The Power of Words. CODE SHARING: Critics say marketing of commuter flights misleads travelers Warwick resident

6.28.98
CODE SHARING: Critics say marketing of commuter flights misleads travelers Warwick resident

Pauline Josefson died in the crash of a plane painted with the colors of American Airlines but flown by another airline

By Arial SABAR
Journal Staff Writer

        There are many things that anger Jeff Josefson about the way his mother died. But the one that stands out is that she didn't even know what airline she was on when American Eagle Flight 3379 crashed outside Raleigh, N.C. four years ago.
        Pauline Josefson, one of 15 people killed in the crash, thought she was flying on a major airline. Her tickets bore the name American Airlines, and she had boarded a plane that was painted in that company's trademark red, white and blue colors. The words on the plane -- "American Eagle" -- were in the same style as the American Airlines logo.
        In February, during a trial in a wrongful-death suit the family had brought against the airline, Jeff Josefson heard testimony that startled him: American Eagle was just a name that American Airlines used for the commuter flights it booked. The flight, said an American Airlines official, was actually operated by a three-year-old Nashville company called Flagship Airlines, which would be faulted for the crash.
        Josefson, a truck driver who lives in North Kingstown, had never heard of Flagship. His mother, he maintains, hadn't either.
        "If my mother told us, 'I'm flying on Flagship Airlines,' we would have said, 'Mom, wait a minute. What is Flagship?' " Josefson said recently. "Mom should have been told. She could have made a choice about whether she wanted to fly an airline she didn't know about."
        The relationship between American Airlines and Flagship Airlines is hardly unique. Almost every major airline has a similar arrangement with commuter airlines.
        The industry term for it is code sharing -- a reference to the two-letter code that airlines use to identify themselves on tickets and in computer-reservation systems. On code-shared flights, the code of the major airline appears on every ticket -- even when another carrier, such as a commuter airline, carries part or all of a flight.
        Because code sharing often obscures the identity of a commuter airline, travelers have remained largely in the dark about which company they're entrusting their lives to when they board an airplane.
        Pilots at commuter airlines are almost always younger, less experienced, and lower paid than their counterparts at the majors. The small propeller planes that most commuter airlines operate are noisier, slower, less comfortable, and more prone to delays and cancellations. And while their safety records have improved over the years, they are still more likely to get into accidents than jets.
        Consumer advocates say code-sharing arrangements are a misleading marketing ploy, designed to lure passengers onto airplanes and airlines they would otherwise shun.
        "It's the equivalent of booking a room at a Hyatt and arriving at the hotel and finding you actually checked into a Motel 6," says Paul Stephen Dempsey, an aviation lawyer who heads the transportation law program at the University of Denver. "There's no reason why a consumer needs to be deceived about the carrier he or she is actually flying."
        While federal law requires airlines to disclose code-sharing relationships to prospective passengers, experts say the law is routinely ignored. A proposal by the U.S. Department of Transportation to strengthen the law has gone nowhere.

        A LARGE PHOTOGRAPH of Pauline Josefson and her late husband, Raymond Josefson, stands in a gilt frame on a bookshelf in their son's North Kingstown home. She is wearing glasses and a powder-blue blouse with a ruffled collar. Her wavy hair looks as though it has just come out of curlers. She is smiling.
        "She was a very likable person," says Jeff Josefson, who is 49 and her eldest son.
        Pauline Josefson worked for many years at a bowling alley, scheduling games for leagues. After retiring, she spent her days reading novels, learning about the latest health care issue from speakers at her church, and playing card games with her granchildren.
        The house she lived in, on Brunswick Drive in Warwick, was under the flight path of planes from T.F. Green Airport. The noise of engines overhead was sometimes so loud that all conversation would stop until the plane passed.
        In late 1994, Josefson bought plane tickets to go to a pre-Christmas family reunion at the old farmhouse in Horsepasture, Va. where she grew up. It was the first time in many years that she and her siblings, eight of them, would gather at the house.
        One the day she arrived, one of her nieces, a hairdresser, gave her a permanent. Another day, she went to the house of a friend, a classmate from elementary school, to eat breakfast and talk.
        A few days later, her youngest sister, Glenda Mays, the mother of the hairdresser, drove her back to the airport, in Greensboro, N.C. "She was talking about how it was a nice permanent," Mays recalled of the hour-long drive. "And how much she enjoyed her trip down."
        Her return flight to Green Airport included a plane change in Raleigh. The first leg of the trip was on American Eagle Flight 3379.
        When she boarded the plane that evening of Dec. 13, 1994, the true name of the airline was just one of the things she didn't know. Another was that the pilot in the cockpit was 29-year-old Michael Hillis.
        In 1991, Hillis was forced to resign from another commuter airline, Comair, after three senior pilots wrote critical reviews of him, according to the National Transportation Safety Board. One review said Hillis "becomes distracted because he gets upset with his performance."
        He was hired by Flagship Airlines four days after his resignation.
        More than a year and a half later, he failed a flight test required for a promotion. He passed it after another round of training. But he told his employer that he didn't want a promotion from first officer, or co-pilot, to captain because he lacked confidence, according to two American Eagle pilots who flew with him and who spoke to the Associated Press in 1995.
        But the expanding Flagship needed captains. Under a policy, called "up or out," that was common among airlines at the time, senior first officers were required to obtain a promotion to captain or lose their jobs, the pilots said.
        Hillis applied for his captain's wings and got the promotion in 1992. But other pilots at the airline continued to complain to management about his flying ability. As late as October 1994, a first officer told a manager she was reluctant to fly with him.
        A month later, the airplane carrying Pauline Josefson and 19 others took off from the airport in Greensboro. As the 19-passenger turboprop hurtled through drizzle and fog toward Raleigh-Durham International Airport, Hillis noticed an engine light go on and concluded -- mistakenly, it would turn out -- that an engine had burned out.
        Without running routine tests to confirm his suspicion, he told his co-pilot that he would continue his approach to the airport, using the sole remaining engine. But four seconds later he changed his mind -- he would make a "go around," meaning he would climb back up, loop back and try the approach again.
        The transportation safety board later concluded that this decision was inexplicable since the aircraft could easily have coasted to a landing at Raleigh with just one engine.
        As confusion in the cockpit mounted, the plane drifted off course and lost speed. Alarms sounded in the cockpit, warning that a stall was immiment.
        On the cockpit voice recorder, one can hear the 25-year-old co-pilot telling Hillis over and over again to lower the plane's nose. Hillis didn't respond.
        The plane began to bank steeply to the left, and finally Hillis tried to counter the rotation. But his foot struck the wrong rudder pedal, only worsening the rotation.
        "It the wrong, wrong foot," the co-pilot said. "Wrong engine."
        Within seconds, the plane was out of control. It plunged 1,800 feet at a rate of almost 170 feet per second, plowing into a pine forest four miles from the airport.
        Hillis, the co-pilot and 13 passengers, including Pauline Josefson, were killed. There were just 5 survivors.
        The safety board pinned only part of the blame for the crash on pilot error. Another factor, the board said, was the failure of Flagship management to identify, monitor and retrain problem pilots like Hillis. Flagship not only failed to discover Hillis's blemished record at Comair, the safety board found, but also failed to properly investigate the complaints of other Flagship pilots.

        MAJOR AIRLINES say they place their names and colors on commuter planes in order to lend an air of familiarity and goodwill to carriers whose real names and safety records are unknown to many passengers.
        U.S. Airways calls its commuter flights U.S. Airways Express. But U.S. Airways Express flights are actually carried by nine different commuter airlines. The names of some of them are Commutair, Chautauqua Airlines, and Mesa Airlines.
        Northwest Airlink, the commuter service of Northwest Airlines, is flown by Mesaba Aviation, Trans States Airlines, and Horizon Air, among others. United Airlines' commuter flights, called United Express, are operated by eight different airlines, including Altantic Coast Airlines, Great Lakes Aviation, and Wisconsin Air.
        None of these commuter airlines are owned by U.S. Airways, Northwest, or United. But many of their aircaft are painted with the colors and names of those major airlines.
        "Part of it is that trust factor," says Tony Molinaro, a spokesman for United, the world's largest airline. "If we're going to put our marketing brand on this, you can trust this service. There's a halo effect."
        United, like other major airlines, doesn't view the practice as misleading. Molinaro says United works closely with its commuter partners to ensure they meet United's standards.
        Yet few passengers know that most commuter airlines share little more than a name with their major affiliates. In just 12 of the industry's 53 code-sharing relationships do major airlines own their commuter partners.
        And even when there is ownership, the major airline doesn't necessarily play a big role in how its commuter subsidiaries operate.
        Flagship Airlines, for example, is owned by AMR Corp., the holding company that also owns American Airlines. But Flagship and American are run as separate companies. They have different management structures, training academies, airplanes and pilots.
        But such distinctions are unknown to the average traveler, in part because Flagship flies planes adorned with colors and a name -- American Eagle -- that resemble those of American Airlines. In addition, the logos of American Eagle and American Airlines are similar and appear side by side in advertisements, on ticket jackets, at check-in counters and on company Web sites.
        "I believe American (Airlines) does want you want to think you're getting the same commitment to quality and service (on American Eagle flights) you would get on their airline," says Mitch Baranowski, an American Eagle spokesman. "We work to communicate that, we try to market to that -- but we never try to confuse people."
        Yet once the crash of American Eagle Flight 3379 moved into a courtroom, American Airlines did all it could to distance itself its commuter affiliate.
        At the Josefson trial last February, American Airlines denied any responsibility for the crash. And it denied that dressing a Flagship plane in American Airlines colors and the "American Eagle" logo led passengers to believe they were flying American Airlines.
        Even the corporate division that oversees American Eagle flights disavowed blame.
        "AMR Eagle doesn't have any pilots -- it's not an airline," Sammy Thompson, one of the airline's lawyers, said during an early phase of the trial. "It's a corporate entity set up to avoid duplication, for marketing and to make things run more efficiently."
        Waving a flight operations manual before the jury, he said, "This is a Flagship manual. Yes, it's got American Eagle on it, but that's just a trade name."
        The stance taken by American Airlines infuriated Jeff Josefson and his three brothers. They wanted to hold the company, as well as Flagship, responsible. They said that American Airlines misled their mother into boarding an airline she would have otherwise avoided.
        The families of other victims of the crash plan to make the same argument when their cases go to trial.
        "To me, (code sharing) is just a lie," says Donald L. Pevsner, a consumer advocate and onetime assistant general counsel to Air Florida who has lobbied the federal government for a ban on code sharing. "It implies that the airline the person is flying on is X when in fact it is Y."

        CODE SHARING MUSHROOMED soon after the deregulation of the commercial airline industry, in 1978. Eager to attract passengers from regional airports, major airlines rushed to establish marketing relationships with small commuter airlines, which in turn benefited from the cachet of a well-known name.
        Airlines were quick to trumpet the advantages to consumers: Code sharing simplifies ticket purchases and baggage handling. It ensures coordinated connection times and convenient gate locations. It gives passengers more opportunities to earn frequent flier miles and brings big-league air service to previously isolated regional airports, such as Rhode Island's Green.
        Commuter airlines began earning record profits. The number of passengers they carried skyrocketed, from 4 million in 1970 to 66 million last year.
        Since 1985, federal rules have required airlines to tell travelers whether part of their flight is on another airline.
        Under those rules, airlines must mark code-shared flights with an asterisk in written and electronic schedule information. Telephone reservations agents must tell travelers about such flights when booking tickets. And airlines must provide "frequent, periodic notice" in advertisements of the existence of code-sharing relationships and the identities of the other airlines.
        But experts say the law isn't tough enough.
        Under the law, for example, Delta Airlines is required to say whether a flight is operated by Delta Connection. But Delta Airlines does not have to tell passengers the names of the actual airlines -- such as Atlantic Southeast Airlines and Comair -- that operate Delta Connection flights.
        Even the existing rules are routinely ignored. An undercover investigation by the U.S. Department of Transportation in 1994 found that airlines failed to disclose code-sharing relationships as much as 30 percent of the time.
        In March 1995, the transportation department fined Trans World Airlines $350,000 after undercover investigators found that its reservations agents had failed in 65 percent of calls to notify prospective passengers of code-shared flights. It was the fourth time in eight years the airline had been cited for such violations.
        Travel agents say that if the public is more savvy today than before about commuter airlines and code sharing, it has more to do with news stories than with any effort by the airlines to educate consumers.
        Pat Anastadis, the manager of the CWT/Midland Travel agency in Warwick, says that almost all of her business travelers will pay more for a ticket, alter their itineraries, or use an alternative airport to avoid propeller planes.
        "It's gotten more so and more so," says Anastadis, who has been a travel agent for 30 years. "They've said to me they know the safety record is better on jets, and they're not willing to take any more risk than they have to with all the travel they do."

        IN THEIR LAWSUIT, the Josefsons asked for $2.75 million in compensatory damages. Using a legal theory called apparent agency, they believed they could hold both Flagship and American Airlines responsible for their mother's death.
        To prevail on that theory, they would have to prove that American Airlines made Pauline Josefson believe that American Airlines and American Eagle were one and the same. They would also have to show that she would not have boarded the plane had she known otherwise.
        Without their mother's testimony, Jeff Josefson and his brothers were forced to rely on circumstantial evidence.
        At the trial last February, witnesses testified that her tickets and boarding passes bore the name American Airlines. The travel itinerary her travel agent gave her mentioned American Eagle but nowhere said Flagship.
        The terminal where she checked in displayed American Airlines logos. And the baggage attendants who took her luggage wore American Airlines uniforms. The in-flight magazine in the plane's seat pocket was American Way, the same as on American Airlines.
        Her sons say she had flown just five times in her 70 years, always on major airlines. When one of them called her to wish her a good trip, she mentioned to him that she was flying on American Airlines.
        In February, the jury ordered Flagship, AMR Eagle -- and American Airlines -- to pay the Josefsons $600,000 in compensatory damages. It was an extraordinary set of verdicts, for it was viewed as the first time a jury had held a major airline liable for the conduct of its code-sharing partner.
        Speaking to lawyers outside the jury's presence at the trial, U.S. District Judge Frank Bullock chided American Airlines for its marketing of American Eagle.
        "American's advertising on this is completely misleading," he said. "They lead people to believe they are getting major airline quality."
        But two months later, judge set aside the jury's verdict against American Airlines
        He conceded that there was "overwhelming" evidence that American Airlines hade made Josefson believe she was flying on American Airlines. But he ruled that under North Carolina's strict standards of proof, Josefson's lawyers failed to show that had she known the truth she would have chosen another airline.
        Jeff Josefson says he is unhappy with the decision. But he says the family wants to move on after a wearying four years of legal wrangling. He and his brothers chose not to appeal.
        The family will still get the $600,000 -- but Flagship and AMR Eagle will now have to pay the entire amount.

        IN MAY, Flagship Airlines ceased to exist. AMR Corp. merged it and three other commuter-airline subsidiaries into a single unit and called it American Eagle, which will now pay the jury award.
        But Jeff Josefson says he will not be completely satisfied until American Airlines answers for what he believes is a case of duplicitous marketing.
        He says he will keep tabs on the eight other cases from the crash that are still pending against Flagship, AMR Eagle, American Airlines and their parent company. Those cases will be tried outside North Carolina. The Josefsons' lawyer, David Rapoport, holds out hope that the more liberal liability laws in other states will make it easier for a verdict against American to stand.
        "I wish that we could put (Pauline Josefson) on the witness stand so she could explain that she relied on American Airlines," Rapoport told a North Carolina newspaper during the trial. "Does it take the dead talking before we (can) hold a company that has paid $200 million on their advertising budget a year . . . responsible?"
        As some consumer advocates see it, the judge's decision is proof that code sharing affords major airlines all the financial benefits of associating with a commuter airline while shielding them from any responsibility.
        "The airlines want it both ways," says Pevsner, the consumer advocate. "They want the image of seamless service. But when push comes to shove and there's a jury award, they want it the other way: It's not us -- it's a commuter subsidiary."

        THE CRASH of American Eagle Flight 3379 in December 1994 made headlines across the country, in part because it was the third fatal crash in a year involving a commuter airline.
        The crashes led to broad new regulations, implemented last year, that hold commuter airlines to most of the same safety standards as the major airlines. Flagship, now called American Eagle, says it has always held itself to exacting standards of safety and has addressed the problems that the National Transportation Safety Board raised in its report.
        Even so, experts say that the "one level of safety" for all airlines -- touted as the cornerstone of the new regulations -- remains mostly a myth.
        "The idea that regionals are as safe as the major airlines is just not true as a practical matter," says Jim Burnett, former chairman of the National Transportation Safety Board. "It may be a goal, but it's not a reality."
        And even though code-sharing arrangements have been a widespread industry practice for more than a decade, the traveling public is still mostly at a loss to understand how they work.
        "Even today," says William Mosley, a spokesman for the U.S. Department of Transportation, "we from time to time receive complaints from passengers who say they didn't know part of a flight was carried by commuter carrier, even though airlines are supposed to disclose that. There are people who expected full jet service all the way and were surpised when they saw a little propeller-driven plane waiting at the airport to pick them up."

        EVEN BEFORE the American Eagle crash in December 1994, then-U.S. Transportation Secretary Federico Pena proposed toughening the disclosure rules.
        Most significantly, Pena proposed extending the rules to travel agents, who sell 80 percent of all airplane tickets. He also wanted to require anyone who sells tickets to provide passengers a written notice of the airline actually carrying the flight.
        Although a few airlines objected to a provision to print the name of the actual carrier on the ticket, most said they supported Pena's August 1994 recommendations. So did consumer advocates, travel agents, and passenger associations. But almost four years later, the transportation department has taken no action on its own proposal.
        Mosley, the department spokesman, says that the department's energies are focused on higher priorities -- such as air safety and airline competition -- but that the proposal for tougher disclosure rules remains under consideration.
        "It's not like we have no protection out there," he continues. "We believe that (the current rules) are working well."
        The comment is at odds with the department's own proposal: "A requirement that applies to only 20 percent of ticket sales" -- those sold by the airlines themselves -- "affords the public too little protection."
        Pauline Josefson's four sons agree.
        "I don't believe the rules worked well in mom's case," says Wayne Josefson, an Evangelical pastor in Canada. "I don't believe she was ever aware that she was flying on Flagship Airlines. And I think that it's important for the traveling public to be made aware of what the actual carrier is, in order for them to be able to make informed decisions."

        A history of codesharing.
        USAir, then called Allegheny Airlines, established the country's first code-sharing arrangements with a commuter airline in 1967. But the practice did not become widespread until the mid-1980s, after federal deregulation of airlines in 1978 freed major airlines from having to fly to small regional airports.
        The majors began to rely on regional airlines to feed them passengers. It was an easy way to increase the number of destinations they flew to without having to buy new airplanes or hire new employees.
        It also assured brand loyalty: If a major airline could sell a ticket from Providence to Los Angeles via New York, a passenger would not get on a different airline at the New York hub. And it also gave major airlines better placement in the computer-reservations systems travel agents use to select tickets for customers. That's because flights that connect on the same airline appear higher on the screen than those that require a switch.
        Finally, major airlines reasoned that passengers would prefer buying one set of tickets for the length of their journey rather than purchasing tickets from two or more companies and trying to coordinate connection times on their own.
        Today, every major U.S. airline except Southwest code shares with a commuter airline. And 38 of the 50 largest regional airlines have code-sharing relationships with major airlines, sometimes with more than one. Trans States Airlines, for instance, flies as Northwest Airlink, Trans World Express, and U.S. Airways Express.
        But the meteoric growth in code sharing has been dogged by criticisms of the safety of propeller airplanes with 30 or fewer seats, which represent the overwhelming majority of those used by commuter airlines.
        In November 1994, the National Transportation Safety Board issued a major study of commuter-airline safety. Noting that planes with 30 or fewer seats have crashed at twice the rate of larger planes, the board recommended sweeping regulatory changes.
        Following a year in which 264 people died in commercial-airplane accidents, then-U.S. Transportation Secretary Federico Pena in 1995 unveiled a set of rules that would hold commuter planes to the same safety standards as larger ones. Those rules took effect in March 1997.
        The commuter-airline industry, which relies on code sharing for most of its business, has done much to burnish its image, hiring major public relations firms and surveying public opinion of commuter airlines. It has tried to get the public to use the term "regional airline" over the somewhat muddied "commuter airline."
        And, aware of public apprehension about propeller planes, the industry is beginning to integrate jets into its fleets and cooperating more with its major partners on safety and pilot training.
        "It made sense from a business perspective," said Deborah McElroy, vice president of the Regional Airline Association. "The regionals were getting much larger, they were becoming more of a critical part of the majors' system in terms of cities they are operating at."
        As government and industry focused attention on improving safety, the accident rates for such planes plummetted. In 1996, there was one accident for every 270,000 departures, a more than threefold improvement since 1982.
        But experts say that while the safety of regional airlines has improved dramatically over the years, they are still not as safe as major airlines.
        Their propeller planes fly at lower altitudes and thus are more vulnerable to severe weather. Their pilots are younger, have less training and are paid one third to one half of what pilots at major airlines make.
        And there are exceptions in the widely hailed new set of regulations that claim to ensure "one level of safety" for small and large planes. One of the main exceptions, which the industry is still negotiating with the government, is flight and duty time limits for pilots. As it stands, airlines can -- and do -- require pilots of planes with 30 or fewer seats to work more hours a week than pilots of larger planes.
        "The idea that regionals are as safe as the major airlines is just not true as a practical matter," says Jim Burnett, a former chairman of the National Transportation Safety Board who is now a aviation safety consultant in Clinton, Ark. "It may be a goal, but it's not a reality."

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