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

By | June 10th, 2010

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.