In early May, Pres. Joe Biden announced plans to introduce new regulations that would require airlines to compensate passengers when flight times change drastically due to reasons within their control. Under the proposal, when an airline-caused disruption leads to cancellations or significant delays, customers would have a right to financial compensation in addition to refunds. This announcement came on the heels of a new congressional report revealing that the surge in flight cancellations during the pandemic recovery period was primarily caused by factors within the airlines’ control, such as maintenance issues and crew shortages.
According to the report, in 2019, Hawaiian Airlines and Alaska Airlines had the highest percentages of cancellations due to airline-controlled issues, accounting for more than 50 percent of each airline’s total cancellations. By late 2021, Allegiant Air, Spirit Airlines, JetBlue, and Frontier Airlines boasted similar numbers, with each airline responsible for 60 percent or more of their total cancellations. Further, almost all carriers had more airline-caused delays during the studied period than in prior years.
This is all compelling evidence that it’s time for an overhaul of our aviation system. Today’s airline industry is the smallest and most concentrated since 1914, with just four airlines—American, Delta, United, and Southwest—controlling 80 percent of the market. But a comprehensive overhaul that would ensure that airlines provide better and more consistent customer service, across their networks and throughout the year, will take time, resources, and political will that would be hard to rally. Luckily, there are more incremental steps that can still make a difference, especially when it comes to protecting consumer rights. Biden’s proposed rules are one example, as is a customer service dashboard recently launched by the Department of Transportation. Ensuring that airline networks, staffing plans, and technology are ready for different types of disruptions through occasional stress tests (as is commonly done for banks) should be the next step.
The need for reform will likely become even more apparent in the coming months, because things are only about to get more frustrating. Flight delays and cancellations always increase during the peak summer travel months—June through August are consistently the months with the worst on-time performance. But this summer, airlines are also battling with staff and tech issues, and weather disruptions could make things worse.
In New York, severe shortages in air traffic control staff at a key facility in Long Island have resulted in several airlines agreeing to reduce schedules this summer and fly fewer and larger airplanes. To avoid disruptions, airlines are cutting flights at Washington’s Reagan National Airport and airports serving New York City. United Airlines reduced its New York and Newark peak daily departures and trimmed service from New York to D.C. Bigger airplanes with fewer flights create a higher load factor, which leads to more delays impacting more passengers. Since schedules are more concentrated, this results in more congestion at airport security checks and uneven schedules throughout the day. These airports serve as hubs for several of the biggest airlines, so these changes will have ripple effects throughout their networks. From a consumer standpoint, it also means higher costs.
But this summer, consumers will also have a new tool to navigate travel chaos. Last fall, the U.S. Department of Transportation released its Airline Customer Service Dashboard in hopes of enhancing transparency and ensuring compliance with refunds related to delays and cancellations. As of now, the dashboard is nothing revolutionary, per se—just some charts with green checks and red marks that indicate airlines’ service commitments or lack thereof. But this dashboard is part of a larger aviation consumer protection initiative, and is used to signal to consumers which airlines are invested in improving their on-time performance. If an airline is willing to incur significant costs when delays and cancellations occur, it follows that it will do what it can to avoid those delays and cancellations.
It’s still early to know what the dashboard’s impact might be, but consumer rights education and regulation do have a good basis in research. When Hinnerk Gnutzmann and Piotr Spiewanowski studied European regulations that require airlines to provide assistance and cash compensation in the case of delays, they found that regulated fights experienced significantly shorter delays. Similarly, research shows that if we increase the amount of competition in the marketplace, consumers might receive better service. For example, when my former colleague Mike Mazzeo analyzed U.S. Bureau of Transportation Statistics in 2000, he found that both the prevalence and duration of flight delays are significantly greater on routes where only one airline provides direct services. Additional competition is correlated with better on-time performance.
But creating additional competition is not easy, especially given unattractive airline economics, significant barriers to entry, and the dynamics of the online marketplace. For example, Itai Ater and Eugene Orlov found that the shift to online distribution channels has changed the way airlines compete for customers—from an environment in which airlines competed for space at the top of travel agents’ computer screens by scheduling the shortest flights, to an environment where price plays the dominant role in selling tickets—resulting, in fact, in worse on-time performance. The internet has shifted the airlines’ incentives from providing high-quality service to providing cheap service. And to achieve lower prices, airlines need to reduce costs, which puts further pressure on staffing and plane utilization, all contributing to more delays.
The clearest examples of this phenomenon are low-cost and ultra-low-cost carriers, which have grown significantly despite their terrible records with delays and consumer compensation. In fact, in 2022, Frontier, Spirit, and JetBlue received the most passenger complaints at the DOT, but those complaints had little impact on their revenue. The rationale is clear: If you need to compete on prices, everything is a trade-off—including timeliness.
Tools like the Department of Transportation dashboard and Biden’s proposed compensation rules are a start, because they expand consumer rights and ensure consumers are aware of and able to exercise the rights they already have. But to really improve the airline system for consumers, we’ll need much more regulation. We need to ensure that these rights are being enforced and that customers are aware of these dashboards and other tools available to them. We’ll also need to make sure that airlines have robust plans to deal with disruptions, such as the one we recently saw with Southwest Airlines.
In the meantime, if you’re going to travel this summer, the best thing you can do is know your rights as a consumer, be willing to pay more for an airline that is committed to good service, choose a competitive route, and pack your patience. Regardless of who and when you fly, you might be spending more time in the airport that you planned.