Economic Liberties Releases Model Legislation to Eliminate Airlines’ Liability Shield

September 20, 2022 Press Release

Washington D.C. — On the heels of a recent letter from 38 state attorneys general urging Congress to empower them to enforce consumer protections for airline travelers, the American Economic Liberties Project today released a new piece of model legislation, How to Address the Air Travel Crisis: Eliminating the Airlines’ Legal Liability Shield, designed to eliminate the U.S. Department of Transportation’s status as sole regulator of the airline industry. The legislation, which gives citizens the right to sue airlines, prohibits “common ownership” of airlines from Wall Street investment groups, and expands enforcement to state AGs, courts, and legislators, is endorsed by a broad coalition of advocates, including Business Travel Coalition, Consumer Action, Consumer Federation of America, National Consumers League, Public Citizen, Public Interest Research Group, and the Revolving Door Project.

“A few weeks ago, 38 state attorneys general made clear that the airline industry is in crisis and they are ready to enforce the law to protect their constituents in light of the USDOT’s inability to do so,” said William J. McGee, Senior Fellow for Aviation and Travel at the American Economic Liberties Project. “Our model legislation lays out a roadmap for how Congress can give them this power, expand it to state courts and state legislatures, restore key rights to consumers, and address Wall Street’s undue influence in the airline industry. After a summer of flight cancellations, delays, and withheld refunds, eliminating the airlines’ liability shield will shift the power back to consumers, state AGs, and state courts and legislatures, forcing the airlines to finally stop mistreating and cheating flyers. We’re excited to work with a broad coalition of advocates to bring attention to this critical issue and hopefully, enter a new era where airlines take consumer protection seriously.”

More flights were cancelled in the first half of 2022 than in the entirety of 2021, a 42% increase over 2021. Yet average domestic airfares are up 45% since 2019 and consumers are still waiting on $10 billion in unpaid refunds dating back more than two years. The airlines blame weather and air traffic control for the delays and cancellations, but after taking $54 billion in bailout funds — which specifically forbid laying off workers — they encouraged pilots and other key staff to retire early. In response, the Department of Transportation has announced a rule on refunds that won’t take effect for at least 2-3 years, sent the airline CEOs a letter, and promised to unveil an information dashboard. It has yet to fine any U.S. airline a single dollar for unpaid refunds, flight cancellations, or systematic violations of consumer protection law, and has issued fewer enforcement orders in 2021 than in any single year of the Trump and Obama administrations.

A federal preemption clause in the Airline Deregulation Act of 1978 gives full power to the USDOT to provide oversight of the airlines. As a result, state attorneys general, state courts, and state legislatures do not have the same authority to regulate the airlines as they do with nearly every other industry. In addition, airline customers have fewer consumer rights than with virtually any other industry in America. This means, for example, that if the DOT fails to hold the airlines accountable for refusing flight refunds, canceling flights at the last minute, and charging fees for families to sit together inflight, consumers are powerless to act. Employees, travel agents, and others who interact with the airlines are similarly defenseless.

Economic Liberties’ new model legislation recommends the elimination of this 44-year-old federal preemption clause to give state attorneys general the authority to enforce relevant regulations, restore the ability of private citizens to litigate against airlines in state courts, allow state legislatures to enact consumer protection regulation, and eliminate “common ownership” strategies from Wall Street firms for good. To facilitate this effort, Economic Liberties has assembled a broad coalition of advocates who have endorsed the legislation. The full list of coalition members is below.

Business Travel Coalition

Consumer Action

Consumer Federation of America

Ed on Travel

National Consumers League

Public Citizen

Public Interest Research Group

Revolving Door Project

“DOT is the sole arbiter of consumer transgressions. In 2019, it leveled $2.4 million in penalties against airline revenues of $196 billion – not even a slap on the wrist. Restoring the right of consumers to sue is critically necessary to provide sufficient discipline to prevent airlines from trampling on their interests. This private right of action is one that Congress never intended to have stripped from consumers when it deregulated the industry in 1978. It is a right available in every other consumer-facing industry.” — Kevin Mitchell, Chairman at Business Travel Coalition

“Consumers deserve recourse when airlines chronically cancel flights, lose their luggage, and refuse to provide refunds. Since the DOT is torn between its responsibilities to carriers and consumers, let’s give the states clear authority to protect their citizens from unfair pricing and unresponsive service.” — Ruth Susswein, Director of Consumer Protection at Consumer Action

“Federal preemption of airline consumer protection regulations has resulted in a ‘free market fail,’ with consumers bearing the brunt of the air travel crisis while giving airlines a special pass to escape liability for problematic conduct. We fully support AELP’s proposal to eliminate this outdated precedent, which would allow consumers to finally obtain meaningful relief and which would require airlines answer to these consumers instead of hiding behind federal preemption.” —  Erin Witte, Director of Consumer Protection at Consumer Federation of America

“The denial of air travelers’ fundamental civil contract rights does not in any way contribute to the basic objectives of the Airline Deregulation Act. Fairness to consumers demands redress from this undesired consequence of the Act,” — Ed Perkins, Author of Ed on Travel and Founding Editor of Consumer Reports Travel Letter

“Over the past two-plus years, the DOT has been overwhelmed by record numbers of complaints about refunds, delayed and cancelled flights, and a multitude of other indignities that airline passengers face on a daily basis. Allowing the Department of Justice, states, and private litigants to enforce consumer protection laws will mean passengers will have more allies on their side when airlines violate their rights.” — John Breyault, Vice President of Public Policy, Telecommunications, and Fraud at National Consumers League

“It’s time that Congress recognizes that the Department of Transportation alone cannot protect consumers from airline abuses. While airlines have profited from decades of liability protection, flyers have seen realistic travel alternatives disappear and service deteriorate. This model legislation gives the public clear routes to hold airlines accountable and opens the door for new customer-focused carriers to compete.” — Matt Kent, Competition Policy Advocate at Public Citizen

“We support eliminating federal preemption so the airlines are finally more accountable to the customers they serve. For decades, the Department of Transportation hasn’t been willing to regulate the airlines as strictly as it should and passengers have suffered, with airlines engaging in refund shenanigans, deceptive prices, last-minute cancellations, unsafe conditions and more. The airlines need to answer to others when appropriate, including attorneys general, state courts and legislatures. Eliminating federal preemption will be a step toward that.” — Teresa Murray, Consumer Watchdog at Public Interest Research Group

“It’s hard enough to ensure that any executive branch department is uncaptured by industry, but that goes double when a department is tasked with playing the role of cheerleader for the American corporations within their jurisdiction. Since the Department of Transportation has consistently played an aviation cheerleader role ever since 1978’s deregulation, it’s long past time that we empowered consumers and state governments to rein in scofflaw airlines.” — Jeff Hauser, Executive Director of Revolving Door Project at the Center for Economic Policy and Research (CEPR)

Read the full piece of model legislation, How to Address the Air Travel Crisis: Eliminating the Airlines’ Legal Liability Shield, here.

Learn more about Economic Liberties here.

The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.