USDOT Forces Airlines to Fix Flight Cancellation Policies. Will Changes Improve Customer Service?

After a summer of flight cancellations, flight delays and post-pandemic disruptions, the U.S Department of Transportation (USDOT) finally issued an ultimatum to airlines in light of its recent Air Travel Consumer Report (ATCR).  The report put into perspective an alarming trend that travelers, flight staff and industry analysts have been aware of for months if not years: consumer complaints are alarmingly high and have been growing at a steady pace. Complaints are not only up 269% compared to June 2019 levels, but even just over the summer months complaints rose by a considerable 34.9% between May and June 2022.

To put it simply, the USDOT is not happy with this trend, telling U.S. airlines that they need to come up with their own improvements for customer service or the agency will be forced to proceed a federal rule change. Essentially, the USDOT is threatening regulation if airlines can’t get their act together.

Voicing his concern, U.S. Secretary of Transportation Pete Buttigieg stated that this level of customer service is “unacceptable” and that regardless of if flight issues are self-imposed or unavoidable industry adversities, airlines have to be more transparent.

“You’ve got to make it easier for passengers to understand their rights and support passengers when they experience delays or cancellations,” Buttigieg said in an interview on NBC’s TODAY.

In the ATCR, one of the key findings that caused the USDOT to threaten intervention was the various factors behind the complaints surge. Flight problems proved to be the highest-represented category of complaints received in June 2022. Of the 5,862 complaints received, 1,686 (28.8%) concerned flight cancellations, delays, or other deviations from airlines’ schedules. Of the nearly 6,000 complaints in June 2022, 3,382 (57.7%) were against U.S. airlines.

 

After Pandemic Furloughs and Layoffs, Lack of Personnel Impacts Flight Cancellations

 

At the center of these alarming figures were the consequences of both a nationwide and a self-inflicted staffing crisis, which continue to burden airline carriers who tried to cut costs during the pandemic and now seek to capitalize on rising travel numbers.

“I think one of the places the airline executives probably pushed it was that they wanted to fly more of their schedule, as much of their schedule as possible, in the summer months, in that constricted 2Q and 3Q period. And again, they did it with staff that a lot of times was just being rehired and retrained,” said George Ferguson, senior aerospace & airline analyst for Bloomberg Intelligence.

Pressured early in the pandemic to take buyouts and/or consider early retirement, flight attendants, senior pilots and other employees were ushered out of the industry as major airlines anticipated shrinking demand and long recovery period. Mid-pandemic calculations from Bloomberg estimated around 400,000 global airline jobs were “lost or at risk” due to pandemic disruptions.

Looking at total airline employment data in the U.S., pre-pandemic employment figures reached a peak of 753,382 jobs in February 2020. It took until May of 2022 to bring airline employment to new heights, hitting more than 760,000 jobs. Though full-time employment for airlines has more than recovered, part-time employment in the industry remains thousands of jobs below pre-pandemic levels.

“I think what it resulted in was a very fragile system. So then when normal interrupters like weather or technology glitches and failures enter into the system inevitably. In normal times, they have a smaller effect. When we have such a fragile system with planes missing with people missing from the system. Then when these normal interrupters happen, they crash and they lead to the weekends that we had Father’s Day and earlier in the summer, where we had these air-mageddon weekends with one third of flights affected,” said James Ferrara, founder & CEO of InteleTravel.

Airlines’ initial concerns around shrinking demand weren’t wrong. Operated domestic flights tanked during the pandemic to 236,000 in June 2020 according to USDOT calculations. However, it can be argued that this staffing and subsequent operational issue could’ve been avoided with a different budget strategy during the pandemic.

10 of the largest U.S. passenger airlines received more than $50 billion from taxpayers during the pandemic in the form of Payroll Support Program government assistance for the express purpose of avoiding worker shortages. At its worst point during the pandemic, the industry was still down nearly 80,000 employees according to BTS November 2020 figures, a loss encouraged by airlines. While airlines argued back that job losses would’ve been even starker without government assistance, major airlines still reported paying out significant cash bonuses to executives during the pandemic while enticing senior operational staff to leave the company in order to remain afloat.

Many major airlines have tried their best to counteract the talent hemorrhage and its impact on flight cancellations by promoting the recertification of pilots and encouraging current pilots to take on more hours by offering bigger paychecks, up to an additional 50% for regional carriers such as Piedmont and Envoy.

“The amount of time that a pilot is out of work, determines whether or not that pilot needs to be recertified and that recertification can take months as it’s hard to get on simulators to find those times. we lost half the world’s pilots, from work during the pandemic,” Ferrara said.

Not only was it pilots and flight attendants who were in short supply and in need of retraining, but it was also other logistical positions at airports such as ground staff and air traffic controllers, who are crucial to planes following schedule and avoiding cancellations, that needed support. The operational consequences of a lacking and/or undertrained pool of mission critical roles were acute.

“Staff like pilots…they’re on the clock all the time. So when they’re flying an airplane, if they land at an airport like Newark and they can’t get to a gate because ground staff aren’t trained as well at getting airplanes into gates and getting jetways out there, that pilot’s allotted time for flying that month is ticking down as the airplane’s waiting for a gate,” Ferguson said.

“Retraining controllers, they’re really key to the to the air travel market. Any slow actions by them increase the time airplanes are traveling, also timed out pilots. And so that combination really, snowballed on them and created the challenges that they see in this summer.”

Airlines’ training and hiring strategies are working to some degree; the BTS reports the U.S. airline industry added close to 7,000 jobs in June 2022 and totaled nearly 768,000 jobs, marking not only a high over June 2019 levels but the highest total employment for the industry in the last 32 years. This is the same month in question that motivated Secretary Buttigieg to issue a regulatory warning to all major airlines, though, so even high employment numbers aren’t offsetting operational issues completely.

Now in the inevitable recovery period, experts say airlines failed to anticipate the logistical lag of trying to rehire and retrain employees to fill the void. Leading up to and during the summer months, travel spending was “roughly at 2019 levels in July,” marking the “fourth consecutive month” where travel spending reached or surpassed 2019 levels. Fourth of July holiday weekend marked the first holiday weekend in 2022 to overtake 2019 numbers, with a reported 2.49 million people screened through TSA on July 1 compared to 2.18 million on the same date in 2019.

This summer travel trend culminated in air travel surpassing pre-pandemic highs, with the TSA reporting 8.76 million people screened over Labor Day weekend compared to 2019’s 8.6 million screenings.

Flight volumes struggled to catch up to increased demand over the summer. The most recent figures from June 2022, which put number of U.S. flights at around 584,000, doesn’t come close to December 2019 numbers of 673,000 U.S. airline-operated domestic flights.

“The airlines will take the position that sounds so reasonable, that no one had a crystal ball and that somehow the market came slingshotting back without warning. But the truth is there were plenty of indicators, and I think it’s clear that the airlines were slow to react and slow to plan for the surge in demand,” Ferrara said.

 

Both the USDOT and Airlines Start to Move the Needle on Flight Policies

 

Since Secretary Buttigieg’s initial call-to-action for airlines, the USDOT has already implemented its own changes toward air travel customer service standards. Leading up to Labor Day weekend, the USDOT remained discontent with airlines’ policies and consequently published an interactive dashboard for air travelers to compare the services of each large U.S. airline as well as better clarify passengers’ rights should a flight be delayed or cancelled.

The USDOT’s pressures also resulted in airlines adjusting their internal policies for “controllable cancellations” to match new agency expectations. Pushing for accommodations like no-cost rebookings on same and competing airlines, meal vouchers for waits over three hours, and complimentary hotel and ground transportation for overnight flight cancellations, the USDOT successfully convinced a majority of the ten largest airlines to implement new policies. These 10 airlines represent 96% of domestic U.S. flights.

“No airline unconditionally guaranteed meal vouchers or hotels prior to Secretary Buttigieg’s letter. Now, nine of the 10 guarantee meals and eight of the 10 guarantee hotel accommodations when an airline issue causes the delay or cancelation,” wrote the Department in its announcement.

Four airlines (American, Delta, United and JetBlue), three of which led June’s carrier cancellation rates, received USDOT recognition for implementing changes in all five categories. In what experts see as a clever move by the USDOT, the governing body’s use of appropriate threats of returning to heavy legislation seems to be enough motivation for major airlines to rectify flaws in their customer service.

“Airlines have never been famous for their customer focus policies. And it’s a lesson they need to have learned during the pandemic. They relaxed, for example, during the pandemic. All of those horrible change fees and penalties, and consumers hate those. So going forward now into this coming year, they’ve already been forced in this chart, this consumer protection dashboard, to come up with some new policies,” Ferrara said.

These policies, though, don’t address the root causes of flight delays and cancellations in favor of providing transparency and reactive accommodations to travelers. While high travel numbers over Labor Day weekend are encouraging for a return to form for the air travel industry, there’s still a long road ahead to reverse the trend of excessive flight cancellations and delays. Final numbers have yet to be released, but Labor Day delays seem to still be up in the long-term, while cancellations are thankfully down in the short-term and long-term.

According to flight tracking intelligence service FlightAware, U.S. airlines cancelled merely 0.6% of over 90,000 scheduled flights over Labor Day weekend, which amounts to around 540 flights. This is compared to 1,400 cancelled flights over Labor Day 2019 weekend, as well as 2.1% of flights cancelled during the prior period between Memorial Day and Labor Day. In both instances, flight cancellations are down.

As mentioned, delays are still a challenge. 2019’s reported Labor Day delays landed at almost 4,000 into Tuesday morning. In 2022, FlightAware reports 16% of U.S. airline operated flights were delayed over Labor Day weekend, amounting to around 14,000 delayed flights. This is even with Labor Day 2019 travel plans getting wrecked by Hurricane Dorian, leading to a high degree of flight cancellations and delays. Locking down accurate numbers can be difficult, though, so take these comparisons with a grain of salt.

In its dashboard announcement, the USDOT reiterated that it’s “considering options” to write new rules “that would further expand the rights of airline passengers” if airlines’ policy changes prove ineffective. The main rule in question, for which it’s actively collecting comments, would…

  1. “require airlines to proactively inform passengers that they have a right to receive a refund when a flight is canceled or significantly changed”
  2. “define a significant change and cancellation that would entitle a consumer to a refund
  3. “require airlines to provide non-expiring vouchers or travel credits when people can’t travel because they have COVID-19 or other communicable diseases
  4. “require airlines that receive significant government assistance related to a pandemic to issue refunds instead of non-expiring travel credits or vouchers”

As this intervention continues to unfold, it is clear that the USDOT is pushing for airlines to be more customer-centric and set a precedent of transparency to avoid replicating the last several years’ worth of rising dissatisfaction from travelers. Airlines and air travel experts are hoping to avoid government intervention, which many including Ferrara and Ferguson see as taking control of an otherwise healthy competitive market. Still, it took threats of regulation and two years of rising customer complaints to motivate policy changes.

“I’m not a fan of the idea of regulating this industry. It doesn’t work. What we saw as a result of deregulation was a real change in pricing in this industry and an increase in innovation, it was good for consumers. So I don’t think we should make that mistake. I think the airlines, through market pressures over the last couple of months, were forced to improve the situation. And then the latest move by the Department of Transportation, I think this is rather brilliant rather than fines,” Ferrara said.

“I think competition between the carriers is the right way to go. I think it’s always hard for government to regulate these issues. I think it gets a little bulky too. You get into these standard rules that require monetary compensation and they have a hard time taking into consideration all the challenges that could be in play on that particular day like weather and other problems,” Ferguson said.

Already competing for the consumer dollar, airlines must work harder to put the consumer experience first if they’re to avoid further USDOT action. And while airlines can learn from the backlash of this post-pandemic struggle, they must better prepare for the imminent peak season in 2023. Airline unions including the Allied Pilots Association and Association of Flight Attendants are still concerned about airlines’ operational stability heading into the fall and winter seasons, saying airlines are “still suffering from this mismanagement,” and that for flight attendants, “staffing is at its lowest level across the board.”

“Due to corporations feeling the inflationary travel pinch, the challenge will be for the airlines to hold onto that staff through the winter and keep a well-trained staff and be ready to go next spring when we see leisure coming back strongly,” Ferguson said. “We saw Southwest come out and take away the expiration of credits when you can’t fly and you reschedule, so you do see the marketplace starting to act here and compete with each other.”

“I’m looking forward to seeing how airline competition hopefully motivates some of those positive changes because as much as we are in an inflationary period, the consumer dollar still talks. And if they find that Southwest’s customer service operations are little more accommodating than American’s, then who knows. They may transfer their business,” Ferrara said.

Article co-written by Matt Franje and Daniel Litwin.

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