BEFORE THE. U.S. DEPARTMENT OF TRANSPORTATION ( Department ) WASHINGTON, D.C. IN THE MATTER OF

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1 BEFORE THE U.S. DEPARTMENT OF TRANSPORTATION ( Department ) WASHINGTON, D.C. IN THE MATTER OF TRANSPARENCY OF AIRLINE ANCILLARY FEES AND OTHER CONSUMER PROTECTION ISSUES; PROPOSED RULE DOCKET NO. DOT-OST COMMENTS OF COMPAÑÍA PANAMEÑA DE AVIACIÓN, S.A. ( COPA AIRLINES ) Communications with respect to this document should be sent to: Christian W. Hansen White & Case LLP Southeast Financial Center Suite South Biscayne Boulevard Miami, FL chansen@whitecase.com

2 I. Summary of Copa Airlines Position. Although Copa Airlines shares the Department s goal of enhancing transparency of information to travelers because the travel industry will be better able to serve customers when more transparency is afforded, Copa Airlines considers that the enactment of the proposed rules as contemplated in the Notice of Proposed Rule Making ( NPRM ) may have unintended adverse consequences that would significantly diminish any such benefits by making its implementation financially and technologically cumbersome for carriers. In particular, the new disclosure rules regarding ancillary fees will require carriers to display on their Web sites and share with ticket agents (which as proposed by the NPRM will not only include traditional ticket agents, but also GDS (as defined below) and Web sites with flight meta-search engines) for display on the ticket agents Web sites a significant amount of additional information. Copa Airlines considers that the integration of this additional information to the current GDS or travel agency s systems offered to carriers may not be technologically feasible or may not be capable of being implemented in a cost-effective manner. Also, the proposed new ancillary fees disclosure rules may require carriers to share proprietary and confidential information with ticket agents that may lead to the disclosure of information that provides a competitive advantage that a carrier has over its competitors and such disclosure could result in the breach of existing agreements with third parties. Further, the amendments to the tarmac delay rules granting the Department regulatory authority to impose fines on a per-passenger basis will potentially subject carriers to economically burdensome fines without considering any mitigation actions taken or exceptional circumstances. Thus, for the reasons outlined below, Copa Airlines submits these comments to share its concerns about the NPRM and respectfully requests that the Department review and consider these comments for the purpose of revising or eliminating certain of the proposed regulations in the NPRM prior to enactment. II. Copa Airlines Comments to Proposed Rulemaking A. Broad Definition of Ticket Agent The proposed rules seek to expand the definition of ticket agent under 49 U.S.C to include basically any person or company that derives revenue through the sale of air transportation services, directly or indirectly, to consumers. This would include global distribution systems ("GDS"), Web sites with flight meta-search engines such as Kayak and Google and other Internet entities that display schedules, fares and availability but direct consumers to other Web sites to purchase tickets and are not the final point of sale for an airline ticket irrespective of the manner in which they are compensated for their role in arranging air transportation. A broad definition of ticket agent, will increase the number of entities with which carriers will have to communicate and share information, which would increase the already high cost of communicating and sharing information with traditional ticket agents. Also, both GDS and Web sites with flight meta-search engines do not actually sell flight tickets. These online tools show flight availability and direct consumers to carriers or traditional ticket agents Web sites with which carriers already share ticket flight information. Thus, in consideration of the foregoing, Copa Airlines opposes the Department s proposal to expand the definition of ticket agents. In any case, if the Department decides to move forward with this rule, the ticket agents should bear the financial burden and costs of seeking and obtaining information from carriers. B. Additional Fee Disclosure for Ancillary Fees The NPRM proposes to require the disclosure of fee information for ancillary services during the air transportation purchase process. The first proposal would require domestic carriers and foreign carriers to disclose fee information for ancillary services to all ticket agents to which an airline provides 2

3 fare, schedule and availability information, including GDS. Under this proposal, carriers will rely on GDS to transmit information to ticket agents that act as a point of sale. The second proposal would require domestic carriers and foreign carriers with sales and/or flight service in the United States to disclose fee information for ancillary services only to those ticket agents to which a carrier provides fare, schedule and availability information that sell air transportation directly to consumers (excluding GDS, which only facilitate sales). This proposal would not require carriers to provide ancillary fee information to entities such as meta-search tools such as Kayak and Google. Under this proposal, carriers will be able to decide which intermediaries, if any, to use to provide ancillary fee information to ticket agents that act as a point of sale. Under both proposals, all carriers (domestic carriers and foreign carriers) and agents would be required to disclose fees (the Basic Ancillary Fees ) for the first and second checked bag, one carry-on item and advance seat selection (the Basic Ancillary Services ). In this regard, the Department has requested comments on the following: 1. Whether it should require the Basic Ancillary Fees to be disclosed only upon the consumer s request or require that the information be provided in the first screen that displays the results of a search performed by a consumer. Copa Airlines has already implemented mechanisms aimed at ensuring that its passengers make informed choices when purchasing air travel services. In particular, Copa Airlines provides prominent and timely notice of its baggage policies and charges on its Web site by displaying a link on the first page on which a fare is displayed in response to a specific flight itinerary search request in a schedule/fare database. If a flight is operated by another carrier, the link takes the passenger to the operating carrier s Web site to allow the passenger to review such carrier baggage policies. Further, while Copa Airlines does not charge its passengers for advance seat selection based on the class and fare type of the passenger s flight ticket, Copa Airlines already displays a direct link to the seat map during the online booking process on the first screen where an itinerary-specific fare is displayed. A passenger may pre-select a seat (from the available seats displayed in the seat chart) once the passenger has completed the booking process and the flight ticket has been purchased or placed on Book and Hold or at the moment the passenger check-in (whether at the airport or online). 2. Whether it should limit the applicability of the disclosure requirement only to agent and carrier Web site displays marketed to members of the general public or whether the disclosure requirement should include agent and carrier Web site displays that are not publicly available (e.g., displays used by corporate travel agents). Subject to the comments mentioned herein with regard to the proposed rules contemplated in the NPRM, Copa Airlines has no objection to the proposed rule that the information regarding Basic Ancillary Fees must be included on agent and carrier Web site displays that are not available to the general public like displays used by corporate travel agents. 3. Whether it should only require carriers and agents to provide information on standard baggage fees without taking into account variations based on frequent flyer discounts, loyalty card, discounts, geography, ticketed fare, etc. As previously mentioned, Copa Airlines already provides prominent and timely notice of its baggage policies and charges on its Web site by displaying a link on the first page on which a fare is displayed in response to a specific flight itinerary search request in a schedule/fare database. Such information is displayed taking into account the country where passengers will begin their trip and their final destination. Copa Airlines considers that displaying baggage fee information based on any other 3

4 criteria like frequent flyer discounts and loyalty card discounts may result in the disclosure of sensitive information regarding Copa Airlines business. Although the proposed rule would not require carriers to provide ticket agents with information about individual customers such as frequent flyer status or method of payment, carriers would be required to provide ticket agents the fee rules for particular passenger types (e.g. military, frequent flyers and credit card holders). This obligation would require carriers to disclose certain proprietary information (or information from which confidential information may be derived) regarding Copa Airlines frequent flyer program and Copa Airlines business model. Also, the disclosure of such information may result in Copa Airlines breaching its confidentiality obligations under Copa Airlines agreements with credit card processors and/or credit card issuers. Further, the Department seeks comment on the technological feasibility and cost of providing this information to consumers in a usable fashion, particularly for ticket agents. In this regard, based on Copa Airlines experience with GDS and travel agency system capability, Copa Airlines considers that either (i) currently agents do not have the technology to integrate the Basic Ancillary Fees information that would have to be provided by carriers or (ii) such integration would require an update of the current GDS or travel agency s systems offered to carriers. Copa Airlines shares the Department s goal of transparency of information regarding Basic Ancillary Fees and thus, if the Department decides to move forward with this proposed rule Copa Airlines is willing to work closely with GDS and travel agents to find a way to distribute this information in an efficient and cost-effective manner. Further, as noted in the NPRM, the cost to carriers of disclosing ancillary fee information to consumers as provided in this rule (US$46.15 million) very significantly exceeds any benefits to consumers of having the information (US$25.1 million). Therefore, if the Department decides to move forward with this proposed rule, the Department should provide clear guidelines to allocate the costs of this endeavor fairly between the agents and carriers (irrespective of any provisions in the current contracts between agents and carriers); otherwise, carriers may end bearing such disclosure costs in full to comply with the proposed regulations and 49 U.S.C , which Copa Airlines considers would be excessively burdensome for air carriers. 4. Whether the Department should require a carrier to disseminate certain ancillary service fee information to the agents that (i) distribute the carrier s fare, schedule, and availability information or (ii) distribute the carrier s fare, schedule and availability information and are a point of sale for the carriers tickets to consumers, requiring in both cases that carriers and agents disclose accurate and up-to-date fee information to consumers. While Copa Airlines is willing to cooperate with agents (including GDS and entities that have not previously considered themselves to be regulated but that would fall under the proposed definition of ticket agent described in the NPRM) in implementing any of the two options proposed by the Department to ensure the transparency of ancillary service fee information for the benefit of consumers, Copa Airlines considers that by allowing carriers to decide which intermediaries, if any, to use to provide ancillary fee information to agents acting as sales outlets, the second option gives the carriers the flexibility to adopt a cost-effective method of distribution that better fits their business model and which may be adapted to constantly evolving market and industry circumstances. This will allow carriers to minimize the burden of implementing the new proposed ancillary fee disclosure rule while providing their passengers accurate and up-to-date fee information. In addition, it is not clear whether the entities that did not previously consider themselves to be regulated but would fall under the proposed definition of ticket agent, have the technology to integrate in a cost-effective manner the ancillary service fee information that carriers would disseminate (either through the GDS, its own system or any other method). Also, in case such information is to be disseminated through the GDS, carriers and such new ticket agents should agree with the GDS upon terms and conditions pursuant to which the disclosure of the ancillary services fees would be disclosed, negotiations that may be lengthy and costly. 4

5 Further, if the Department requires disclosure of certain ancillary service fees, but does not require the ability to purchase these services at the time of booking, what would be the preferred way for carriers to collect payment for such services? On the Internet through the airline Web sites prior to check-in, at the airport at the time of check-in, etc.? Although Copa Airlines prefers that the collection of payments for the ancillary services be made through the carrier s Web sites prior to check-in, Copa Airlines considers that carriers should have the flexibility to implement any other available method that they may consider proper under the then-prevailing circumstances. 5. Whether the Basic Ancillary Services that are disclosed to consumers should also be transactable. What would be the costs and benefits of requiring transactability and how requiring transactability would affect existing contracts between the GDS and the carriers? While Copa Airlines is not opposed to this initiative, the relevant rule should clearly provide that agents (including GDS and Web sites with flight meta-search engines, in case the definition of ticket agent is expanded as proposed by the NPRM) may not charge carriers additional fees under any concept or form whatsoever for dissemination of Basic Ancillary Fees information on top of what they may already charge carriers for such services pursuant to the existing contracts between the carriers and the GDS. Also, the rule should provide that agents may not pass on the costs of implementing this option to customers by charging passengers a commission (or similar fee) for the sale of Basic Ancillary Services. 6. Whether the Basic Ancillary Services should also include services such as in-flight wireless internet access, seating upgrades, food and beverages, or priority boarding (the Additional Services ). If such services should be included, how should carriers and agents display the information related to these additional services? Copa Airlines considers that expanding the list of Basic Ancillary Services to cover the Additional Services would be cumbersome for carriers in practice and the logistical and financial burdens placed on carriers to disseminate such information to ticket agents would be excessive. Further, as previously mentioned with regard to the disclosure of Basic Ancillary Services information, Copa Airlines considers that it may not be technologically feasible for ticket agents and carriers to integrate this Additional Information in a cost-effective manner. Thus, in light of the foregoing, Copa Airlines opposes expanding the list of Basic Ancillary Services to include the Additional Services. C. Minimum Customer Service Standards for Ticket Agents The Department proposes to create new Customer Service Commitments for ticket agents that sell air transportation and have annual revenue of $100M or more, similar to the Customer Service Plans required of airlines. Thus, as part of these new Customer Service Commitments, these ticket agents should promptly process and provide refunds to customers; allow consumers to make reservations at a quoted fare without payment or permit cancellation without penalty for 24 hours after the reservation is made; disclose cancellation policies and aircraft specifications on its Web site or over the phone; notify consumers of carrier-initiated changes to air travel itineraries they are made aware of and reply to consumer complaints or forward complaints to the carrier when appropriate. The Department seeks comment on whether carriers should be required to provide their agents with cancellation policies, seating configurations and lavatory availability or whether agents should be permitted to provide links to carriers' Web sites so customers can obtain information there. In this regard, Copa Airlines considers that the most cost-effective method to share this information with agents would be by displaying links to the carrier s relevant Web site. Further, if the Department decides to move forward with this rule, the ticket agents should bear the burden of obtaining and disclosing all required information without any cost to carriers. 5

6 D. Tarmac Delays Reporting Standard Under 49 U.S.C , the Department may impose a civil penalty of not more than $27,500 on carriers for each violation of the specifically listed aviation-related laws and regulations, which include the Department s tarmac delay rule. Pursuant to the NPRM, the Department proposes to clarify that it may impose penalties for tarmac delay violations on a per-passenger basis (rather than per-flight basis), when an airline operating flights subject to the rules of 259 does not abide by such rules or comply with its own Contingency Plans for Lengthy Tarmac Delays. Such failures are considered unfair and deceptive practices under 49 U.S.C The Department maintains that it is currently entitled to impose civil penalties for tarmac delay violations on a per-passenger basis under its statutory enforcement authority and now, as proposed by the NPRM, seeks to codify its regulatory authority to impose such civil penalties by amending 49 U.S.C Pursuant to the Department s interpretation of 49 U.S.C , in the event of a tarmac delay violation, each passenger on a flight gives rise to a separate violation. Thus, under such interpretation, a carrier transporting 200 passengers may be required to pay up to US$5,500, as a civil penalty for violating the Department s tarmac delay rule if the penalty were US$27,500 1 per passenger. Copa Airlines believes the aim of imposing civil penalties is to establish a strong deterrent to prohibited practices by carriers, rather than to impose on carriers burdensome economic measures. 2 We acknowledge that several carriers have agreed to settle alleged claims to the Department s currently enacted tarmac delay rules by paying amounts in excess of the US$27,500 ceiling codified in 49 U.S.C , but we do not think carriers generally share the Department s view that it may, under current regulations, impose penalties on a per-passenger basis for tarmac delay violations. Further, Copa Airlines considers that increasing the ceiling of the civil penalty for violation of the tarmac delay rule will not reduce tarmac delays, as those delays usually occur due to circumstances outside of carrier s control (e.g. extreme weather delay, national aviation system delay, etc.). Also, Copa Airlines strongly believes that a highly competitive market already imposes enough pressure on carriers to improve their own performance and treatment of passengers in tarmac delay situations. In addition, according to Department reports, tarmac delay violations have decreased significantly and, thus, no longer represent a major source of dissatisfaction for air travelers to justify per-passenger penalties to assure compliance with the Department s tarmac delay rule. 3 For the reasons mentioned above, Copa Airlines respectfully opposes to the Department s proposed amendments to 49 U.S.C However, if the Department decides to codify its asserted authority to impose civil penalties on a per-passenger basis, we respectfully encourage the Department to consider incorporating language that lessens the penalty to carriers for mitigating circumstances (for instance, if there is evidence that a carrier has timely taken all reasonable actions to correct any situation arising during a tarmac delay or acted in good faith) and creates exceptions for issues that are outside the carriers control such as extreme weather delays, national aviation system delays, and other situations in which the carriers are acting under the direction of the control tower or airport operators leading to excessive tarmac delays. Carriers have not been able to avoid lengthy tarmac delays in certain situations despite their best efforts to do so. As currently drafted, the NPRM seeks to revise the tarmac delay rules without taking into consideration these mitigating factors, which Copa considers of utmost relevance 1 Please note that pursuant to 49 U.S.C. Ş46301 the civil penalty may not exceed the amount of US$25,000 rather than US$27,500 as set forth in the NPRM. 2 For instance, a civil penalty in the amount of US$5,500, would exceed the total amount assessed in civil penalties for aviation consumer rule violations by the Department in 2012, which amount totaled US$3,610,100. See Tang, Rachel, Airline Passenger Rights: The Federal Role in Aviation Consumer Protection, May 20, 2013, p From January 2014 to September 2014 there have been only eight tarmac delays longer than four hours on U.S. international flights and tarmac delays longer than three hours on U.S. domestic flights have been virtually eliminated. See U.S. DOT Air Travel Consumer Reports issued on March (p. 40), April (p. 37), May (p. 20), June (p. 25), July (p. 30), August (p. 36) and September (p. 38) and New Digest DOT

7 considering that civil penalties may be imposed on a per-passenger basis and thus, respectfully encourage the Department to consider the inclusion of mitigation circumstances and exceptions to tarmac delay violations in the proposed rule amendments. E. Extension of Prohibition on Post-Purchase Price Increases In the second Enhancing Airline Passenger Protections rule, the Department prohibited a carrier or agent from increasing the price of air transportation after the passenger purchases a ticket. As a result, the plain language of 14 CFR prohibits carriers and other sellers of air transportation from increasing the price of air transportation to a particular passenger after the purchase of a ticket, including but not limited to the price of a seat, the price for the carriage of passenger baggage and the price for any applicable fuel surcharge (except for an increase in a government-imposed tax or charge). Later, the Department clarified that this price increase prohibition applies to any ancillary service after a ticket is purchased even though such services were not purchased with the ticket. Nonetheless, in the Guidance on Price Increases of Ancillary Services and Products not Purchased with the Ticket on December 28, 2011, the Department announced that it would only enforce the referred price increase prohibition on postpurchase price increases for carry-on bags and first and second checked bags. Pursuant to the NPRM, the Department proposes to modify 14 CFR to codify its current enforcement policy in regulation and seeks comments on the costs and benefits of retaining the rule as originally set forth in 14 CFR and on the new proposal to prohibit only an increase in the price of the carriage of baggage if not purchases with the fare. As mentioned by the Department in the NPRM, the prohibition on any increase in the price of any ancillary service after a ticket purchase could prove cumbersome for carriers in practice. The logistical and financial burdens placed on carriers related to ancillary services other than baggage that are not purchased with the ticket would be too great. Thus, Copa Airlines does not have any objection to the Department s proposal to modify 14 CFR to codify its current enforcement policy, which provides that carriers may increase the price of any ancillary service after a ticket purchase, other than fees regarding carry-on bags and first and second checked bags and ancillary services already purchased (except for an increase in a government-imposed tax or charged). F. Mistaken Fares The Department has explained in a guidance document that under Section , once a consumer purchases a fare and that consumer receives confirmation (such as a confirmation and/or the purchase appears on their credit card statement or online account summary) of his/her purchase, then the seller of air transportation cannot increase the price of that air transportation to that consumer, even when the fare is a mistake. The Department has become concerned that, increasingly, mistaken fares are being posted on frequent-flyer community blogs and travel-deal sites and individuals are purchasing these tickets in bad faith and not on the mistaken belief that a good deal is then available. Thus, the Department solicits comment on how best to address the problem of individual bad actors while still ensuring that airlines and other sellers of air transportation honor mistaken fares that were reasonably relied upon by consumers. In this regard, Copa Airlines considers that in case mistaken fares are published, carriers should be entitled, at their election, to (i) cancel reservations within a reasonable period of time and reimburse customers for the mistaken fare they paid as an exception to Section or (ii) honor the mistaken fare. Copa Airlines considers that it would be practically impossible to distinguish between good faith and bad faith purchases and, thus, to implement different rules based on this distinction. However, Copa Airlines considers that the proposed solution would allow carriers to mitigate their losses by opting to cancel the relevant reservations if the cost of reimbursing the affected customers is less economically burdensome than honoring the mistaken fares and, at the same time, deter customers purchasing services 7

8 in bad faith to take advantage of mistaken fares because there is no assurance that they will be able to fly to the relevant destination at the erroneous fare. Honest mistakes such as mistaken fares happen and carriers should have the opportunity to undo a transaction when honoring a mistaken fare is economically burdensome. 4 On the other hand, to provide certainty and protect the affected passengers, the DOT may consider to set forth (i) a specific period of time to cancel a reservation based on a mistaken fare, (ii) guidelines to determine a fair rate at which affected passengers may repurchase their flight ticket and (iii) the manner in which carriers may communicate the cancellation of the relevant reservation. The latter, irrespective of any additional benefit carriers, at its discretion and as part of their client service policy, may consider proper to compensate their passengers for the inconvenience they may have experienced. III. Conclusion Copa Airlines would like to express its sincere appreciation to the Department for considering its comments contained herein. Copa Airlines believes that the intended goal of improving passenger travel and information can be attained but should balance the conditions of the airline and travel industry and should be enacted after careful cost-benefit and feasibility analyses have been performed in consultation with carriers. We are committed to serving our customers and share your goal of improving the safety and experience of our passengers and employees. Respectfully submitted, Christian W. Hansen White & Case LLP Counsel to and on behalf of COMPAÑÍA PANAMEÑA DE AVIACIÓN, S.A. September 26, The Federal Trade Commission says there is no federal statute that requires merchants to honor mistaken pricing, unless it's misleading or deceptive. Honest mistakes do happen, and a transaction can be undone," says FTC spokesman Mitch Katz. See McCartney, Scott, When Airline Fares Are Too Good to Be True, the New York Times, March 25,