On August 25, 2015, recent amendments to U.S. Department of Transportation (DOT) regulations pertaining to denied boarding compensation and domestic baggage liability limits will take effect. The DOT also has amended its enforcement policy pertaining to the prohibition of post-purchase price increases in circumstances involving mistaken fares.
Increase in Maximum Denied Boarding Compensation
Federal regulations prescribe the amount of compensation that must be provided to passengers who are involuntarily denied boarding as a result of an oversold flight. The regulations also establish the maximum denied boarding compensation that must be paid to passengers.1
The regulations further provide that these limits must be reviewed every two years to determine whether they should be adjusted for inflation.2 In accordance with this rule, the DOT recently applied a formula prescribed by the regulation and determined that the liability limits should be increased from $650 and $1,300, to $675 and $1,350, respectively. As such, when a passenger is involuntarily denied boarding, he or she will be entitled to compensation in the amount of 200% of the fare up to $675 if the carrier offers alternate transportation scheduled to arrive at the passenger’s first stopover or final destination more than one hour but less than two hours (for domestic flights) or four hours (for outbound international flights) after the scheduled arrival time of the passenger’s original flight. Compensation increases to 400% of the fare up to $1,350 if the alternate transportation is not scheduled to arrive within two hours (for domestic flights) or four hours (for international flights) of the scheduled arrival time of the original flight.
These changes will take effect on August 25, 2015.
Increase in Domestic Baggage Liability Limits
Federal regulations also establish the minimum amount to which an air carrier may limit its liability for loss of, damage to, or delay in baggage in U.S. domestic air transportation.3 At present, the minimum liability limit is $3,400.
As with denied boarding compensation, the DOT must review the limit every two years and adjust for inflation.4 The DOT recently applied the formula prescribed by the regulation and determined that the domestic baggage liability limit should be increased to $3,500.
This change also will take effect on August 25, 2015.
Modifications to Enforcement Policy Regarding Mistaken Fares
In 2011, the DOT promulgated sweeping regulations aimed at improving airline passenger protections. In 2012, the DOT published guidance outlining its enforcement policies pertaining to these regulations.
One of the new rules prohibits air carriers from increasing the price of air transportation after a consumer has paid in full.5 An issue that often arises under this rule is whether an air carrier must honor “mistaken fares” – fares sold at a substantially lower price than the carrier intended – following a passenger’s payment of the fare. In guidance published in 2012, the DOT asserted that once a consumer completes a purchase and receives a confirmation, a purchase has been made for purposes of the rule barring post-purchase price increases; accordingly, any subsequent attempt by the carrier to increase the fare would be deemed a violation of the rule. Since that time, there have been a number of incidents in which mistaken fares were published, and the DOT typically has required carriers to honor the mistaken fares in order to protect passengers.
However, in 2014, the DOT issued a Notice of Proposed Rulemaking in which it expressed concern about websites that rapidly disseminate alerts about mistaken fares to enable consumers to exploit the post-purchase price increase rule, and noted that the rule was not intended to protect individuals who purchase mistaken fares in bad faith.6 The DOT invited comments about how best to address the problem of bad actors while ensuring that carriers continue to honor mistaken fares on which consumers reasonably relied. The DOT has not yet issued a final rule on this matter.
In the interim, the DOT published guidance in May 2015 in which it asserted that it would not require a carrier to honor a fare that the carrier proves was a mistake. The carrier must refund the fare and reimburse purchases of the fare for all reasonable, actual, and verifiable out-of-pocket expenditures incurred in reliance on the purchase, such as non-refundable hotel reservations or tour packages, or cancellation fees. A carrier may ask the consumer for proof of payment for these expenditures.7
This policy will remain in effect until the DOT issues its final rule regarding mistaken fares.
1 4 C.F.R. § 250(a-b).
2 14 C.F.R. § 250(e).
3 14 C.F.R. § 254.4.
4 14 C.F.R. § 254.6.
5 14 C.F.R. § 388.88.
6 See Transparency of Airline Ancillary Fees and Other Consumer Protection Issues, 79 Fed. Reg. 29970 (May 23, 2014). One instance of particularly egregious exploitation of a mistaken fare involved a fare that was sold by a U.S. carrier only on its Denmark website and only in Danish Kroner. In order to access the fare, individuals in the U.S. had to represent that they were in Denmark, then manipulate the search process to force a conversion error to obtain the fare in Danish Kroner by representing that their billing addresses were in Denmark. The DOT declined to take action against the carrier because the fare was not marketed to consumers in the U.S., but also commented that the “evidence of bad faith by the large majority of purchasers contributed to the Enforcement Office’s decision.” See Office of Aviation Enforcement Proceedings Determination Regarding United Airlines Mistaken Fare, https://www.transportation.gov/sites/dot.gov/files/docs/Mistaken_Fare_AEP_Statement_on_United_Airlines.pdf.
7 Notice: Enforcement Policy Regarding Mistaken Fares, May 8, 2015, www.transportation.gov/airconsumer/mistaken-fare-policy-statement-050815