In a filing on January 28, Judge Catharina Haynes wrote that in April 2024, the DOT issued a final rule that mandated airlines to disclose certain fees upfront when passengers look for flights.
However, two groups of airlines, including associations, challenged the rule, with the stakeholders arguing that the US Congress did not authorize it and that it was unlawful under the Administrative Procedure Act (APA).
Airlines For America (A4A), the National Air Carrier Association (NACA), and the International Air Transport Association ( IATA ) were the associations that challenged the rule.
Carriers that had sued against the ‘junk fee’ rule included Alaska Airlines , American Airlines , Delta Air Lines , Hawaiian Airlines (the lawsuit was filed before its merger with Alaska Airlines was finalized), JetBlue , United Airlines , and Spirit Airlines and Frontier Airlines.
The latter two, despite being members of NACA, launched an independent legal challenge (with Frontier Airlines supporting Spirit Airlines in its case), which was then moved from the Eleventh Circuit to the Fifth Circuit by the Court of Appeals. The judges’ decision can be found here.
Haynes stated that the petitioners, namely the airlines and associations that challenged the rule, said that the DOT did not have the authority to issue such regulations and that it violated the APA. Frontier Airlines and Spirit Airlines also argued that the rule violated the First Amendment.
However, the judges said that since it returned the rule to the DOT, it declined to review the First Amendment question for the time being. Nevertheless, Haynes outlined that the judges concluded that the DOT had the power to make such rules and that it was not inconsistent with other major questions, though, again, since it violated the APA, the judges did not need to “determine whether this Rule is fully authorized […].”
“We agree. DOT’s reliance on new data here resembles the SEC’s reliance on materials outside the rulemaking record [in a case in 2006].”
As such, the DOT relied on extra-record material critical to its cost-benefit estimates without providing an opportunity for potentially affected stakeholders to comment on the matter.
“Indeed, DOT acknowledged in the 2024 [Regulatory Impact Analysis (RIA)] that its cost-benefit methodology is “highly sensitive to the percentage of consumers who consider ancillary fee information relevant to their airfare purchase decision,” and one of DOT’s two inputs for that percentage (46 percent) came from the Rupp study—at the expense of the lower 20 percent figure provided by A4A.”
When the DOT announced the rule to protect travelers from surprise junk fees when buying an airline ticket, Pete Buttigieg , the former Secretary of Transportation, said that airlines should compete between themselves rather than who can charge the most in surprise fees.
“DOT’s new rule will save passengers over half a billion dollars a year in unnecessary or unexpected fees by holding airlines accountable for being transparent with their customers.”
As such, the Department said that it wanted to create a more competitive market by ensuring that customers had the information to understand the actual cost of a ticket.
The DOT gave airlines and travel agencies between six and 24 months, depending on whether they met the Small Business Administration (SBA) definition, following the publication date of the rule (April 24, 2024).
However, not only have the aforementioned airlines and industry bodies launched a legal challenge to dispute the rule, but the DOT also has new leadership.
Sean Duffy, the new Secretary of Transportation, was sworn in on January 28, with the Department’s first statement under his guide outlining that the DOT was working to “remove government overreach” as Duffy ‘reset’ Corporate Average Fuel Economy (CAFE) standards.
