Everything you need to know about the new denied boarding compensation rules

Editor’s note: This is part six in a series about the Transportation Department’s sweeping new airline passenger protection rules. You can read the entire document here (.DOC). Please take a moment to comment on these proposed rules at Regulationroom.org. The future of air travel depends on it.

The problem with proposed rulemakings is that they often run on forever, and the journalists who are supposed to review them and report back gloss over the really important material.

Result? You get the headline: “Government to raise denied boarding compensation.” And that’s it.

But there’s more — so much more — when it comes to the proposed overbooking rules.

Let’s start with the preliminary regulatory analysis (PDF), which succinctly defines the problem of denied boarding.

Overbooking is the airline industry’s original sin. Selling more tickets than your have seats is a practice that predates deregulation, and the consequences of it have been written into law for half a century.

And what are the consequences? At the moment, involuntarily bumped travelers are required to be given denied boarding compensation equal to 100 percent of the fare (200 percent if alternative transportation is not provided within the specified time limits) to the next stopover on the flight itinerary, up to the cap specified in the regulation.

Two years ago, the maximums were raised from $200 to $400 when alternative transportation is provided by the carrier within two hours for domestic flights and within four hours for international flights and from $400 to $800 otherwise.

But that’s not enough. And here’s why, according to the government:

Since May 2008 when the new rule was issued, despite these higher denied boarding compensation amounts, we have seen an increase in involuntary denied boardings. Load factors are also increasing, making it less likely that “bumped” passengers are being conveniently accommodated on other flights.

We are therefore concerned about whether the current rule adequately encourages carriers to seek volunteers to give up their seats and whether the minimum denied boarding compensation amount adequately compensates those passengers that are involuntarily “bumped” from their flights.

How does the Transportation Department intend to improve its denied compensation, or DBC, rules?

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1) Increase the minimum DBC limits to take account of the increase in the Consumer Price Index (CPI) since 1978.

2) Implement an automatic inflation adjuster for minimum DBC limits.

3) Clarify that DBC must be offered to “zero fare ticket” holders who are involuntarily bumped.

4) Require that a carrier verbally offer cash/check DBC if the carrier verbally offers a travel voucher as DBC to passengers who are involuntarily bumped.

5) Require that a carrier inform passengers solicited to volunteer for denied boarding about its principal boarding priority rules applicable to the specific flight and all material restrictions on the use of that transportation.

The most important point for air travelers, as correctly pointed out by all of those headline-writers, is that the amount of denied boarding compensation would go up. The department proposed revising the minimum amounts by using the Consumer Price Index for All Urban Consumers (CPI-U), rounded to the nearest $25, with the base of $200/$400 for the maximum DBC amounts in the year 1978.

That would bring the maximum DBC amounts for involuntarily oversold passengers to $650/$1,300 as of January 1, 2010.

There are lots of details that have yet to be worked out. One of the most interesting to me is a new disclosure requirement for denied boarding compensation.

We are concerned that … passengers who are verbally offered a travel voucher may not have time to read the written notice and are not in fact verbally told by an agent that they are entitled to compensation by cash or check. Likewise, they may not be adequately informed of any conditions or limitations placed on the vouchers they are receiving.

Accordingly, we are proposing that in any case in which a carrier verbally offers an involuntarily bumped passenger free or reduced-rate air transportation as an alternative to cash DBC, it also must at the same time verbally advise that passenger of his or her right to insist on compensation by cash or check and the actual amount of such compensation that would be due and of any conditions or restrictions applicable to the vouchers.

No two ways about it: This highly detailed rulemaking is telling airlines exactly what they must do, point by point, when they deny you boarding.

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Is it necessary? Absolutely. Denied boarding problems have plagued my readers for too long, and the penalties have been laughable.

What about the cost? The preliminary analysis concludes “it is not possible to determine the number or share of passengers who would have been involuntarily bumped, but who chose to accept travel vouchers or coupons instead.” But it’s a safe bet that if these rules are adopted, it will cost airlines who overbook in a big way.

The Rulemaking Series

I’ve written this series of posts in order to help you understand the Transportation Department’s proposed rules and offer the most informed feedback during its commenting period. Please take a moment to read them and then tell the government what you think at Regulationroom.org.

Part 1: New tarmac delay contingency plans — what’s in it for you?

Part 2: Government will require airlines to offer “complete picture” of ground delays

Part 3: New rules would require airlines to meet “minimum” customer service standards

Part 4: Government to airlines: Put it in the contract!

Part 5: New requirements would force international airlines to monitor and respond to passenger complaints

Part 6: Everything you need to know about the new denied boarding compensation rules

Part 7: The truth about the government’s new “full fare” disclosure rule

Part 8: Transportation Department wants airlines to reveal all fees and an airfare — or two

Part 9: New rule: No more price increases after you buy a ticket

Part 10: Airlines must “promptly” notify passengers of flight delays under proposed rule

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Part 11: No more lawsuit limits for passengers under proposed government rules

Part 12: The hard facts about the peanuts-on-a-plane rule everyone’s talking about

If you have any feedback on this series, please send me an email. And thanks for reading.

(Photo: hugo vk/Flickr Creative Commons)

Christopher Elliott

Christopher Elliott is an author, journalist and consumer advocate. You can read more about him on his personal website or check out his adventures on his family adventure travel site. Contact him at chris@elliott.org. Read more of Christopher's articles here.

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