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US DOT issues new passenger protection rules, punts on ancillary fee disclosure

US Secretary of Transportation, Ray LaHood
US Secretary of Transportation, Ray LaHood

The long-awaited final consumer protection rules were issued yesterday by the US Department of Transportation expanding the tarmac delay rule to international carriers and requiring refunds for lost baggage. However, it dodged the top issue on consumer minds: point-of-sale disclosure of all extra fees.

Instead, the department said it would address fee transparency issues under a separate rulemaking to require all ancillary fees be displayed at “all points of sale”. However, it is unclear whether that means that all ancillary fees must be displayed at all points during the sale. This gives airlines the opportunity to do what they say they favour, the ability to offer the point-of-sale disclosure of the all-in price, although they will likely delay that as the technology to do so on online travel agencies and global distribution systems catches up with demand. Even so, the department is now requiring that advertised fares includes government taxes and fees, which the airlines have been successful in avoiding for years.

The rule also requires airlines to hold reservations at the quoted fare without payment – or cancelled without penalty – for at least 24 hours after the reservation is made if done a week or more before departure. This will likely not affect Continental’s new FareLock programme rolled out with great fanfare last December offering callers the option of holding the reservation for 72 hours or seven days for between USD5-9. It already has a 24-hour flexible booking policy which allows reservations changes and cancellations with full refund without a fee within 24 hours of the booking.

Lost baggage at top of agenda

At the top of Transportation Secretary Ray LaHood’s agenda was the new requirement for airlines to reimburse bag fees to passengers with lost baggage although it decided not to pursue its original intention to penalise airlines for delivering baggage late.

Alaska Airlines remains the only airline to provide a guarantee offering a USD20 discount for use on a future flight or 2000 miles in its Mileage Plan if baggage is not delivered to the passengers within 20 minutes of the aircraft parking at the gate.

The DOT press release also led with the increased compensation for being involuntarily bumped. Mr LaHood said the final rule builds on the December 2009 prohibition against tarmac delays although it did nothing to clarify whether the fines when airlines violate the three-hour rule is per passenger or per flight, which could color airline decisions on whether or not to cancel.

The fine, now USD27,500, has been interpreted to mean per passenger forcing airlines to be far more conservative when making such decisions. The department has previously said that it is awaiting a determination on the question by an administrative law judge although, to date, no fines have been levied.

The new rule expands the existing ban on lengthy tarmac delays to cover both US and foreign at US airports and, very interestingly, sets the cap at four, not three hours. Were the domestic restrictions to be capped at four hours there would be far fewer cancellations. Carriers must also ensure that passengers stuck on the tarmac are provided adequate food and water after two hours, as well as working lavatories and any necessary medical treatment.

New rule for foreign carriers

The department cited the extended delays by foreign carriers during the winter in expanding the rule.

It is requiring airlines to report lengthy tarmac delays at US airports with the DOT, including data for international flights and charter flights.  Previously, only the 16 largest US passenger carriers were required to file this data, and only for domestic scheduled flights.

“Without comprehensive data and appropriate benchmarks, it is difficult to accurately evaluate regulatory effectiveness or whether existing rules should be modified,” said ATA president Nicholas Calio. “Airlines should have more flexibility in making operational judgment calls to ensure that they are getting the maximum number of customers to their destinations reliably and safely.”

Nor did the final rule address the fact that while the rule has been successful in stemming tarmac delays, cancellations are far more numerous creating a backlog for passengers who need to be rebooked on already over-booked flights. The department continues to steadfastly deny cancellations are up, much less owing to the tarmac rule.

Airlines are angry about the department’s refusal to acknowledge the increase in cancellations coming from the rule.

“Airlines will comply, but DOT must create a new cancellation tracking code in line with the new regulations to provide greater understanding of the rule’s effectiveness and whether unintended consequences are occurring,” said Air Transport Association Spokesperson Victoria Day in response to a question from the Centre for Aviation.

In detail: Baggage

In addition to requiring refunds on bag fees for lost bags, the department requires airlines to apply the same bag fee on all segments regardless of whether some segments are flown by interline or codeshare partners. The department pointed out that airlines are already required to compensate passengers for lost bags.

In 2010, passengers paid USD2.5 billion in bag fees, according to DOT statistics, which also showed the airlines lost 2.0 million bags during the year. ATA reported that in 2010, the industry posted its lowest rate of mishandled baggage – 3.57 bags per 1000 customers – since the DOT began keeping records, and its third consecutive year of improvement. It pointed out the industry recently launched a project to create a centralised database of baggage rules in order to make the rules more transparent for interline or codeshare trips.


The department is requiring airlines to disclose all potential fees on their website which is already a common practice across the industry. It included baggage, meals, cancel/change or advanced or upgraded seating in its list. Res agents will also be required – both before and after the sale – to alert passengers to baggage fee updates.

Consumer advocates reported passenger survey’s indicate fee disclosure is the number one pet peeve.

“The airline industry supports increased communication and full transparency, ensuring that our customers always know exactly what they are getting every step of the way; and market forces – not additional regulations – are already providing customer benefits,” said Mr Calio. “As the DOT statistics demonstrate, airlines already have made many service improvements and many of the regulations formalise procedures already in place, including prompt delay notification, one-way fare advertising, and irregular-operation contingency plans.”

The organisation went on to say some airlines who charge for ancillary services are “fully transparent, ensuring that customers know exactly what they are buying and paying for before the purchase transaction”, it said, taking aim at government fees. “Airlines will continue to work to present a clear differentiation between the fare charged by the airlines and the government taxes and fees, which can account for roughly 20% of the ticket price.” 


As expected from the notice of proposed rulemaking, the bumping compensation has been doubled to USD800 if passengers are delayed for more than two-to-four hours, depending on whether their flight is domestic or international. Under the new rule, bumped passengers subject to short delays will receive compensation equal to double the price of their tickets up to USD650, while those subject to longer delays would receive payments of four times the value of their tickets, up to USD1300.  Inflation adjustments will be made to those compensation limits every two years.

DOT stats show 65,000 passengers were involuntarily bumped last year along with another 681,000 that were voluntarily bumped. The 2010 rate of involuntary denied boardings was the lowest since 2006, according to ATA’s statement. As reported by the DOT, there were 1.09 involuntary denied boardings per 10,000 enplaned passengers, down 11% from 2009. Many airlines have long-standing policies and procedures to assist passengers, including first asking for and compensating volunteers.

Currently, bumped passengers are entitled to cash compensation equal to the value of their tickets, up to USD400, if the airline is able to get them to their destination within one-to-two hours of their scheduled arrival time for domestic flights and one-to-four hours for international flights.

Other provisions

The department is also requiring prompt notification of delays of more than 30 minutes as well as cancellations and diversions, although many airlines offer mobile or email alerts. DOT wants notification in the boarding area as well as its website and reservations line.

It also bans post-purchase fare increases except when in the case of government-imposed taxes or fees and only if the passenger is notified of, and agrees, to the increase at the time of sale.

The final rule becomes effective in four months.

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