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DOT EXPECTED TO ENFORCE NEW AIR RULES AGGRESSIVELY
Travel agents who fail to comply with the new DOT rules that went into effect this week run the risk of “draconian” penalties, as the department is likely to make an early example of violators.
That’s the view of industry attorney Jonathan Harriman. Harriman and other industry members are urging agents to take a close look at the rules on baggage fee disclosure, airfare advertising and post-purchase price increases and make appropriate changes.
“These rules will significantly impact the regulatory environment in which travel agencies operate and failure to comply could result in substantial penalties,” said ASTA CEO Tony Gonchar. (For a description of new DOT fare and fee rules, please see related story, “An Agent-Friendly Guide to New DOT Disclosure Rules.”)
Dramatic impact on agents
The new rules could require agencies to make fundamental systems and programming changes and to re-train frontline employees, ASTA stated.
The rules are also expected to have a sizable impact on agency-tour operator business dealings.
The DOT’s advertising rules go into effect on Jan. 26. Its fare hike and fee disclosure rules took effect on Jan. 24.
While some new DOT fare rules became effective in August 2011, the rules taking effect this week “may have the most dramatic impact on an agency,” Gonchar said.
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Penalties for violating the rules can be sizable, said travel industry attorney Alexander Anolik of Tiburon, Calif.
Travel Market Report asked Anolik and his law associate Jonathan Harriman to discuss the DOT’s new rules and what agents can expect.
What should agents do to make sure they are complying with the new DOT rules?
Anolik: Closely review the new regulations and speak to their travel attorney. A few hours of legal consultation is much cheaper than even one day’s worth of penalties.
What are the penalties for violating the rules?
Anolik: The penalties are substantial. The statutory penalty is $27,500 per violation. It increases for each violation and/or each day the violation continues.
Is DOT proactive about enforcement?
Anolik: The Department of Transportation is proactive about enforcement and has an entire office dedicated to finding and punishing violators. Be aware that many agencies are turned into DOT by other agencies that are caught with a violation.
Last year, DOT issued nearly $6 million in penalties against agents and carriers for noncompliance. We expect increased enforcement in 2012 due to the new laws.
Harriman: Get ready for the first wave of penalties in April and May. DOT will give everyone two months to get their act together. Then they will come down hard and make examples of OTAs, airlines and tour operators. This is the way they work – make an example of one company in each segment of the industry.
Penalties are draconian. The average fine for an advertising violation can cost an agency $57,225 – and that is for a small agent.
What benefits do the rules provide to agents and consumers?
Anolik: Consumers enjoy most of the benefits from the new DOT rules. Although short of a Passenger Bill of Rights, these rules make serious efforts to protect consumers from unfair practices and re-civilize the air travel experience.
Agents will certainly enjoy some benefit from the more complicated rules, but this benefit will be outweighed by the additional costs of compliance.
Harriman: One minor benefit is that the new full fare advertising rule is simple and straightforward – what the consumer pays for a ticket is what you have to advertise.
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That’s a change from the 1990s’ DOT rule letting agents break out fares and fees, a Byzantine rule that was very complicated and that many agents got wrong – and were fined $40,000 (as a result).
Are there any drawbacks for agents?
Anolik: Absolutely. Compliance with the new DOT rules will not be easy. The new advertising rules will dramatically change the way airfares are advertised and will required a complete overhaul of most agent websites – especially for OTAs.
As always, there will be agencies that make incorrect changes or completely fail to make the required changes.
This will result in brutal penalties and lots of publicity by DOT, which is looking forward to an opportunity to get the word out and ensure industry compliance.
How will the ban on airfare increases after full payment affect tour operator-travel agent engagement?
Anolik: The new price increase regulations will force tour operators to heavily modify their established booking procedures.
Harriman: It will change the booking process for tour operators. I see them wanting deposits as early as possible and pushing off full payment as long as possible. They will provide full fare disclosure, and then wait it out before they purchase the air so they can lock in the price later on and limit their liability if there is an airfare increase.
Anolik: The agent is paid full commission on the booking, as compared to the deposit [the tour operator receives]. It helps agents’ cash flow and overrides for the consortium – and you want that all in as early as possible so the consortium hits its override level.
Harriman: So agents probably want consumers to pay as soon as possible to lock in prices, whereas the operator does not want full payment [too far in advance], because of the liability for an airfare increase that they cannot pass on.
CLIENT REASSURANCE TRICKLES IN FROM CRUISE LINES by Dori Saltzman
Royal Caribbean International, Celebrity Cruises and Norwegian Cruise Line this week emailed safety reassurances to past and prospective passengers, but so far they are alone.
While Costa Cruises and parent company Carnival Corp. & plc released statements relating to the ongoing investigation and compensation for passengers affected by the dire Costa Concordia accident two weeks ago, most of the cruise industry has been absent from the conversation.
Reassurances of safety
This week sister lines Celebrity Cruises and RCI, both owned by Royal Caribbean Cruises Ltd. (RCCL), and Norwegian broke the silence.
Both Dan Hanrahan, president and CEO of Celebrity Cruises, and Adam Goldstein, president and CEO of RCI, emailed past and prospective passengers to reassure them of the safety of their ships.
“At Royal Caribbean International, the safety and security of our guests and crew is our highest priority,” wrote Goldstein in his letter to members of the line’s Crown & Anchor Society.
“Our maritime safety record over our 42-year history illustrates our commitment to the safety of the millions of guests and crew that sail on our ships. The measures we take in the interest of safety are many, often exceeding the regulatory requirements.”
And Dan Hanrahan wrote, “The concerns that have been raised about the safety of cruise ships compelled me to take the opportunity to share what an intense focus we have always placed on safety, and how rigorously we put that focus into practice every day.
“Our guests see just a portion of our safety practices through the mandatory muster drills we conduct at the outset of every sailing. But our safety practices encompass so much more.”
Norwegian chimes in
A day after the RCCL brands emailed their past passengers, Norwegian Cruise Line followed suit with a letter from CEO Kevin Sheehan.
“We want to take this opportunity to assure you that the safety of our guests and crew is, at all times, our number one priority,” he wrote in the email, in which he outlined some of the line’s safety protocols.
New safety info resources
To address the safety concerns of passengers, both RCCL lines also created informational resources – a video overview from Royal Caribbean International and a Safety Summary from Celebrity.
RCI’s Goldstein also wrote about cruise line safety in his blog, where he called the Costa Concordia accident “a defining moment in the history of the modern cruise industry.”
Goldstein also said, “Safety is a journey rather than a destination. We need to operate safely now yet constantly improve our safety. We need to hunt for lessons learned in every minor incident or accident. We need to apply those lessons learned across the fleet ASAP. This is a never ending cycle.
“As our Chairman Richard Fain says, there is no such thing as perfect safety but there is such a thing as perfect dedication to safety.”
Additionally, this week Royal Caribbean’s Royal Meetings and Incentives division switched a previously scheduled webinar for agents called “Answer the Sea: How to Use Our New Campaign” to “Safety is Our Business.”
Few policy changes
RCCL was also the first out of the gate to make actual changes to its safety policies. Last week the company changed its muster drill requirements so that all ships must now hold drills 30 to 60 minutes prior to departure on the day of embarkation of turnaround, regardless of departure time.
But Royal was not the only cruise company to quickly make – and announce – changes to its muster drill procedures.
Premier Cruise Holdings, the parent company of Oceania Cruises and Regent Seven Seas Cruises, this week changed its policy to require guest muster drills on the day of departure – no exceptions.
Call for policy reviews
So far no other lines have changed their policies, though Carnival Corp & plc did announce a comprehensive audit and review of safety and emergency responses across all its cruise lines.
Similarly, CLIA has asked the International Maritime Organization (IMO), the group in charge of setting the global standards for the safety and operation of cruise ships, to review the Costa Concordia post-accident findings once the investigation by Italian authorities is complete.
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