Sen. Al Franken raises concerns about 'personalized pricing' by airlines

WASHINGTON – Airlines may price seats based on your ZIP code, your travel habits or your marital status — a practice Sen. Al Franken on Tuesday urged the U.S. Department of Transportation to further regulate.

The federal agency last year gave the airlines permission to use "personalized pricing," which allows the industry to charge one consumer more than another for the same seat on the same flight based on collected personal information.

The rule, supported by the airline industry and business travel groups, prohibits companies from using consumer-provided information to discriminate against consumers based on "race, creed, color, sex, religious or political affiliation, disability or national origin," according to the federal agency.

But, it is technically legal for airlines to use other types of information to tailor prices — or in Franken's word, discriminate — based on consumers' income level, marital status and trip purpose.

Franken noted in his letter, signed by four other Democratic senators, that business travelers with the same flying routine could be charged more based on habit. Likewise, Franken said, people living in high-income ZIP codes may get better fares to entice them to book more tickets, over consumers living in low-income neighborhoods.

"I'm concerned that this practice … may be anti-consumer, discriminatory and harmful to Minnesotans who are already struggling to afford the high cost of travel," said Franken, the top Democrat on the subcommittee on privacy, technology and the law for the Senate Judiciary Committee. "I'm sort of in an information-obtaining mode. This may make it harder for people to do comparison shopping, if you have your own personal price they're setting for you. Based on your information, that might mean fewer choices for consumers."

Franken, along with Sens. Maria Cantwell, Ed Markey, Cory Booker and Richard Blumenthal, pushed the Department of Transportation to clarify why the rule excludes income level, marital status and trip purpose from its list of prohibited discriminatory behavior.

The senators also asked the department to describe safeguards in place to protect consumers from discriminatory practices.

Franken, who has in the past few years lashed out at car-sharing programs and dating websites for not adequately protecting customers' private information, said he was also worried about airlines selling consumers' personal information to other vendors.

DOT officials had no comment on the letter Tuesday, saying only that Transportation Secretary Anthony Foxx will respond to the senators soon. The group asked for a response by May 19.

Personalized pricing has been around for far longer than the advent of the Internet.

Hotels often still charge customers more in high seasons and beverage companies have been known to inch up prices in hotter weather, according to a trio of Seattle University professors who have written extensively on the topic.

But the Internet has created a glut of consumer data — usually offered up by consumers themselves — that companies routinely mine. This means personalized pricing is more intense and targeted than ever.

Kevin Mitchell, founder of the Business Travel Coalition, said if the airline industry follows the rules negotiated with the Department of Transportation, this rule will help the consumer.

He said the efficiencies created by understanding consumer habits ultimately will save money and that airlines are required to abide by privacy policies.

"Let's say twice a year I go to Disney or Orlando, the airlines that I go on will know that, so there may be a soft period in their schedule where demand doesn't materialize and they can customize an offer for me and make me go for a third time," Mitchell said. "Hey, that's relevant to me, because now I get to go three times."

Airlines for America (A4A), the lobbying group for the airline industry, urged consumers to shop anonymously if they don't feel comfortable giving up information to airline companies.

"Airlines, like many other companies, such as Amazon or Pandora, have the ability today to customize offers based on previous shopping habits," said Melanie Hinton, a managing director at the A4A, in an e-mail. Still, she said, "all carriers enable customers to shop online anonymously and there's no reason for that to change."

Neither Delta nor American Airlines responded to questions about how they employ personalized pricing.

Franken said he wants the airline industry to be transparent about what they know about consumers.

"What if you live in a more affluent suburb or something and they charge you more than they charge someone else, or they use your frequent flier thing and they charge you more?" he said. "There are all kinds of questions here."

Staff writer Jim Spencer contributed to this report.

Allison Sherry • 202-383-6120