of frequent flyer programs and co-branded credit card agreements [1:44:18] that's another source of squelching competition is it not the credit card programs i believe [1:44:25] are are successful in achieving the goals of what the airlines want which is to create even more [1:44:30] loyalty to to those airlines but it really starts with the the dominance in in certain cities [1:44:36] if if there was more competition in those large cities then those credit card programs would not [1:44:42] be quite as effective because then there'd be a lot more choice for the customers in those cities to [1:44:47] choose who do they really want to fly with or do they feel locked in to who they must fly with and the [1:44:53] practical consequence to consumers is that take fees the major airlines have the power to march lock step in [1:45:06] in a parallel way parallel pricing is a established antitrust term um on february 20th 2024 american raised [1:45:23] its domestic first check bag fee by five dollars that's correct mr johnson isn't it correct senator [1:45:30] then mr nocella isn't it true that united raised its domestic first check bag by the same amount [1:45:38] within days of america's announcement i believe it is true in fact it raised it on february 23rd just [1:45:48] three days later and then mr carter uh delta raised its domestic first check bag within two weeks of [1:45:58] american and united increases correct i believe that's correct so this is the reason why we've asked [1:46:06] for the department of transportation the letter that we've made a part of the record today to look into [1:46:13] some of these practices because this kind of anti-competitive conduct or the symptoms and evidence [1:46:23] of it i think requires a deeper look uh let me ask uh just for the record mr schroeder um will you commit [1:46:35] to ending this bag bounty program or i'll call it in your terms an incentive payment program will you commit [1:46:44] attending it um again i i wouldn't characterize it as a bounty program um it's not something i'm able [1:46:51] to commit to um again we review um all opportunities to make the customer experience better are we're in [1:46:58] the business of attracting our customers back as somebody who has a background in marketing and has gone [1:47:03] through that it's a lot cheaper to keep the customer you have then go get new ones and so this is about [1:47:08] creating a fair and equitable scenario for all of our customers um we will continue to review of [1:47:15] what's the best um way to do that um but right now that's the most important part of your answer just [1:47:21] now is no you won't commit to ending it and the reason i'm asking is that you know there there is a [1:47:29] history here which is that the practices and tactics that begin with frontier or spirit [1:47:36] are then mimicked by the legacy airlines you have been at the vanguard of low-cost airlines and the [1:47:49] charging of fees to make up for the lower cost of the basic fares and that kind of business model [1:47:58] has been mimicked or followed by the legacy airlines and so a tactic like this one is important not just [1:48:06] for frontier but for the industry in general and that's why i'm going to ask every one of the [1:48:12] witnesses here today will you commit on behalf of your companies not to adopt this payment incentive [1:48:23] program we'll use your terms mr johnson absolutely senator mr carter senator it's not a business practice [1:48:34] we would ever endorse mr nocella we also agree it's also very inconsistent with our brand [1:48:42] we will not do it um let me point out that um we've been talking about the consolidation within [1:48:50] the industry that has enabled four airlines southwest is not here today because they don't charge these [1:48:57] fees or they haven't until now there's some talk about they're beginning to charge seat assignment [1:49:03] fees but that's the reason they weren't included in the investigation but those four airlines control [1:49:08] 70 percent of the market and that's the reason or that's the result of airline consolidation beginning [1:49:18] in 2008 delta merged with northwest united merged with continental southwest acquired air trans american [1:49:31] merged with u.s airways alaska airlines has acquired virgin america i opposed a number of these mergers and [1:49:43] acquisitions the department of justice went to court uh against the recent proposed merger of spirit and [1:49:52] jet blue but the horse was out of the barn by that point and so i think that we have work to do in this [1:50:04] area and i hope the department of transportation will begin it um you've been very patient i appreciate [1:50:12] your again your being here today uh we wanted your ceos to be here as you know but i'm glad we had you [1:50:24] here today and that we had this hearing i hope that you will take back to your ceos i think the message [1:50:30] that is pretty clear here which is there's a bipartisan demand for changes in the way you do business [1:50:39] on these junk fees you don't like to call them junk fees but that's what they are and i think the [1:50:51] bipartisan tenor of today's hearing speaks very loudly to this point um i just want to close with a [1:50:59] couple of questions um on um what we've referred to generally as algorithms or artificial intelligence [1:51:15] which again is um a trend in the industry which i think poses some dangers notwithstanding your [1:51:24] reassurances mr klein i want to ask uh mr carter uh two weeks ago during delta's investor day the [1:51:36] president of delta airlines gave a presentation about how the airline was planning to use ai to [1:51:44] set and i'm quoting granular pricing end quote that was quote responsive to con customer signals end [1:51:56] quote the end result of ai powered targeted pricing is that customers may soon confront a world where [1:52:05] every person is charged different price for every product every time they look at an airline's website [1:52:17] this optimization may work to delta's benefit but i can't imagine that most travelers would welcome [1:52:27] it it would be confusing conflicting inconsistent and potentially anti-competitive is it fair if two [1:52:43] customers searching for the same flight at exactly the same time are charged different prices senator let me [1:52:53] tell you that i'm i'm i was at investor day and and recall the comment and our use of ai is incredibly [1:53:01] small we are just trying to understand ai's application as you know ai is talked about every day everywhere [1:53:10] all the time and we thought it was incumbent upon us to at least try and test and and i would say it's it's [1:53:18] it's it's a lab it's very isolated it's a tiny you know tiny percentage it's one it's tiny right now [1:53:26] as we sit here at about noon on december 4th it's tiny but it could explode over the next six months [1:53:39] and i think that the question to you is whether it is fair for two customers going to your website at [1:53:47] exactly the same time for the same flight being charged different prices based on their zip code [1:53:54] their gender their other characteristics senator senator i i think you're making an assumption about [1:54:04] what ai would be used for when i can tell you that that's certainly not the conclusion that we have come [1:54:11] to to date i think the way again these are the earliest stages and this is just early learnings [1:54:20] we have so much to learn about ai we all do i think as a as a country um but it's more about [1:54:27] the right offer at the right time as opposed to well i'm asking you a question about exactly the same [1:54:37] time and it may be an unfair question to delta only because you don't you're not you're exceptional [1:54:47] in not asking for that information before someone decides to buy a ticket from you but i'm asking [1:54:55] you the question which i think is is not just a hypothetical it's very real because that's the [1:55:02] direction that the airlines are going using ai to charge different fees and different fares depending on [1:55:12] the personal information they get from you before you even decide to buy that ticket i would say to [1:55:19] you senator because of our commitment to our customers and our desire to be the airline of choice [1:55:27] by our customers and the desire to have loyalty from our customers i can't conceive of we all don't know [1:55:35] how ai will be used but i can't conceive of delta using ai the way you've described but i have to emphasize [1:55:41] we're just learning we don't really know what we don't even know about ai today well that's the [1:55:47] frightening part of the direction that the airlines are going truly the terrifying part from a consumer [1:55:57] standpoint i can assure you that our focus is efficiency and and and i can assure you that [1:56:02] it to the extent delta uses ai it's in a responsible manner senator let me ask you uh mr johnson um during [1:56:12] americans earnings call last month americans uh ceo said that the airline will soon quote put an ai [1:56:21] lens to everything we do everything we do an ai lens now as we know in its worst form ai could be used [1:56:32] to determine which passengers are traveling for weddings funerals family emergencies they have no [1:56:40] choice but to take your airline and they'll pay anything to be on that flight airlines could use [1:56:50] these tools to exploit passengers worst moments or best to pad their profits can you commit that american [1:56:58] will never use ai to exploit passengers who are traveling for a family emergency or even a funeral you [1:57:07] will commit to it can you commit to never using this personal information to set different fares or [1:57:14] fees for different passengers at the same time for the same flight senator i that it's fascinating that [1:57:23] that you bring this up because it's such an important topic um it's it's pretty easy just to [1:57:29] immediately think about the issues with ai the things that can go wrong the things that won't be consumer [1:57:34] friendly um but ai is a potentially a fabulous computational and automation tool that can [1:57:40] be used in many many really extraordinary ways um for instance our dabbling with ai uh in the early [1:57:48] stages is focused on trying to you know run our operation better we we operate you know 6 000 flights [1:57:54] using 1700 aircraft of you know 365 days of the year it's a really really complicated exercise and [1:58:02] very automated um ai you know offers the opportunity for us to do that much better and in a way that's [1:58:09] much better for our customers particularly in terms of you know operations i am going to just say [1:58:17] with all all due respect you're not answering the question i know you don't really have the authority [1:58:22] and maybe none of us has the knowledge right now to answer this question but the fact that i'm [1:58:31] assuming none of you can answer this question i invite others to say that your airlines will never [1:58:37] use ai to charge different fees or fares to people at the same time for the same flight and if you want [1:58:45] to commit none of you is truly one reason that we need to continue the kind of oversight that we're [1:58:55] we're seeing here today because ai opens the potential for practices that may be deeply unfair [1:59:05] in resulting in discrimination based on these factors that you now collect information on routinely [1:59:17] and i know mr klein you may be dubious about the use of algorithms for this purpose algorithms can [1:59:24] be defined in a lot of different ways ai has been used for 10 years in various settings and we're just [1:59:32] discovering the vast potential for using it but the setting of fees and fares by airlines again as a [1:59:42] potential paradigm for other industries is deeply disconcerting when ai becomes a factor in the use of [1:59:51] personal information gender age residence and so forth so um i'm going to conclude this hearing [2:00:03] i want to thank you again for being here um i don't need to repeat uh the messages that are contained in [2:00:15] uh our report and i think we're pretty dramatically and graphically restated here today but um i just don't [2:00:23] think it can be business as usual for the airlines if you want to retain customer trust and credibility [2:00:31] um so um thank you for being here um with that uh this hearing is adjourned we'll keep the record [2:00:40] open for two weeks um in the event that uh any of you want to supplement your answers or any of my [2:00:48] colleagues want to ask additional questions for the record thank you so much hearing is adjourned