ATA strongly objects to a CSP proposal that would require a carrier
to hold a reservation ``at the quoted fare'' for 24 hours for the
following reasons: it eliminates the carrier's ability to sell these
seats to another willing buyer; the DOT has not demonstrated a market
failure that merits this action; a consumer could hold a reservation
during the last 24 hours and then cancel, resulting in a seat that will
never be sold; and this requirement would effectively prevent re-
pricing, which ordinarily happens multiple times a day.
    Of the U.S. carriers that commented, US Airways does not support
adoption of a 24-hour standard as a rigid rule. The carrier suggests
that DOT allow airlines flexibility to restrict refunds in certain
situations in order to assure that the largest number of potential
passengers have access to seats. Spirit states this proposal is an
effort to impose on all airlines a practice that was common prior to
deregulation. As a low cost carrier, it states that almost all low-fare
carriers require payments at time of booking to guarantee the fare and
that making tickets non-refundable is a practice that is critical to
its ability to keep fares low. Should a consumer choose to, he or she
can buy refundable tickets at a higher price. The carrier states that
travel agents that book via global distribution systems (GDS) can hold
a reservation (space only) for 24 hours without penalty and Spirit
offers a 24 hour courtesy refund for bookings made via GDS, but no
other procedure for refunds via travel agents can be accomplished due
to limited GDS functions. In order to comply with this provision,
Spirit states that it would have to substantially change its business
model and incur large IT cost.
    Hawaiian Airlines (Hawaiian) notes that it has ``on-demand'' or
``walk-up'' flights that run on a high frequency basis. As proposed,
this provision would put the carrier in the position of turning
inventory over to passengers who will make several reservations for a
flight (within a 24 hour time period) but will pay for only one of the
reservations, even though Hawaiian must retain a seat for them on each
flight. It notes the rule could result in forcing Hawaiian to oversell
flights to protect against the loss of seats and revenue. The carrier
suggests the proposal be modified to allow customers to hold seats for
24 hours up until 72 hours before the departure of the flight. Similar
to Hawaiian, JetBlue suggest that the proposal be modified and that the
``24 hour rule'' apply not later than 120 hours prior to departure for
carriers that have a no oversales policy. JetBlue explains that it does
not oversell seats on its flights and it is the company's policy not to
issue refunds to passengers that cancel their reservations (in return
for a guaranteed seat on the flight). It notes that the proposal would
allow customers to hold a reservation without making a financial
commitment and could cause lower load factors, which would threaten
JetBlue's business model. ASTA supports the 24 hour ``reservation
hold'' rule applying to travel agent bookings.
3. Refunding the Ticket Price for Flights That Are Canceled or
Significantly Delayed
    In discussing a commitment to provide prompt refunds, we asked for
comments on whether we should require carriers to refund the ticket
price for flights that are canceled or significantly delayed if the
passenger chooses not to travel as a result of the travel disruption.
ATA opposes including as a standard in the customer service plan a
requirement that carriers automatically provide ticketed passengers
holding non-refundable tickets a refund for flights that are canceled
or significantly delayed. ATA notes that the regulatory effort to
redefine restricted tickets as fully refundable even when cancellation
is desirable due to impending weather or government order would impose
obligations not present in any other mode of transportation. ATA adds
that in most cases passengers on a cancelled flight are accommodated
soon after the originally scheduled flight. In addition, ATA provides
the following reasons for its opposition:
    [cir] The cause of the delay could be out of the carrier's control;
    [cir] Carriers often allow free rebooking for significant delays or
cancellation;
    [cir] This is a marketplace issue;
    [cir] Imposing mandatory refunds when a passenger chooses not to
fly would convert all tickets in cancel or delay situations to fully
refundable tickets;
    [cir] Passengers have a choice of what type of ticket to buy; and
    [cir] The DOT is not authorized to interfere in the marketplace in
this manner.
    Of the foreign carriers and carrier associations that commented,
AACO asserts that this provision intrudes in business practices and
raises a risk that carriers cannot resell the seat post-cancellation.
NACC is also concerned about this proposal. Malaysia Airlines strongly
opposes this proposal because delays are often beyond airlines' control
and carriers already make efforts to mitigate their impact. Similarly,
Qantas states that cancellations may also be out of the carrier's
control.
    Lufthansa and Austrian state that, if imposed, the final rule
should allow carriers to accommodate passengers in ways other than
refunding the fare. JetStar contends that it is unfair to place the
entire burden of costs of unforeseen delays and cancellations on the
carriers and states that mandatory refunds may result in the operation
of delayed flights empty or at a net loss. The carrier also believes
that it is not unfair or deceptive for consumers to share some of the
risk in return for lower priced non-refundable tickets, provided fare
rules are disclosed prior to purchase. VivaAerobus states that it is a
no frills ultra low-fare carrier that only sells non refundable tickets
and its policy is disclosed on its website so customers can
comparatively shop prior to purchase. The carrier asserts that it never
overbooks flights and contends that it cannot give refunds.
    Of the U.S. carriers that commented, US Airways notes that many of
its tickets are fully refundable and consumers that purchase non-
refundable tickets are clearly informed of the risk. While the carrier
supports the Department's efforts in the NPRM to enhance disclosure, it
does not think DOT should restrict options available to passengers or
competition among carriers by requiring refunds of non-refundable
tickets. Spirit Air opposes requiring carriers to make refunds to
passengers who choose to purchase non-refundable tickets but decide not
to fly because of a flight cancellation or significant delay. Rather,
Spirit gives passengers the option of re-accommodation or a voucher or
refund, or a passenger can purchase travel insurance.
    Of the consumers and consumer organizations that commented on this
issue, Flyersrights.org thinks tickets should be refunded if the flight
is cancelled or significantly delayed for reasons within the airline's
control. However, it is concerned about passengers who don't receive
refunds of taxes and fees collected by the government for services
passengers do not receive due to cancelled reservations. Some
``Regulation Room'' commenters favor airlines providing full refunds as
well as reimbursement for hotel rooms and meals if there is a
significant flight delay.
    With regard to defining a ``significant delay'' for purposes of
ticket refunds, ATA opposes any definition of ``significant'' delay
that would create a single government standard and eliminate a
carrier's latitude to create its own policies on non-refundable tickets

that serve customer and commercial needs. It reiterates that the
application of non-refundable tickets and carrier policies to re-
accommodate passengers during an event beyond the carrier's control is
best left to the marketplace in a deregulated industry, which will
leave customers with more options. Of the foreign carriers that
commented on defining a ``significant delay,'' Cathay Pacific states
the Department should take into account the length of delay, length of
the flight and the circumstances. The longer the flight, then the
greater the tolerance should be for the delay. TAP Portugal makes a
similar comment and states that the definition should depend on the
duration of the flight. It also notes that long-haul flights can make
up for delays while in the air. Some commenters on ``Regulation Room''
suggest that any delay over three hours is ``significant,'' while
others note they are willing to let the Department define the term.
4. Refunding Fees for Optional Services for Flights That Are Canceled
    In discussing prompt refunds, we specifically asked for comments on
whether we should require, as part of any refund due a consumer, a
refund of any optional fees charged a passenger in connection with the
flight in question. ATA opposes including as a standard in the customer
service plan that when a flight is cancelled carriers must refund not
only the ticket price but also any fees for optional services that were
charged to a passenger for that flight. ATA states that its members
object to the Department's concept that cancellation in itself should
create a right to the refund of optional fees. It urges the Department
to clarify that a carrier has the opportunity to accommodate a
passenger with other transportation options after a cancellation,
instead of automatically refunding a ticket and ancillary fees. ATA
also asks the Department to clarify that the proposed customer service
plan requirement to provide prompt refunds ``where ticket refunds are
due'' is meant to include only those situations where the passenger is
unable to fly due to the carrier's decision to cancel. US Airways
supports refunding fees for optional services for flights that are
canceled, but only in cases where the services in question are not
ultimately provided (e.g. baggage fees, seating fees). It asks the
Department to clarify that if the services are provided, refunds are
not mandated. Among the foreign carriers and carrier associations that
commented, AACO states that fees should not be reimbursed for the
ticket and ancillary services that have been provided. Malaysia
Airlines also states that this proposal should not require refunds of
fees for services already delivered. ASTA thinks mandated refunds
should include ``optional fees'' paid by a passenger.
5. Delivering Baggage on Time, Compensating Passengers for Expenses Due
To Delay in Delivery of Baggage and Refunding Baggage Fees
    Of the foreign air carriers and industry groups that commented,
AACO states that the Department needs to define what ``on time''
delivery of baggage means and opposes any requirement that airlines
bear the sole responsibility for areas of business that other parties
have control over (e.g. bags may be handled by airport or TSA). Air
Berlin notes that international baggage compensation is already
governed by the Montreal Convention. South African Airways states that
the proposal does not address Montreal or Warsaw and asks DOT to
confirm that the rule does not apply where either Convention controls.
Singapore Airlines offers similar comments. Air France and KLM state
that the NPRM does not take into account vast differences between long-
haul international flights and domestic U.S./transborder flights, and
as such, returning bags within 24 hours may be impossible due to
limited frequencies to a specific destination, absence of local
services, and/or a passenger with a multi-stop and multi-country
itinerary.
    Among the U.S. industry groups and air carriers, US Airways
believes that, before advancing new proposals in this area, DOT should
articulate any additional facts warranting action beyond steps that the
Department has already taken. It asserts that it is neither possible
nor desirable to set a uniform maximum time for delivery of delayed
bags or to impose remedies for failure to make delivery within a time
frame because there are too many variables involved, and asks that the
Department seek more input from stakeholders involved. Spirit Airlines
notes that Part 254 already requires airlines to compensate passengers
and airlines have incentives to locate and return bags. It also states
that ``every reasonable effort'' to return bags is a vague standard,
and points out that there is no evidence that the current rules are
inadequate or passengers are being treated unfairly or with deception.
    ATA notes that its members oppose including as a standard in the
customer service plan that carriers reimburse passengers the fee
charged to transport a bag if that bag is lost or not timely delivered.
ATA states that bag fees are a competitive issue and whether a carrier
chooses to refund a fee in all instances is a matter the marketplace
should determine. Spirit also opposes such a requirement although it
notes that its policy is to refund fees when there is a delay in
delivery. Flyersright.org states that fees should be refunded if the
bag is not delivered on the same flight or an earlier one.
6. Notifying Passengers of Past Delays and Cancellations Prior to
Ticket Purchase
    We already require the reporting carriers (i.e., largest U.S.
carriers) to provide delay and cancellation information on their
websites and upon request provide consumers on-time performance
information during oral reservations. We asked for comment on whether
all carriers required to have a customer service plan should be
required to disclose past delays and cancellations of flights to
consumers before the latter purchase a ticket. Many carriers oppose
having a customer service commitment on disclosure to passengers of
past delays or cancellations of particular flights before ticket
purchase and do not see the need for it. They assert that past
performance is not necessarily indicative of future performance. Swiss
International also states that, if imposed, the requirement to disclose
past delay and cancellation information should not apply to
reservations agents via telephone because foreign carriers utilize call
centers that often work with multiple carriers and the proposal is not
feasible. Cathay Pacific does not support mandatory disclosure of past
delays and cancellations before ticket purchase for international
flights that have limited operations, but notes that for domestic
services operated more frequently there may be value. ATA members
oppose additional information notices regarding past flight delays or
cancellations before purchase of a ticket, as the Department has
recently adopted new flight information requirements and in accordance
with those rules, the public will have access to information on flight
delays, cancellations, and flights 30 minutes late more than 50% of the
time before purchase on the largest U.S. carriers' websites. Of the
U.S. carrier commenters, US Airways notes, similar to ATA, that this
information is available on the carrier's website and that is
sufficient to provide consumers with information. It also asserts that
historic data is unreliable, the current rule is new and more time is
needed to see how effective it is prior to initiating new rules, and
DOT already decided further disclosures were not required.

7. Other Customer Service Provisions
    With regard to the customer service requirement to notify consumers
of itinerary changes in a timely manner, British Airways expressed
support for this provision, but thinks it should be limited to
passengers for which the carrier has reliable contact information. In
situations where a passenger books his/her ticket through a travel
agent, British Airways states that the travel agent and not the carrier
should be held responsible for notifying the passenger of any itinerary
changes. With respect to disclosing aircraft configuration, among other
things, to consumers on the selling carrier's website and upon request
from the selling carrier's telephone reservations staff, Singapore
Airlines contends that there is no reason for its telephone
reservations staff to provide this information as its customers can
find this information on the carrier's website. With regard to
responding to consumer complaints, Air Berlin is concerned that as
drafted the proposed definition would obligate a carrier to react to
complaints from non-passengers.
    As for the requirement to ensure ``good customer service'' from
code-share partners, a number of carriers and carrier associations
expressed concerns with the definition of ``ensuring good customer
service'' as it relates to code-share partners and claim that they
cannot be held responsible for code-share partners' actions. More
specifically, NACC contends that the provision to have ``comparable
service plans'' could be an extraterritorial application of law if
applied to more than flight segments to or from a U.S. airport. It
states that the requirement to have comparable service is too
prescriptive and is an unwarranted interference in commercial
relationships, and may discourage such arrangements, leading to less
flexibility and network connectivity. NACC also expresses concerns that
aligning customer service plans with code-share partners may raise
anti-trust issues. JetStar does not support requiring code-share
participants to adopt each other's customer service plans or align
their service levels and states that this is an issue of competition
best left to the marketplace. It also notes that the marketing carrier
has the primary relationship with the consumer. US Airways states that
DOT should not adopt rules that marketing carriers are responsible for
violations by operating carriers and says that marketing carriers
cannot control the application of uniform standards of all operating
carriers with which they work.
    DOT Response: Having fully considered the comments, the Department
has decided to adopt a final rule largely along the lines set forth in
the NPRM, with some clarifications to address comments received about
extraterritorial application of U.S. law and the appropriateness of
individual customer service commitments. In adopting this approach, we
believe that our action strikes a proper balance between ensuring that
the traveling public is provided an adequate level of service and is
not subjected to unfair or deceptive practices, while ensuring the
marketplace governs to the extent possible. We also view our approach
as striking the proper balance between protecting consumers on nearly
all flights to and from the United States by requiring not just U.S.
carriers but also foreign carriers to adopt and adhere to customer
service plans, while ensuring that these requirements do not involve an
extraterritorial application of U.S. law by limiting their application
to foreign carriers to flights to and from the U.S., sales made within
the U.S., and to the conduct of foreign carriers on U.S. soil.
    Under the final rule, foreign carriers are required to address the
same subjects in their customer service plan as U.S. carriers. The
final rule also establishes minimum standards for the customer service
plans of both U.S. and foreign carriers. In making this decision, we
note that carriers are already required to address a number of the
subjects and comply with the minimum standards imposed for these
subjects through existing requirements [e.g., 14 CFR part 250, Part 254
(for U.S. carriers), and Part 382] or requirements imposed by other
sections of this rule (e.g., 14 CFR 259.4, 259.7, and 259.8).
Additionally, based on the comments received, many carriers already
address many of the requirements in the customer service plans and, in
some cases, their customer service commitment is more stringent than
those we are adopting. Consequently, we are not persuaded that it would
be unduly burdensome for carriers to adopt and adhere to these
standards.
    Commenters have convinced us that it is not appropriate to require
U.S. or foreign air carriers to include in their customer service plans
a commitment to ensure good customer service from their code-share
partners by making certain that code-share partners have comparable
customer service plans or provide comparable customer service levels.
We agree with commenters that the requirement for code-share partners
to have comparable service may unnecessarily restrict the marketplace
and may unduly discourage code-sharing arrangements. We have also
decided against requiring covered carriers to include in their customer
service plans an assurance that they will notify consumers of past
delays and cancellations. We are persuaded that the current
availability of data about past delays and cancellations provided by
the largest U.S. carriers on their websites as a result of action of
our recent consumer rulemaking is sufficient and additional
requirements in this area would not materially benefit consumers.
    While, as noted above, the Department has decided to establish
minimum standards for the customer service plans of both U.S. and
foreign carriers, we are modifying or clarifying a few of these
standards based on comments received. For example, we are clarifying,
as requested by U.S. and foreign carriers and associations, that the
requirement to compensate passengers for reasonable expenses that
result due to delay in baggage delivery comports with 14 CFR part 254
for domestic transportation and applicable international agreements for
international transportation. We are also adding as a standard that
carriers must reimburse passengers for any fee charged to transport a
bag if the bag is lost. We have decided against requiring carriers to
reimburse passengers for any fee charged to transport a bag that is not
timely delivered. Arguably, as is the case with transporting passengers
themselves, while delay in receiving baggage may be inconvenient, once
the carrier delivers a bag the service has been performed. Consumers
may, of course, seek reimbursement for damages caused by delay in the
delivery of their baggage by filing a claim with the airline or, if
dissatisfied with the airline's resolution of the matter, with an
appropriate civil court.
    With regard to carriers' obligation to notify passengers of known
delays, cancellations and diversions, we specify that the minimum
standard required to comply with this obligation is met through
compliance with a requirement imposed elsewhere in this final rule,
i.e., 14 CFR 259.8. Under section 259.8, we explain that the obligation
to notify passengers of delays applies only to delays of 30 minutes or
more and that the carrier has the obligation to inform passengers of
such delays, cancellations and diversions within 30 minutes of the
carrier becoming aware of a change in the status of a flight. We also
explain that carriers must inform consumers of cancellations and delays
of 30 minutes or more and diversions in the boarding gate area at U.S.
airports, on board

aircraft, via a carrier's telephone reservation system and on its
website, and through whatever means made available by the carrier for
passengers who subscribe to the carrier's flight status notification
services.
    With respect to providing prompt refunds, we conclude that the
obligation to provide such refunds applies not only to refunding the
basic price of a ticket but also to refunding optional fees charged to
a passenger for services that the passenger is unable to use due to an
oversale situation or a flight cancellation. For example, if a
passenger pays for premium economy seating, but his flight is canceled
or oversold and that seating is not available on the flight that he/she
has agreed to be re-rerouted on, then the carrier must promptly refund
the passenger the fee paid for the premium seating. In adopting this
requirement, the Department believes it is unfair for a carrier to
refuse to provide a refund to a passenger of fees paid for services not
provided through no fault of the passenger.
    We continue to believe that there are circumstances in which
passengers would be due a refund, including a refund of non-refundable
tickets and optional fees associated with those tickets due to a
significant flight delay. However, we have been persuaded by industry
commenters that the Department should not adopt a strict standard of
what constitutes a significant delay as such a delay is difficult to
define. We agree with the contention of carriers and carrier
associations that the definition of a significant delay depends on a
wide variety of factors such as the length of the delay, length of the
flight and the passenger's circumstances. The Department's Aviation
Enforcement Office will continue to monitor how carriers apply their
non-refundability provision in the event of a significant change in
scheduled departure or arrival time, and will determine on a case by
case basis based on the facts and circumstances of the delay whether a
failure to provide a refund in response to such a delay is an unfair
and deceptive practice.
    We reject some carriers' and carrier associations' assertions that
carriers are not required to refund a passenger's fare when a flight is
cancelled if the carrier can accommodate the passenger with other
transportation options after the cancellation. We find it to be
manifestly unfair for a carrier to fail to provide the transportation
contracted for and then to refuse to provide a refund if the passenger
finds the offered rerouting unacceptable (e.g., greatly delayed or
otherwise inconvenient) and he or she no longer wishes to travel. Since
at least the time of an Industry Letter of July 15, 1996 (see http://airconsumer.dot.gov/rules/guidance) the Department's Aviation
Enforcement Office has advised carriers that refusing to refund a non-
refundable fare when a flight is canceled and the passenger wishes to
cancel is a violation of 49 U.S.C. 41712 (unfair or deceptive
practices) and would subject a carrier to enforcement action.
    We also have determined to modify the standard regarding the
availability of the lowest fare from what was proposed in the NPRM. In
the NPRM, we proposed that a carrier offer the lowest fare available on
the carrier's website, at the ticket counter, or when a customer calls
the carrier's reservation center to inquire about a fare or to make a
reservation. Having taken into consideration the comments received
about how this requirement could unduly interfere with airline business
models by requiring airlines offer to a consumer shopping via one
point-of-sale the lowest fare available via any channel, we are
modifying this provision to require carriers to disclose to consumers
who contact the carrier through any of these mediums that a lower fare
may be offered by the carrier through another channel (for example, the
carrier must reveal via its telephone reservation service that a lower
fare may be available on the carrier's website if that is the case). Of
course, wherever the carrier offers its lowest fare, the carrier should
not state that the lowest fare may be available elsewhere as such a
statement would likely confuse consumers and could result in increased
search time by consumers for a nonexistent lower fare. In sum, we are
not requiring carrier personnel to offer the lowest fare available via
whatever sales channel a consumer chooses to use, but to inform all of
its customers and prospective customers that a lower fare may be
available elsewhere in the carrier's systems in order to give the
consumer the opportunity to locate a lower fare offered by that
carrier.
    We have also decided to modify the customer service proposal which
would require carriers to allow reservations to be held at the quoted
fare without payment, or cancelled without penalty, for at least
twenty-four hours after the reservation is made. We agree with
commenters who expressed concerns that allowing consumers to hold a
seat without payment for twenty-four hours could result in loss of
sales and revenue by carriers and prevent other passengers from
purchasing the seat if the seat is not released in a timely manner
prior to the flight. We find persuasive the comments submitted by
JetBlue and Hawaiian Airlines suggesting that a set point in time
should exist after which carriers would no longer be required to hold a
passenger's reservation in order to give the carrier a more realistic
opportunity to sell that seat in the final days before the flight
departs. Accordingly, we are modifying this provision to require
carriers to hold the reservation for twenty-four hours only if a
consumer makes the reservation one week (168 hours) or more prior to a
flight's scheduled departure. After that time, a carrier is no longer
required to hold a reservation without payment for any period of time.
The Department believes that this modification strikes the right
balance between a consumer's desire to make travel plans and shop for a
fare that meets his or her needs, and the carrier's need for adequate
time to sell seats on its flights.
    As for the remaining seven customer service requirements, we
received very few comments on them and we are adopting them as proposed
in the NPRM. These seven customer service requirements pertain to
accommodating passengers with disabilities, meeting customers'
essential needs during lengthy tarmac delays, handling ``bumped''
passengers with fairness and consistency, disclosing cancellation
policies, frequent flyer rules, aircraft configuration, and lavatory
availability, notifying consumers of changes in their travel
itineraries, ensuring responsiveness to customer complaints, and
identifying the services the carrier provides to mitigate passenger
inconveniences resulting from flight cancellations and misconnections.
In adopting these customer service commitments as proposed, we note our
disagreement with comments stating that the requirement for carriers to
notify consumers of itinerary changes should be limited to passengers
who book their tickets directly with the carrier and not apply to
passengers who book their tickets through a travel agent. A passenger
has a right to know and benefit from knowing about changes in his/her
itinerary whether that person purchased the ticket directly from a
carrier or from a travel agent. We also disagree with comments that the
disclosure of aircraft configuration be limited to the selling
carrier's website. While most consumers will have access to the
Internet and be able to obtain this information from carriers'
websites, we also see benefit in requiring that aircraft configuration
information be made available upon request from the selling carrier's
telephone reservations staff, particularly for those passengers who do

not have access to the Internet or are not familiar with how to use it.
With regard to the concern expressed by a carrier that it may be
required to respond to complaints from non-passengers, we want to point
out that ``complaint'' is defined in section 259.7 as a specific
written expression of dissatisfaction concerning a difficulty or
problem which a person experienced when using or attempting to use an
airline's services.
C. Self-Auditing of Plan
    The NPRM: The NPRM proposed that foreign air carriers audit their
adherence to their customer service plan annually and make the results
of their audits available for the Department's review upon request for
two years following the audit completion date. U.S. carriers are
already required to self-audit their plans and to make the audit
results available for the Department's review upon request for two
years.
    Comments: Of the foreign carriers that commented, TAP Portugal
opposes self-auditing and contends that it is too burdensome to audit a
dozen service standards, some of which involve hundreds of activities
performed on a daily basis. Similarly, British Airways opposes self-
auditing customer service plans on the basis that the plans cover many
services and involve different departments that are responsible for
these services, and as such would necessitate coordination at
significant additional costs. Qatar Airways states that global surveys
regarding customer service standards already exist and audits specific
to a limited number of international routes will not add value to
consumers. Swiss International and Air Tahiti note that there is no
guidance as to what a ``self-audit'' requires.
    A business travel organization supports requiring audits and states
that its travel managers can provide their clients better protection on
flights to and from the U.S. if they have this information available.
Of the consumer groups, Flyersrights.org supports requiring foreign air
carriers to audit customer service plans and thinks failure to adopt a
plan, adhere to it, and make audit results available should be
considered an unfair and deceptive practice.
    DOT Response: We have decided to adopt the self-auditing
requirements as proposed in the NPRM. The final rule requires each
carrier to audit its own adherence to its plan annually and to make the
results of each audit available for the Department's review upon
request for two years afterwards. The Department believes that a system
for verifying compliance with the customer service plans is essential.
As noted in the first rule to enhance airline passenger protections, we
believe that requiring covered carriers to audit their plans annually
will further ensure that carriers will live up to their commitments. It
will also enable an airline to quickly take action if it learns that it
is not in compliance with its customer service plans or if it is not
effectively implementing its plan. A self-audit is essentially a system
for the carrier to verify its compliance with its customer service
plan. We are not requiring that such audits be conducted ``at similar
times in the year'' or even that there be a single unified audit of all
the subjects covered in the customer service plans, in order to allow
each airline the flexibility to design an audit program that fits its
particular operational environment.

4. Contracts of Carriage

    The NPRM: This NPRM was the second time that the Department
proposed requirements regarding incorporation of tarmac delay
contingency plans and customer service plans into carriers' contracts
of carriage. In December 2008, the Department published in the Federal
Register an NPRM proposing to require U.S. carriers to incorporate
their tarmac delay contingency plans and customer service plans in
their contracts of carriage, and make their contracts of carriage
available on their websites. In December 2009, the Department issued a
final rule where it decided not to require such incorporation. Instead,
the Department strongly encouraged carriers to voluntarily incorporate
the terms of their contingency plans and customer service plans in
their contracts of carriage and required the carriers to post their
plans and their contracts of carriage on their website. At that time,
the Department also indicated its intention to address this matter
again through rulemaking.
    In this proceeding, the Department again proposed to require
carriers to include their tarmac delay contingency plans and customer
service plans in their contracts of carriage, and for foreign air
carriers that have a website to post their entire contract of carriage
on their website in an easily accessible form. U.S. carriers are
already required to post their contract of carriage on their website
under the existing rule.
    The Department again sought comment on whether incorporation of the
contingency plans and customer service plans in the contract of
carriage would give consumers notice of what might happen in the event
of a long delay on the tarmac and of passengers' rights under carriers'
customer service plans. As in the past, we asked commenters to address
whether and to what extent requiring the incorporation of contingency
plans in carriers' contracts of carriage might weaken existing plans:
that is, would the requirement encourage carriers to exclude certain
key terms from their plans in order to avoid compromising their
flexibility to deal with circumstances that can be both complex and
unpredictable.
    Comments: RAA questions whether DOT has authority to impose a
requirement for carriers to incorporate their tarmac delay contingency
plans or customer service plans into their contracts of carriage. If
the Department nevertheless adopts such a requirement, RAA states that
it should not apply to regional carriers, as most regional passengers
are subject to the ticketing carrier's contract of carriage.
    ATA contends that the Department would be exceeding its regulatory
authority if it were to require that the contingency plans and customer
service plans be incorporated into carriers' contracts of carriage as a
means of creating a private right of action. ATA asserts that Congress
did not create a private right of action for violations of 49 U.S.C.
41712 and the Department cannot substitute a different enforcement
process than the one Congress intended. ATA also states that the
Department has failed to demonstrate how a carrier's failure to
incorporate either its tarmac delay contingency plan or its customer
service plan in its contract of carriage could be viewed as an unfair
and deceptive practice under 49 U.S.C. 41712 . ATA points out that if
the Department is interested in ensuring that passengers are more aware
of their rights, then it should be sufficient that both the contingency
plan and customer service plan are available on carrier websites.
    U.S. carriers that commented generally support ATA. For example, US
Airways, like ATA, states that there is no reason to require
incorporation of the contingency plans or customer service plans as
U.S. carriers already post these plans on their websites. US Airways
speculates that only a small percentage of visitors to its website
review the page containing the Contract of Carriage, suggesting that
the inclusion of the plans in carriers' contracts of carriage would not
increase passenger awareness of their rights. US Airways as well as
other carriers are particularly concerned that this requirement would
create a private right of action and subject airlines to a multitude of
lawsuits in a variety of jurisdictions.

    Similar to the U.S. carriers and carrier association, foreign
carriers and carrier associations strongly oppose the proposed
requirement to incorporate plans into carriers' contracts of carriage.
IATA asserts that the DOT exceeds its authority in proposing this
requirement and that it would substantially increase airlines' legal
costs. IATA also states that international airlines cannot be expected
to adopt multiple contracts of carriage for each territory into and out
of which they fly and that contracts of carriage are contracts between
a carrier and all of its passengers, not just those that fly into the
U.S. AEA generally supports and agrees with IATA. IACA states that
placing contingency and customer service plans in a contract of
carriage will make the contracts unreadable, as they are already
detailed and will result in too much information for the consumer. IACA
also states, similar to IATA, that for many airlines U.S. flights make
up only a small share of the total flights, so it is inappropriate to
incorporate information that is valid only for U.S. flights. IACA also
notes that EU regulations already require carriers to provide customers
with details of their rights, so the proposal is superfluous and
counterproductive. IACA suggests that foreign carriers be exempted from
this requirement.
    The foreign air carriers that commented generally support IATA.
Many carriers note that rules already exist in their countries
regarding customer service issues. For example, Virgin Atlantic notes
that EC Reg 261/2004 already has passenger rights requirements covering
delays and oversales. Others raised concerns about extraterritoriality.
More specifically, JAL and TAP Portugal note concerns about the
proposal as their Conditions of Carriage are reviewed and approved by
their homeland regulator and any changes would need to be approved by
those bodies. Qatar Airways states that there should be global
harmonization of different government regulatory standards before such
plans are incorporated in each carrier's Contract of Carriage. Various
carriers also expressed fears about the litigation risks that would
exist. South African Airways notes that mandating terms of an airline's
contract of carriage may improperly create a private right of action
for minor lapses in service. Air France speculates that in order to
avoid legal risks carriers may weaken plans if incorporation into
carrier's contract of carriage is required. Air France as well as many
other carriers who object to the proposal assert, similar to IATA, that
the Department does not have authority to impose this requirement. In a
similar fashion, Lufthansa strongly opposes the proposal and fully
supports ATA's and IATA's comments, as do Alitalia, British Airways and
various other foreign carriers.
    While most foreign air carriers are opposed to including the plans
in their contract of carriage, a number of them did support the idea of
placing the contingency plans and customer service plans on their
respective websites or state that they have already done so. For
example, Air France and KLM agree that the plans could be placed on a
website. Virgin Atlantic states that its Conditions of Carriage are
based on IATA standards and are available on its website, as does Qatar
Airways. In addition, Virgin Atlantic suggests that contingency plans
and customer service plans be provided, where there is a specific
situation, to an affected passenger. South African Airways makes
similar comments.
    Of the consumer groups that commented, CTA and AAPR generally
support the proposal to include tarmac delay contingency plans and
customer service plans in a carrier's contract of carriage, or in the
alternative on their websites. CTA also states that code-share rules
should be included in the contract of carriage. Flyersrights.org, and
its individual members that filed comments, support the proposal that
carriers place both the tarmac delay contingency plans and the customer
service plans in their contracts of carriage. The organization warns,
however, that requiring carriers to incorporate plans into their
contracts of carriage may result in carriers excluding key terms from
the plan so as to make the plans unenforceable and asks that the
Department review and monitor the plans.
    DOT Response: Having considered all the comments, the Department
has decided not to adopt the proposal requiring U.S. and foreign
carriers to include their contingency plans and customer service plans
in their contracts of carriage. In making this decision, we note that
some carriers have voluntarily put not only their customer service
plans but also their tarmac delay contingency plans into their
contracts of carriage since we issued the first rule to enhance airline
passenger protections. We will continue to monitor whether other
carriers choose to do so, as well as determine if we need to revisit
this issue in the future should a problem exist.
    Further, with regard to the need to incorporate customer service
plans into the contract of carriage, the Department believes that our
decision to set minimum standards for the provisions in a carrier's
customer service plan gives consumers more certainty as to the quality
and types of services they can expect. In addition, these minimum
standards may make it easier for a consumer to demonstrate to the
Department's Aviation Enforcement Office that a carrier has violated
the law when that carrier does not meet its standard of service
commitment as the requirements of the customer service plans are more
exacting than in the past. If the minimum standards are not met by a
given carrier, the Department can determine if enforcement action is
appropriate in a given situation.
    Although we are not requiring tarmac delay contingency plans and
customer service plans to be incorporated in contracts of carriage, the
Department has decided to require foreign carriers to post their tarmac
delay contingency plans, customer service plans and contracts of
carriage on their websites. The December 2009 rule to enhance airline
passenger protections already requires U.S. carriers to post these
plans on their websites. The purpose of this requirement is to ensure
that interested consumers can easily review an airline's contract of
carriage, customer service plan, and/or tarmac delay contingency plan.
By having the ability to review these documents, consumers can find out
an airline's stated obligations to passengers and be better informed
about their rights and a carrier's responsibilities before purchasing
tickets and whenever problems occur (for example, the passenger's
rights and carrier's responsibilities if an airline delays or cancels a
flight or loses a bag). The Department believes that having the plans
and contracts of carriage on websites will lead to a better informed
consumer. The Department's Aviation Enforcement Office will
periodically monitor carriers' websites to ensure that the required
information is available.

5. Response to Consumer Problems

A. Designated Advocates for Passengers' Interests
    The NPRM: The NPRM proposed to require foreign air carriers that
operate scheduled passenger service to and from the United States using
any aircraft with 30 or more seats to designate an employee who will be
responsible for monitoring the effects of flight delays, flight
cancellations and lengthy tarmac delays on passengers. We proposed that
this employee have input into decisions about which flights to cancel
and which will be delayed the longest. U.S. carriers must comply with
this requirement under the existing rules.

    Comments: IATA, IACA, and AEA generally state that the proposal to
designate an advocate for passenger interests intervenes too much in an
airline's operation as airlines organize themselves differently to
monitor operational issues and address customer concerns. Lufthansa
opposes this proposal and comments that the decision to designate an
employee to monitor the effects of irregular operations should be left
to the discretion of each carrier. Similarly, Air Tahiti states that
requiring dedicated staff to monitor delays improperly interferes with
internal airline operations. JAL does not think it makes sense to
designate an employee for a non-problem and asks for additional
information and clarification regarding the employee's
responsibilities. Swiss International states that this proposal is a
substantial burden and believes that one individual may not be
effective because each airport has its own issues, so splitting these
tasks makes more sense and would result in better data. The carrier
urges the Department to require each airport to designate an employee
responsible for monitoring delays and coordinate with carriers to
reduce delays. Air France and KLM oppose this requirement and explain
that it has limited resources in the U.S. to fulfill any such new role
and contends that this requirement would impose substantial costs on
foreign carriers. Air France and KLM state that, if this proposal is
implemented, the Department should permit foreign carriers to comply by
having an off-site employee in a specific department who is accessible
by a specific telephone number assist in such matters, and by providing
this advocacy only in the principal language of the carrier's homeland
(French for Air France, Dutch for KLM) and in English. Of the travel
agent interests that commented, ASTA generally supports the proposal to
have a designated employee, but does not believe the employee should
have to be available in the U.S. as long as he or she is accessible. We
received a few comments from consumers and consumer groups, all of whom
generally support the proposals.
    DOT Response: The final rule requires foreign air carriers
operating scheduled passenger service to and from the U.S. using any
aircraft with 30 or more passenger seats to designate an employee to
monitor the effects of flight delays, flight cancellations, and lengthy
tarmac delays on passengers and to have input into decisions on which
flights to cancel and which will be delayed the longest. It applies to
all of a covered foreign carrier's scheduled flights to and from the
United States, including those involving aircraft with fewer than 30
seats if a carrier operates any aircraft with 30 or more passenger
seats to/from the U.S.
    We are not persuaded by commenters that the Department is
excessively intervening in an airline's operation by requiring an
employee or employees be designated to monitor performance of flights
and that these employees have input into decisions such as which
flights are cancelled or subject to the longest delays. Additionally,
we have taken note of foreign carriers' concerns regarding the
potential lack of carrier personnel located in the United States or at
specific airports where the carrier does not have a large presence. We
are not requiring that the employees responsible for monitoring
irregular flight operations be located at a U.S. airport. As has been
permitted for covered U.S. carriers, foreign carriers can determine
where its employees are located, as long as the designated employees
can monitor flight delays and cancellations for the carriers' flights
to and from the U.S. throughout the carriers' system and have input
into decisions regarding how to best meet the needs of passengers
affected by any irregular operations. This requirement is intended to
ensure that passenger interests are considered by carriers when
decisions on irregular flight operations are made. We are not requiring
that the designated employees make themselves available to speak with
airport personnel or passengers and certainly are not prescribing the
language to be used by the designated airline employees. By adopting
this performance standard, the Department leaves it up to each carrier
to determine the most efficient and effective method to monitor the
effects of flight delays and cancellations (for example, designating
one or more individuals at its systems operations center). This rule
does not require carriers to hire new employees to comply with this
provision as these responsibilities may be borne by current employees
in addition to their other responsibilities.
B. Informing Consumers How To Complain
    The NPRM: Under the proposed rule, a foreign air carrier that
operates scheduled passenger service to and from the U.S. using any
aircraft with 30 or more passenger seats would be required to inform
consumers how to file a complaint with the carrier (name of department,
address, and email or web-mail address) on its website, on all e-ticket
confirmations, and, upon request, at each ticket counter and gate.
    Comments: As with other sections of this proposal, carrier
association commenters, such IATA, IACA, and AEA, generally state that
the proposal to inform consumers how to complain unnecessarily and
excessively intervenes in an airline's operations. Many foreign
carriers concur. For example, Qantas and JetStar state that if a
carrier has given a consumer reasonable access for lodging complaints,
there is no need for the Department to mandate a particular form of
communication. Qatar Airways, among others, notes that foreign carriers
already offer passengers a number of means by which to file a
complaint.
    Foreign carriers and carrier associations also oppose the
requirement to inform consumers how to complain as an extraterritorial
application of U.S. law. IATA asserts that this requirement would
violate the Chicago Convention and U.S. Open Skies Agreement as it
would necessitate foreign carriers modifying procedures and operations
that take place outside the U.S. to meet U.S. regulatory requirements.
For example, IATA states that this requirement would mandate that
foreign carriers modify their home websites and foreign-issued tickets
to include information mandated by the Department.
    NBTA generally supports the provisions, as do Consumers Union and
AAPR. Flyersrights.org, in addition to supporting a requirement for
foreign airlines to make the mailing address and email or web address
for filing a complaint available on their website and e-ticket
confirmations, thinks there should be contact information for the
Department's Aviation Consumer Protection Division on e-ticket
confirmations and boarding passes.
    DOT Response: The Department is extending this provision to foreign
carriers as proposed in the NPRM, with some clarifications to address
concerns about extraterritoriality. First, we are requiring foreign
carriers to inform consumers how to complain, upon request, at each
ticket counter and boarding gate at U.S. airports. We are not seeking
to govern the activities of foreign carriers outside the United States.
U.S. carriers are still required to inform consumers how to complain
upon request at all ticket counters and boarding gates staffed by the
carrier or a contractor of the carrier, whether or not those locations
are within the U.S. We are also specifying that the requirement to make
information about how to file a complaint available on a carrier's
website applies to a foreign

carrier only if its website markets to U.S. consumers. Foreign carriers
would not need to modify their home websites to ensure that they are
complying with this requirement unless those sites market to U.S.
consumers. We expect foreign carriers to follow U.S. law in the U.S.
when marketing within the U.S. and when flights are entering, operating
within or departing from the U.S.
    Also, while we acknowledge foreign commenters' concerns with the
Department mandating avenues by which a consumer can file a complaint,
we believe it is important that consumers have more than one avenue for
registering their service-related concerns. As commenters note, since
some foreign carriers already provide a number of means by which to
file a complaint, the requirements of this rule should not prove overly
burdensome. As with the December 2009 rule to enhance airline passenger
protections, this rule requires carriers to only provide passengers
their email or web-form address and their mailing address. We did not
propose and are not now requiring that carriers provide passengers a
telephone number for complaint calls because of concerns that telephone
``talk time'' would impose a high cost on airlines when there are other
more-efficient and effective complaint processing methods available. Of
course, in addition to accepting complaints through the Internet and
postal mail, airlines are free to voluntarily accept customer
complaints through other methods such as telephone. We also point out
that, as is currently allowed for U.S. carriers, a foreign carrier can
comply with the requirement to provide contact information on an e-
ticket confirmation or itinerary by including a link to a website
containing the complaint information in lieu of displaying the entire
text of the contact information, which will take up even less space on
an e-ticket and reduce cost. It is our opinion that requiring complaint
contact information on e-tickets and, upon request, at each ticket
counter and boarding gate instead of just on websites will be
beneficial to consumers since a large number of passengers do not have
access to the Internet while traveling and would not be able to access
the complaint contact information through the airlines' websites.
    We are not adopting the suggestion that carriers be required to
provide consumers information as a general matter on how to file
complaints with DOT. That suggestion is beyond the scope of the notice
and is not wise since it might direct consumers away from contacting
carriers that are in the best position to quickly resolve problems.
C. Responding to Consumer Complaints
    The NPRM: Under the NPRM, a foreign air carrier that operates
scheduled passenger service to and from the U.S. using any aircraft
with 30 or more passenger seats would be required to acknowledge
receipt of a complaint within 30 days of receiving it and send a
substantive response to each complainant within 60 days of receiving
it. We proposed to define a complaint as a specific written expression
of dissatisfaction concerning a difficulty or problem which the person
experienced when using or attempting to use an airline's services. We
solicited comments on any operational difficulties U.S. and foreign
airlines may face in responding to such complaints when received
through social networking mediums such as Facebook and Twitter.
    Comments: We received a number of comments on this issue from
foreign carriers and carrier associations, some of whom supported this
requirement. IATA, IACA, AEA, and many foreign carriers generally state
that the proposal to respond to consumer complaints within a set
timeframe excessively intervenes into an airline's business practices
and disregards procedures carriers already have in place to respond to
consumer complaints. They also contend that the Department has not
shown that this type of requirement is needed. More specifically,
British Airways notes that the timeline is unnecessary and overly
burdensome and would force carriers to divert personnel to unnecessary
administrative and recordkeeping functions. Qantas states that it does
not see the need to single out the airline industry for mandatory
requirements related to customer response times and that the carrier
already aims to provide substantive responses in less than 60 days.
IATA suggests that, if adopted, any final rule should include a
provision allowing an airline to stop the clock by providing a
provisional response. Lufthansa makes a similar suggestion that the
Department allow for a ``provisional'' response to a customer's
concerns within the 60 day time frame in the event it cannot provide a
full detailed response. A number of carriers such as Virgin Atlantic
also recommend that any final rule adopted include an exception to the
time frame established to respond to complaints for extraordinary
circumstances, such as the Icelandic volcano incident, as the volume of
complaints resulting from such events requires a longer response time.
    Some carriers generally agree with the proposal or note that they
respond to consumers in a shorter time period. For example, Singapore
Airlines states that it would not oppose the Department's proposal to
provide a substantive response in 60 days if complaints are limited to
actual customers and flights to or from the U.S. Japan Airlines states
that its response time of 14 days surpasses the Department's proposal
and that it has many mediums by which passengers can contact it. Air
France notes that it tries to reply to complaints within 28 days.
Virgin Atlantic states that it already has a robust complaint handling
process and generally replies to all written complaints within 28 days
of receipt. Air New Zealand states that the suggested timeframes to
respond to complaints are generous.
    A number of carriers expressed concern regarding the definition of
a complaint. Swiss International states that complaints need to include
the passenger's name, mailing address or email address, a copy of the
ticket or boarding pass and the applicable flight number. Qatar Airways
generally supports the principles stated in the NPRM, but states that
it should only have to respond to complaints from passengers who use
its service, i.e., the definition of a complaint should be limited to a
difficulty or problem which the person experienced when using an
airline's service. Similarly, South African Airways and Condor state
the proposal as drafted is burdensome and flawed because carriers would
have to respond in 60 days to both customers and anyone else that
``attempted'' to use their service. They also note that the proposal
fails to give carriers any discretion in refusing to respond to
repetitive or frivolous complaints. With regard to complaints received
through social networking mediums, U.S. and foreign carriers and
carrier associations all oppose any mandate to communicate to
passengers through such mediums. They recommend that the definition of
complaint exclude complaints sent by passengers to carriers' Facebook
or Twitter accounts.
    The consumers and consumer groups that commented generally support
requiring carriers to acknowledge and respond to complaints within the
time frame set forth in the NPRM. Flyersrights.org states that U.S.
passengers should have an avenue to file a complaint with a foreign
carrier and to expect a timely and substantive response. CTA states
that U.S. airline customer service personnel should be responsible for
handling any foreign

alliance partner complaint and believes there should be a clear way to
contact foreign carriers through the Internet or by telephone number
provided on the homepage of the airline. Very few consumers or consumer
groups commented on the issue of complaints sent through social
networking sites. Of those that did, AAPR states that social networking
sites are not an appropriate venue for filing complaints though it
supports the requirement for foreign carriers to acknowledge a
complaint within 30 days and send a substantive response within 60
days, as does the NBTA.
    DOT Response: We have decided to require foreign carriers to
acknowledge receipt of a complaint within 30 days and provide a
substantive response to passengers within 60 days, as is currently
required of U.S. carriers. We believe that 30 days to acknowledge a
complaint and 60 days to provide a passenger with a substantive
response allows carriers adequate time to investigate and respond
appropriately. We are not convinced by arguments put forth by
commenters that suggest 60 days is not enough time to provide a
substantive response. We note that more than one carrier suggests that
60 days is a reasonable amount of time in which to respond.
    We acknowledge and agree with industry commenters that it may not
be possible in all instances to provide a final reply to a passenger
within 60 days. The rule speaks of a substantive reply, which is not
necessarily a final reply. By substantive response, we mean a response
that addresses the specific problems about which the consumer has
complained. This type of response often but not always results in a
resolution of the complaint. If a carrier is actively investigating a
complex complaint and is not able to conclude the investigation within
60 days, it is still likely to know more at the 60-day point than it
did when it acknowledged the complaint. The airline can update the
complainant with all known information prior to the 60-day mark by
sending a substantive response, continue its investigation, and
thereafter send the final reply later. Regarding carriers' suggestions
for an exception for complaints concerning unusual events such as the
Icelandic volcano, the Department believes that such an exception is
not necessary as many consumers complain about similar issues
associated with such events (e.g., delays, cancellations) and carriers
generally create form letters in which to respond substantively to most
such complaints.
    As for the definition of a complaint to which carriers must
respond, the Department continues to believe that it is important that
this definition include not just problems which a person experiences
when using an airline's services but also problems encountered by a
person attempting to use an airline's services (for example, if he or
she had problems while attempting to book or cancel a flight on the
carrier's website). Carriers are not required to respond to general
complaints from members of the public. We are requiring a carrier to
respond to complaints from individuals that had a problem when they
used or attempted to use its services. As with other portions of this
section, foreign air carriers are only required to respond to
complaints from consumers that are related to a carrier's services
being marketed in the U.S. and its flight to or from the U.S.
    We are persuaded by the commenters that the Department should not
mandate that U.S. and foreign carriers respond to complaints sent
through social networking sites. Carriers do use such sites to invite
the public to communicate with them and perhaps even to monitor public
opinion about their practices. However, we can appreciate concerns that
such sites are not intended to be a mechanism for handling individual
consumer complaints. In recognition of these somewhat competing
interests, the final rule makes it clear that U.S. and foreign carriers
need not to respond to such complaints so long as (1) the carrier's
primary page on that social networking site clearly indicates that it
will not reply to complaints filed via that medium, and (2) on that
page the carrier directs the consumer to the mailing address, e-mail
address, or website location for filing written complaints. The
Department believes this approach takes into account the difference
between social networking sites and the traditional one-on-one methods
of text communication (e.g. a letter, email, printed complaint form, or
Internet complaint form) while ensuring passengers know how to file a
complaint that will result in a response from the carrier.

6. Oversales

A. Denied Boarding Compensation Limits, Rates, and CPI-U Adjuster
    The NPRM: We proposed to increase the minimum for denied boarding
compensation (DBC) limits from the current amounts of $400 or $800
depending on the length of the bumped passenger's delay to $650/$1,300
to take into account fully the increase in the Consumer Price Index--
All Urban Consumers (CPI-U) since 1978. We also proposed to implement
an inflation adjuster for these minimum DBC limits. We sought comments
on whether the proposed increases in the DBC limits and the periodic
adjustment are called for and, if so, whether the increased amounts are
reasonable. We asked whether we should completely eliminate the DBC
limits and require carriers to pay DBC based on 100%/200% of a
passenger's fare without limit, and whether the current 100%/200%
formula (depending again on the length of the bumped passenger's delay)
should be increased to, for example, 200%/400% of a passenger's fare.
    Comments: Eighteen individuals and consumer organizations, in
addition to over 60 individuals who participated on the Regulation Room
website, provided comments on the oversales proposals. The majority of
these commenters support increasing DBC limits. Some commenters,
however, oppose calculating DBC amounts based on the passenger's fare,
arguing that it will provide carriers an incentive to bump passengers
with the lowest fare. As an alternative, one individual suggests that
DBC should be based on a fixed amount. Another commenter suggests that
DBC amounts should be based on the length of delay.
    A number of individual commenters go further by suggesting that the
Department should abandon the oversales rule and ban oversales. These
commenters reason that a ticket is a contract between a passenger and a
carrier and that when the carrier cannot honor the ticket, it should
run a bid or auction by continuously increasing the offer to volunteers
until enough volunteers come forward. Most commenters on Regulation
Room support eliminating DBC limits though a number of these commenters
support a DBC amount based on 200%/400% of the passenger's fare instead
of the current 100%/200% of the passenger's fare.
    Among the few individual commenters who oppose increasing DBC
limits, one commenter questions whether raising DBC limits would result
in the reduction of the number of passengers being bumped. Another
commenter states that increasing DBC limits to $650/$1,300 would only
benefit passengers whose fare is more than the current limits (i.e.,
$400/$800 one way). One commenter is concerned about the possibility
that in response to the raised DBC limits and amounts, carriers would
increase the required check-in time for the purpose of being eligible
for DBC.
    We also received comments on a variety of other issues. With
respect to

the proposed bi-annual adjustment on DBC amounts based on CPI-U,
Consumers Union as well as several commenters on Regulation Room
expressed their full support for the proposal. FlyersRights.org
suggests that we should declare it to be a deceptive practice to give
boarding priority to passengers who checked in later but paid a higher
fare. In addition, FlyersRights.org recommends that we ask carriers to
increase offers to passengers solicited to volunteer.
    Nine U.S. carriers and carrier associations as well as 27 foreign
carriers and carrier associations commented on the oversales proposals.
ATA states that it does not oppose the proposed increase to the DBC
limits to $650/$1,300 but questions the effectiveness of such an
increase in reducing the number of passengers being involuntarily
bumped. According to ATA, increasing DBC limits may provide incentives
to passengers who would have otherwise volunteered to hold out, hoping
to be bumped involuntarily. ATA opposes eliminating the DBC limits,
contending that DBC is meant to compensate passengers for the loss of
time only, because passengers retain the value of the fare by accepting
alternate transportation provided by carriers. Delta Air Lines does not
oppose the proposed increase of DBC limits but suggests that the new
DBC limits should not be applied to airfare purchases that occur before
the effective date of the final rule. On the other hand, the Regional
Airline Association (RAA) opposes the increase of DBC limits to $650/
$1,300, asserting that these increases far exceed the costs of most
regional airfares.
    Southwest Airlines asserts that the current 100%/200% of one-way
fare formula works well and if the Department worries about the impact
of fare unbundling practices on the DBC value, it should require that
the carriers refund all ancillary fees in the event of oversales,
instead of raising the 100%/200% rates to 200%/400%. RAA avers that the
DBC limits should be 100%/200% of the fare, and any adjustment to DBC
limits should be based on fare changes. Spirit Airlines and Virgin
America both oppose the increase of DBC limits, questioning the
economic soundness of such increases. Virgin America argues that the
new proposal is a departure from the hybrid calculation method that the
Department established in 2008. Virgin America also points out that in
2007 the Department rejected the proposal to implement a CPI-based
adjuster on the DBC limits. Spirit Airlines takes a similar position as
Virgin America and further contends that as a result of the proposal,
many consumers will be harmed by increased fares due to the windfall
that the new DBC proposal will provide to a small number of passengers.
    The majority of foreign carriers and carrier associations oppose
the proposed increase in the DBC limits to $650/$1,300. Several
commenters argue that increasing DBC limits will reduce the number of
passengers who volunteer to be denied boarding and in turn increase the
number of passengers who are involuntarily bumped, a result that is
counter to the goal of the oversales rule. Some commenters contend that
the Department has failed to provide evidence showing that the current
DBC amounts are inadequate and also failed to recognize that air fares
have decreased in ``real'' terms during the past decade. IATA and
several foreign carriers operating long haul international flights to
and from the U.S. raise the concern that passengers on those flights
will most likely get the higher limit of $1,300 in an oversales
situation due to the infrequent schedule, and these passengers,
according the commenters, will get a windfall for their mild
inconvenience. Some long haul carriers also insist that the
Department's proposal is aimed at addressing the fare unbundling
practice by most U.S. carriers and these foreign carriers' bundled
fares would be subject to inequitable and discriminatory treatment
under this proposal. IATA further comments that the proposed $1,300 DBC
limit is disproportionate to the value of time that a passenger denied
boarding involuntarily may lose due to the delay. The Air
Transportation Association of Canada and National Airline Council of
Canada, on the other hand, argue that the increased DBC limits will
penalize foreign carriers operating short flights, as these limits far
exceed the cost of air fare for those flights. IACA argues that the
proposal interferes with the European Union (EU) laws and may create
uncertainty for carriers and passengers. Several European carriers
suggest that the U.S. oversales rule should be harmonized with the EU
rule.
    The majority of foreign carrier commenters firmly oppose
eliminating DBC limits, averring that without a limit, the DBC amounts
would be exorbitant, especially for many long-haul carriers who do not
unbundle fares. Virgin Atlantic and Air New Zealand prefer a fixed
amount for all involuntary denied boarding situations, reasoning that
this approach will avoid the complexity in calculating DBC amounts
based on fares.
    Most foreign carrier commenters also oppose the CPI-based bi-annual
adjuster, arguing that air fare changes in the past are not related to
CPI. The National Airlines Council of Canada argues that the proposal
ignores the fact that fares paid by passengers are significantly lower
than what they were ten or fifteen years ago, accounting for the
inflation. Qantas and JetStar Airways state that the interval for the
CPI-U based adjuster should be every five years instead of two years to
avoid excessive administrative costs to implement the changes.
    DOT Response: With respect to the DBC limits increase, we have come
to the conclusion that the proposed $650/$1,300 amounts are not only
reasonable but also necessary. We disagree with carriers' remarks that
the increase in the DBC limits is a disincentive for passengers to
volunteer for denied boarding and will result in an increase in the
number or rate of passengers who are involuntarily denied boarding. To
the contrary, if the DBC limits are increased, carriers will have a
greater incentive to seek volunteers through increasing the value of
the compensation they offer to volunteers in order to avoid the higher
DBC payments to involuntarily bumped passengers. The ultimate result is
that involuntary denied boarding should decrease while both volunteers
and passengers who must involuntarily be denied boarding will receive
increased compensation that more accurately reflects their
inconvenience.
    Although it is our firm belief that the DBC limits at the level of
$400/$800 tend to be insufficient to compensate the passengers who are
involuntarily denied boarding for their inconvenience and loss of time,
we maintain that the basic structure of the regulatory regime for
oversales remains sound. In that regard, we are declining to adopt the
suggestion of some commenters that the Department should eliminate
involuntary denied boarding and require carriers to run auctions until
they obtain sufficient numbers of volunteers. As we have repeatedly
stated in the past, the benefits to most consumers of a well-controlled
oversales system outweigh the inconvenience experienced by a few. By
contrast, an unlimited auction system could increase the cost of
oversales to carriers to a prohibitive level, which would cause
airlines to be much more conservative in overbooking flights.
Considering the reduced schedule frequency and capacity during recent
years, such an approach would result in fewer affordable seats being
available to the public in general. Running an

unlimited auction for volunteers is both time-consuming and complex,
and requiring such a system may impose other negative impacts on all
passengers, such as causing more flight delays, increasing the number
of misconnections, and requiring earlier check-in times.
    We are also not adopting some consumer commenters' suggestion that
we should set a minimum standard for the amount of compensation offered
to passengers solicited to volunteer for denied boarding. We maintain
that other than the requirement that carriers must solicit volunteers
before bumping any passengers involuntarily, the procedures for
solicitation of volunteers and the amounts of incentive offered to
potential volunteers should remain within carriers' discretion because
this aspect of the system has worked well. The Department believes that
the involuntary DBC rates and limits set by the regulation are
effective tools to motivate carriers to offer adequate compensation for
volunteers.
    This final rule also provides that carriers must pay DBC equal to
200%/400% of the fare based on the length of delay experienced by
passengers up to the maximum of $650/$1,300. We are unconvinced by the
argument of some industry commenters that the regulatory mandated DBC
limits should not be increased because airfares have not increased ``in
real terms.'' Although the ``fare,'' in terms of the dollar amount
reflected on a passenger's ticket confirmation or ticket receipt, may
not seem to be increasing over the past decade, the actual cost for a
passenger to travel by air, however, has indeed increased. Such
increase in air travel cost is not reflected in the base ticket prices
that are used as the basis for calculating DBC amounts. The increase of
the cost to passengers is evident by the fact that a passenger now must
pay, in addition to the base airfare, for many items that were included
in the fare before the unbundling practice became widespread, such as
for checked baggage, food and beverage, in-flight entertainment,
preferred seating, advance seat selection, telephone reservations, etc.
It is the Department's view that carriers may continue to explore other
ways to further unbundle fares, thus leading to base ticket prices
staying flat or declining. The Department believes that DBC amounts
based on 100%/200% of the base fare are no longer adequate, under many
circumstances, to address the inconvenience and consequential damages
suffered by passengers who are denied boarding involuntarily,
especially passengers who purchased the most deeply discounted fares,
and who, by virtue of the low fares, are most likely to be selected as
the candidates for involuntary denied boarding. Realistic DBC rates are
also a necessary incentive to encourage careful overbooking practices
on the part of carriers. Precisely for these reasons, we are raising
the 100%/200% rates in the involuntary DBC calculation to 200%/400%. In
our opinion, this new formula, in conjunction with the raised DBC
limits of $650/$1,300, strikes a balance between permitting carriers to
continue to overbook flights, but limiting the carriers' financial
burden from compensating passengers due to oversales, and adequately
protecting passengers' interests in oversales situations.
    We are aware that the amended DBC formula and limits may have a
larger impact on carriers operating regional and international short-
haul flights, because these flights' base fares are lower in general
than the fares of long haul flights. RAA has argued in its comments
that the DBC amounts should be based on 100%/200% of the fare and that
the $650/$1,300 limits far exceed the costs of tickets on most regional
flights. Several Canadian carriers and carrier associations also
contended that the oversales rule as proposed unfairly discriminates
against carriers operating shorter flights by requiring the same limits
of compensation depending on the length of delay, regardless of the
length of the flights from which the passengers were involuntarily
denied boarding. The Department has fully considered these comments but
remains unconvinced that the consequences of our amendment would be
detrimental to these carriers. It is important to understand that the
$650/$1,300 limits come into play only when the DBC formula would cause
a passenger's DBC to exceed the limit. To the extent the fare paid by a
passenger is low, the new $650/$1,300 limits have no effect. Fares in
the $49-$59 range are still regularly sold and even under the 400%
calculation formula, the DBC amounts would not even come close to the
$800 limit under the previous rule. Furthermore, compared to long-haul
flights that are usually less frequently scheduled, regional and low
cost carriers typically have more options with regard to finding
alternate transportation in a timely fashion for passengers who are
denied boarding involuntarily. Thus, passengers on these short haul
flights often have a better chance of getting to their destination or
the next stopover without extensive delay. Consequently, regional and
low cost carriers have a better chance of limiting their DBC exposure
to the lower rate of 200% of the fare with a $650 limit.
    To ensure that there isn't any confusion as to how DBC is
calculated, we have added a definition for ``fare'' in section 250.1.
Under this definition, carriers do not need to take into account any
ancillary fees and/or charges for optional service paid by passengers
when calculating DBC amounts based on the passenger's fare. In relation
to this definition, however, we emphasize in section 250.5 that when a
passenger is denied boarding involuntarily, the carrier must refund all
unused ancillary fees paid by that passenger. Carriers do not have to
refund any ancillary fees that will be applied to the alternate
transportation to the extent those same services are provided to the
passenger. For instance, when a passenger denied boarding involuntarily
has paid for seat selection and checked baggage for the original
flight, the passenger should receive a refund for the seat selection
fee if the alternate transportation arranged by the carrier does not
allow the passenger to select his/her seat. Conversely, the carrier
does not need to refund the checked baggage fee if the passenger was
able to check in the same number of bags for the substitute flight at
no additional cost.
    We are also clarifying the meaning of the term ``minimum DBC
amounts'' in this final rule as some commenters seem to be confused by
the term. These commenters believe that the Department is mistaken in
referring in the NPRM preamble to ``minimum'' DBC amounts when it
should be referring to ``maximum'' DBC amounts. We recognize that the
source of the confusion was the term ``maximum'' used in the rule text
under section 250.5. The term ``minimum DBC amounts'' as used in the
preamble of the NPRM refers to the lowest amount of DBC that is due an
involuntarily oversold passenger when the DBC calculation based on the
passenger's one-way fare results in an amount exceeding the DBC limits
(previously $400/$800 and increased to $650/$1,300 in this Final Rule).
For example, when a passenger on a domestic flight who paid $550 one-
way for a non-stop flight is delayed for 1 hour 20 minutes due to
having been involuntary denied boarding, the initial calculation of DBC
due is based on 200% of the fare, which amounts to $1,100. However, the
maximum amount of DBC a carrier is required to pay this passenger under
our rule would be $650. We continue to use the term ``maximum'' in the
rule text. Accordingly, in order to avoid further

confusion, we have used the term ``DBC limits'' instead of the term
``minimum DBC amounts'' in the preamble of this final rule.
    With regard to an automatic inflation adjustor for DBC limits, the
Department has decided to adopt the proposed bi-annual adjustment on
DBC limits. In doing so, we note our disagreement with some carriers'
comments that such an adjuster is not justified because air fares do
not reflect changes in the CPI-U. DBC is not meant to fully compensate
passengers for the loss of transportation, because carriers are
obligated to offer alternate transportation for the passengers or
refund the passengers' fare; therefore, fare value change is not
directly relevant. DBC is meant as a form of liquidated damages to
compensate passengers for their inconvenience, loss of time, and other
incidental and consequential costs associated with the delay (e.g.,
food, lodging, ground transportation, communication etc.). To simplify
the DBC calculation and to expedite the process, the Department uses a
formula that is tied to the one-way airfare paid by the passenger,
which does not necessarily mean DBC amounts should be changed according
to the levels at which the average airfare has changed. We observe that
the costs for food, lodging and other accommodations and commodities
passengers need in an oversales situation have all increased in
correlation with inflation. In addition, as noted in the NPRM and
further discussed above, the actual total cost of flying is likely to
have increased, while what is commonly referred to as the ``fare'' may
not have increased or increased as much as a result of the carriers'
current practice of unbundling fares, i.e., charging extra for services
once provided as part of the airfare. Our decision to adopt the bi-
annual inflation adjustment provision for DBC limits is also not
contradictory to our decision made two years ago that we would take up
the issue de novo. We have indeed taken a fresh look at the issue
during this rulemaking and ultimately reached the conclusion that the
bi-annual inflation adjustment is the most efficient way to address the
impact of inflation on the DBC limits.
    We are also addressing the issue of airline travel vouchers vis-
[agrave]-vis DBC in this final rule. Carriers frequently offer free or
reduced-rate air transportation, most commonly in the form of airline
travel vouchers, to passengers denied boarding involuntarily as an
alternative to the cash or check DBC payment required by our rule. Our
previous rule required that the value of such a voucher must be equal
to or greater than the cash or check DBC payment otherwise required.
One issue we did not address in the previous rule is whether any
mandatory fees, such as service fees, that some carriers charge for
using the voucher should be taken into account when considering the
value of the benefit of the voucher offered. In this final rule, we
clarify that any fees that passengers must pay in order to use the
voucher for future travel must be considered when determining the value
of the voucher. For instance, if the cash or check DBC payment for a
passenger involuntarily denied boarding is required to be $400 under
the 200%/400% calculation, and the passenger agrees to accept a travel
voucher in lieu of that cash or check payment and there is a service
fee of $50 to redeem the voucher, the minimum voucher value that the
carrier must offer to the passenger is $450. The carrier must inform
passengers, whether volunteers or involuntarily oversold, of any
restrictions imposed on the use of the voucher. In addition, as
described in detail below, it is unfair and deceptive for a carrier to
offer a travel voucher as compensation, particularly in an oversale
situation, without advising the person to whom the voucher is offered
of any restrictions that may apply to the use of the voucher, such as
service fees to redeem the voucher, and advance notice requirements or
expiration dates.
    Finally, we have made non-substantive revisions to the text of
sections 250.5 and 250.9 in order to provide the most straightforward
explanations of the methodology applicable under different
circumstances for calculating DBC amounts. In a counterintuitive way,
the previous rule describes the maximum DBC rate (200% at that time)
and then states the circumstances under which the DBC amount will be
reduced by half. We have encountered confusion on the part of both
carriers and the public regarding this somewhat convoluted description.
In this final rule, we discuss the DBC calculation for domestic flights
and for international flights separately. In each category, we specify
the amounts of DBC required under each of the three circumstances based
on the length of delays incurred by a passenger using alternate
transportation due to the involuntary denied boarding: no compensation;
200% of the fare subject to the $650 limit; and 400% of fare subject to
the $1,300 limit. These categories and classifications are summarized
in the two tables that we added in the written notice that carriers
must provide to passengers who are denied boarding involuntarily and to
anyone else upon request. These tables are meant to be used by carriers
as a quick reference to assist bumped passengers so they can better
understand the DBC limits and calculations when those passengers may be
confused and under time pressure during an involuntary bumping
situation.
    We have also added a definition for ``alternate transportation'' in
section 250.1 to capture the two components of this term. The first
component is what was described as ``comparable air transportation''
under the previous rule. In order to qualify as ``alternate
transportation'' and consequently allow the carrier to limit its DBC
exposure to less than the 400% rate, any air transportation offered to
passengers involuntarily denied boarding as a substitute for the
original flight must be operated by a carrier as defined in Part 250,
i.e., a U.S. certificated or commuter air carrier or a foreign carrier
that has been duly authorized by the Department to operate scheduled
air services. Thus, if the carrier offered a substitute flight operated
by an air taxi operator that is not a commuter carrier, that flight
would not qualify as ``alternate transportation.'' Furthermore, in
order to qualify as ``alternate transportation'' carriers must offer a
confirmed reservation on that alternative flight. The second component
of the concept of ``alternate transportation'' includes non-air
transportation (such as bus, rail, or taxi) and air transportation that
does not meet the definition above of ``alternate transportation''
arranged by the carrier. In order for these modes of transportation to
qualify as ``alternate transportation,'' the carrier must obtain the
passenger's consent that the passenger will accept the proposed form of
transportation in lieu of air transportation. To further explain the
concept and application of ``alternate transportation,'' we emphasize
that carriers are free to offer substitute transportation that does not
meet the definition of ``alternate transportation'' in this rule (e.g.,
a flight on an air taxi that is not a commuter carrier, transportation
on a scheduled flight without a confirmed reservation, or on a charter
flight, or surface transportation), but the bumped passenger has ``veto
rights'' over such arrangements. If the bumped passenger declines this
``non-alternate'' transportation, he or she is due DBC at the 400% rate
because the carrier did not offer ``alternate transportation'' as
defined in section 250.1. However, if the passenger chooses to accept
the carrier-offered transportation that does not

qualify as ``alternate transportation,'' the carrier is free to avail
itself of the lower 200% DBC rate in the case of rerouting within 2/4
hours, and need not pay DBC at all if the non-alternate transportation
accepted by the passenger will arrive at the passenger's destination
less than one hour after the planned arrival time of the passenger's
original flight. The passenger has no such veto right over ``alternate
transportation.'' If the carrier offers alternate transportation and
the passenger declines it, the carrier is still free to limit DBC to
200% or zero as applicable.
    Also in section 250.1, we have deleted the definitions for ``sum of
the values of the remaining flight coupons'' and ``comparable air
transportation'' as these terms are no longer used in the rule text.
B. Zero Fare Tickets
    The NPRM: We proposed to clarify in the rule text that DBC must be
offered to ``zero fare ticket'' holders who are involuntarily denied
boarding. We asked the public to comment on whether these passengers
should be protected by the oversales rule, and whether the proposed
calculation method for their DBC amounts is reasonable (i.e., the
``passenger fare'' for purposes of DBC would be the fare of the lowest
priced ticket paid for a comparable class of ticket on the same
flight). We also invited the public to suggest any alternative method
of establishing denied boarding compensation for zero fare ticket
holders, including whether we should allow carriers to compensate these
passengers using the same ``currency'' (e.g., frequent flyer miles or
vouchers) in which the tickets were obtained.
    Comments: The individual and consumer organization commenters
generally support affording zero fare ticket holders who are
involuntarily denied boarding the same protection and rights as
passengers with other tickets. Regarding the form of compensation, some
commenters suggest that compensation may be in the same form of
``currency'' as that was used in acquiring the tickets; others are in
support of the Department's proposal, i.e., providing zero fare tickets
holders DBC in the form of cash or check based on the lowest fare paid
for a ticket on the same flight for a comparable class of service. Some
commenters support payment in either form.
    The majority of the industry commenters do not oppose applying the
oversales rule to zero fare ticket holders who are involuntarily denied
boarding. However, these commenters are adamant that zero fare tickets
covered under the oversales rule should not include non-revenue tickets
such as airline employee passes. With respect to the form of DBC
payment to zero fare ticket holders, several commenters are in support
of compensating those passengers in the same form of ``currency'' that
they used to acquire the tickets. ATA state that carriers should have
the discretion to pay DBC in the same form of ``currency,'' in travel
vouchers, in cash/check, or in any combination thereof. ATA reasons
that a mandatory cash payment requirement would create problems for
carriers because gate agents cannot assign a cash value to the
passenger's fare as they do not have information on the lowest
comparable fare sold on the same flight. On similar grounds, the
National Airlines Council of Canada avers that it is virtually
impossible to figure out the value of a ticket in the comparable class
of service ``on the spot'' as it is subject to a wide range of
variables.
    JAL opposes the inclusion of zero fare ticket holders under the
oversales rule, stating that it should be left to a carriers'
commercial judgment as to whether to compensate zero fare ticket
holders; JAL further states that the Department should not assume that
carriers' decisions would be adverse to passengers' interests. Also in
opposition to the proposal, South African Airways states that such a
requirement would drastically reduce the carriers' ability to offer
zero fare tickets.
    DOT Response: The majority of commenters from both consumer and
industry representatives seem to agree that certain types of zero fare
ticket holders should be compensated when they are denied boarding
involuntarily in an oversale situation. The Department agrees with most
industry commenters that compensable zero fare tickets should exclude
``non-revenue'' tickets as that term has traditionally been used in the
industry. In that regard, we have added a definition in the final rule
that defines ``zero fare tickets'' to cover only tickets acquired with
frequent flyer miles and airline travel vouchers, as well as
consolidator tickets that are purchased with money but do not display a
dollar amount on the ticket. In our view and the view of most
commenters, zero fare ticket holders provided something of value in
exchange for their air transportation and when they are bumped, they
should be compensated. The Department also wishes to point out that,
for most non-revenue tickets such as airline employee and employee
family travel vouchers, the terms and conditions accompanying these
tickets have already explicitly excluded them from any compensation for
involuntarily denied boarding. We note that under the definition of
``zero fare ticket,'' a passenger who paid a nominal monetary amount in
connection with a ticket may still qualify as a zero fare ticket
holder. Therefore, a carrier must in those cases treat a passenger as a
zero fare ticketholder even if the passenger's fare is not ``zero'' in
a literal sense, e.g., where the passenger has paid by cash or credit
card the requisite taxes or ``processing fees'' and ``service fees''
for the redemption of travel vouchers or frequent flyer miles. On the
other hand, if a passenger has paid substantial monetary value for the
air transportation, e.g., paid cash for an economy class seat and used
frequent flyer miles to upgrade to a business class seat, this
passenger should not be treated as a zero fare ticket holder if bumped
from the flight and the amount of DBC the passenger receives should be
based on the economy class fare paid by that passenger. However, the
carrier must credit the amount of frequent flyer miles used for an
upgrade back to the passenger's account if any substitute
transportation provided is not in the class of service that he or she
used the frequent-flyer miles to acquire.
    With respect to the form of DBC for zero fare ticket holders, some
consumer commenters urge the Department to require all DBC to be paid
in cash or check while many industry commenters either oppose paying
DBC to zero fare ticket holders or at a minimum, argue that the
Department should allow those passengers to be compensated by means
other than cash or check. The Department has fully evaluated the
reasons presented by the carriers for why we should not mandate cash or
check DBC payments to zero fare ticket holders, but we have decided to
apply the same DBC standard by requiring carriers to offer DBC to these
passengers in the form of cash or check. DBC in non-monetary forms such
as frequent flyer miles would not compensate a passenger for food,
lodging and other expenses that may be associated with delays caused by
the denied boarding. Furthermore, we reject some commenters' notion
that requiring carriers to pay cash to these passengers may result in
harm to consumers, such as making frequent flyer tickets more expensive
and restrictive for consumers. We note that under section 250.5(c),
carriers may offer free or reduced rate air transportation to any
involuntarily bumped passengers, including zero fare ticket holders, in
lieu of cash payment. Carriers should not assume that zero fare ticket
holders would almost always opt to receive cash or check

compensation, as the cash or check DBC amount is calculated with the
lowest comparable fare as the base amount. We also disagree with some
carriers' suggestion that procedurally paying DBC in cash or by check
based on the lowest comparable fare is unworkable because the gate
agents may not have the lowest fare information ``on the spot.'' Just
as is permitted for DBC payment to passengers who purchased their
tickets with money, carriers are being afforded up to 24 hours after
the involuntary denied boarding occurred to tender a check to the
affected passengers. We believe the 24-hour window is sufficient for
the carriers to obtain necessary fare information and calculate the
appropriate DBC amount for the zero fare ticket holders.
    In calculating the DBC amounts for zero fare ticket holders, we
clarify in the rule text as well as here that the applicable lowest
comparable fare paid by cash, check, or credit card refers to the fare
in the same class of service as the zero fare ticket. By adding a new
definition for ``class of service,'' we explain that we are referring
to the lowest fare within the same service class or cabin such as first
class, business class, economy/coach class, or economy plus (premium
economy) class. For instance, when a passenger holding a zero fare
ticket in economy plus class is bumped, as the base fare for DBC
calculation purposes, the carrier should identify the lowest fare paid
by cash, check, or credit card in the economy plus class on that
flight, not the economy class.
C. Disclosure Requirements
    The NPRM: In the NPRM we proposed to require that (1) carriers
offer cash/check DBC options verbally if they verbally offer a travel
voucher as DBC to passengers who are involuntarily denied boarding, and
(2) carriers inform passengers solicited to volunteer for denied
boarding about their principal boarding priority rules applicable to
that specific flight, the availability of alternate transportation, and
all material restrictions on the use of any transportation vouchers
that may be offered as compensation for giving up the passenger's
reservation. We asked whether there are any other forms of disclosure
that may better inform passengers being solicited to volunteer or those
involuntarily bumped of their rights and carriers' obligations.
    Comments: Most consumer advocacy groups and associations support
imposing more disclosure rules regarding oversales. CTA proposes more
disclosure to passengers solicited as volunteers, such as informing
them of the oversales rule in writing and orally prior to the
negotiation, and providing them information on whether they will
receive confirmed seats and when they are expected to arrive at the
destination on the alternative flight. CTA also recommends that
carriers provide their boarding priority rules to the passengers when
soliciting volunteers. FlyersRights.org suggests that carriers should
be required to publish their principal boarding priority rules on their
websites and inform passengers of their risks of being bumped before
ticket sales. Comments posted on the website of Regulation Room
generally support our proposal of requiring carriers to verbally inform
passengers of the cash or check option for DBC payment if carriers
verbally offer these passengers travel vouchers as DBC. These
commenters also support the proposal that both passengers solicited as
volunteers and passengers denied boarding involuntarily should be
clearly informed of their options, the amount of compensation they can
receive, and details of alternative flights. They also recommend
enhancing disclosures regarding oversales prior to and at the time of
ticket sales, such as requiring carriers to ask whether a passenger is
willing to be bumped at the time of making the reservation and to
provide notice to all passengers 24 hours before the departure if the
flight is oversold.
    ASTA supports the idea of disclosing oversales rule at the time of
ticket purchase and advising passengers of the risk involved if they do
not secure a seat assignment. ASTA also recommends that carriers be
prohibited from ``gaming the system'' by making it impossible to obtain
seat assignments. ASTA points out that all disclosures regarding
oversales should be made earlier because providing an explanation to
passengers at the gate is time consuming and it may create chaos and
passenger confusion.
    Most carrier and carrier association commenters oppose all the
proposed verbal disclosure requirements. These commenters are generally
concerned about the additional time they assert would be needed for
gate agents to comply with the various verbal notification
requirements, arguing that these requirements would impose hardship on
the agents who are under time pressure to board passengers and close
out the flight. These commenters also contend that this information is
available in the written notice and assert that verbal notification is
not necessary and may be hard to enforce. Some carriers also point out
that if the gate agents are not familiar with the oversales rule,
verbal notification may result in inaccurate or incomplete information
being passed on to consumers, causing further confusion.
    DOT Response: As we have stated in the NPRM, we believe disclosure
in an oversales situation is essential for the passengers to fully
understand their rights and options. After thoroughly evaluating all
the comments, we have decided to adopt some but not all of our
proposals in this regard. We will discuss each proposal individually.
    With respect to the requirement that carriers must verbally offer
the cash option when they verbally advise passengers bumped
involuntarily that a carrier voucher as a form of DBC is available, we
have reached the conclusion that this requirement is in fact critical
to ensuring that passengers are fully informed when they are given the
opportunity to choose what form of DBC they are willing to take.
Although the cash option is clearly stated in the written notice that
carriers are required to provide to passengers denied boarding
involuntarily, it is likely that due to the time pressure and
occasional confusion associated with involuntarily denied boarding,
passengers may not have the opportunity to fully review the written
notice before they choose the form of DBC that they are willing to
accept. Thus, it is the Department's view that when carriers verbally
offer a voucher option but omit (either inadvertently or intentionally)
mentioning the cash option, it is unfair and deceptive to the
passengers. Furthermore we consider that to the extent carriers are
willing to explain to passengers their option of receiving carrier
vouchers as DBC payment, the additional time needed to add a few words
about the cash/check option should not be substantial. In any event, if
carriers are concerned about the additional time needed to verbally
inform passengers of all options, it is permissible to not verbally
advise passengers of DBC options at all. They can simply hand the
passengers a written notice.
    On similar grounds we have decided to adopt the proposed
requirement that carriers must disclose any material restrictions on
airline travel vouchers offered to both passengers solicited to be
volunteers and passengers denied boarding involuntarily. Some carriers
argue that the process of informing passengers is too time-consuming.
The Department disagrees although we note that the more time-consuming
such a notice is, the more restrictions must apply to the voucher,
necessitating more than ever that notice of such restrictions be
provided. To provide a brief summary covering all the material

restrictions on vouchers should not take more than a few moments. For
example, when the carrier announces at the gate that it needs
volunteers who will receive a roundtrip voucher for any destination
within the continental U.S., to add a description of conditions on the
use of vouchers such as ``the vouchers are not transferrable, subject
to certain blackout dates and service charges and will expire after two
years * * *'' would not require more than a few moments, and carriers
may encourage anyone who wants to learn more details to speak to the
gate agent directly. Typical examples of material restrictions and
conditions are expiration dates, blackout dates, advance booking
requirements, transferability restrictions, administrative fees and
flight choice restrictions. We emphasize that this is not an exhaustive
list and by the term ``material'' we refer to all the restrictions and
conditions that might reasonably be expected to affect a passenger's
decision regarding whether to accept the voucher.
    Since the substance of any restrictions and conditions on the
airline vouchers varies by carrier and is not incorporated in the
general written notice mandated by section 250.9, we require that any
verbal offer of a travel voucher by carriers, either to passengers
solicited to volunteer or to passengers denied boarding involuntarily,
must be accompanied by a verbal explanation of any material
restrictions and conditions imposed on that voucher. In the event
carriers make a written offer of travel vouchers, but no verbal offer,
carriers should provide a written explanation of the restrictions and
conditions on travel vouchers, along with the general written notice
required by section 250.9.
    In adopting these disclosure requirements, we clarify that we do
not intend to require carriers to give every passenger who is in danger
of being denied boarding involuntarily a ``personal presentation'' of
their rights. The Department's goal is to ensure that when carriers opt
to verbally provide any information to the passengers, the information
is not presented in a misleading manner regarding any material terms.
    In the NPRM, we also proposed to require carriers to inform
passengers solicited to volunteer of their principal boarding priority
rules and the availability of comparable air transportation. Our
intention in proposing these two requirements was to provide passengers
more information upon which they would be able to determine whether
volunteering to give up their confirmed reservations would be in their
best interests. After considering all the comments in this regard, we
are convinced that these proposals, as well as some other disclosure
measures not proposed by us but recommended by consumer commenters, may
not achieve the expected goal. Although we disagree with some carriers'
comments that providing such information will only assist some
passengers to ``game'' the system to the detriment of the majority of
other passengers, we note that providing such information at the gate
is time consuming and carriers' principal boarding priority rules can
be found in the written notice prescribed in section 250.9, as well as
on most carriers' websites and/or in the contracts of carriage. We
conclude that the burden on carriers of verbally providing such
information at the boarding gates outweighs the benefits. Furthermore,
we reject some commenters' suggestions that all passengers should be
informed of the carriers' principal boarding priority rules and whether
a particular flight was oversold at the time they make their
reservations. We note that oversales might not occur until close to the
departure time or date and, due to no-shows, many overbooked flights
will not be oversold on the day of departure. We believe requiring
carriers to provide these two types of information through their
reservation systems may not be beneficial to consumers yet will
increase the operational costs of carriers, depress revenues and limit
seat availability. These costs and restrictions ultimately will be
borne by the consumers.
    Related to the boarding priority rule disclosure proposal,
FlyersRights.org and some other consumer commenters also suggested that
we should not allow carriers to set their boarding priority rules based
on the amounts of passengers' fares. FlyersRights.org went further to
urge the Department to declare that bumping a passenger who checked in
earlier but who paid a lower fare is an unfair and deceptive practice.
We cannot agree. With the exception of unlawful discrimination, the
Department has traditionally allowed carriers extensive flexibility to
set their boarding priority rules based on several criteria, including
passengers' fares. We believe affording carriers such flexibility is an
important marketplace tool and permits carriers to proactively control
the costs of oversales so they are able to continue to offer the
maximum numbers of seats to the traveling public. It makes perfect
sense that passengers who pay more for a ticket to get the last
available seat and the right to obtain a full refund also want to be
assured that they will be the last person to be bumped from an oversold
flight. We do agree that passengers seeking the lowest fare on a flight
are most likely budget-conscious consumers and are most likely to be
the ones bumped by some carriers. In this final rule, we have adopted
provisions to increase the DBC limits and rates based on the
passengers' fare which should help them.
    With respect to the proposal to require disclosure of the
availability of alternate transportation at the time of volunteer
solicitation, we have come to the conclusion that such a requirement is
unworkable under most circumstances. The availability of alternate
transportation is a fluid issue and is subject to many variables. Due
to these variables, what carriers may offer at the time of volunteer
solicitation could change by the time the alternate transportation is
provided to the volunteer. Should such change occur, the expectation
created by the earlier information may cause passengers further
confusion and frustration. Thus, we are not going to require such
information to be provided at the time of volunteer solicitation.
D. Covered Entities and Other Miscellaneous Issues
    The NPRM: The oversales rule currently covers scheduled passenger
service using aircraft with 30 or more seats. We solicited comments on
whether the oversales rule should be expanded, either in its entirety
or partially, to cover scheduled services using aircraft with 19-29
seats and whether we should allow these flights to be oversold at all.
    Comments: CTA believes that the oversales rule should apply to all
flights of major carriers, regardless of the size of the aircraft.
Comments from RegulationsRoom.org generally support applying the
oversales rule to all aircraft sizes. Some of these commenters urge the
Department to ban oversales on small aircraft, arguing that being
bumped from those flights is more disruptive and costly to passengers.
ASTA supports extending the oversales rule to aircraft with 19-29
seats, stating that involuntary denied boarding on short-haul flights
operated by small aircraft has drastic effects on passengers who are
connecting to long-haul flights and these passengers are often
surprised after being bumped to discover they have no protection from
the Department's oversales rule.
    On the carriers' side, ATA supports maintaining the status quo,
i.e., allowing overbooking on flights operated with aircraft with 19-29
seats and not applying the oversales rule to

these flights. ATA argues that banning oversales on these flights will
threaten the existence of small community air services and imposing the
oversales rule on these flights would be too costly to carriers. RAA
also opposes banning oversales on regional flights, arguing that such a
ban would eliminate the ability of carriers to serve small communities,
as carriers would not be able to bear the costs of running flights with
empty seats. RAA also contends that the denied boarding risk is low on
regional flights operated by small aircraft because regional carriers'
load factors lag behind large aircraft operators.
    DOT Response: The Department has been persuaded that it should not
extend the oversales rule to flights operated with aircraft with 19-29
seats. Aircraft of this size make up a small and diminishing portion of
scheduled-service operations, particularly in the case of the code-
share partners that were the predicate for this proposal. After being
bumped from a short-haul segment, the cost of paying DBC based on the
fare to a passenger's downline destination -- up to 400% of the fare
and $1,300 under the final rule -- would be an unreasonable burden for
operators of 19-29-seat aircraft. These carriers are most likely to be
the very small entities to which the Regulatory Flexibility Act
requires federal agencies to afford special consideration in
rulemaking. Based on similar rationale, we have also decided that it is
not in the best interests of the public to ban oversales on these
flights because doing so will further reduce the capacity of flights
serving smaller airports and communities and cause price increases.
    Although not proposed in the NPRM, there are several issues raised
by the commenters that the Department feels it is important to address
in order to clarify what appears to be confusion associated with the
oversales rule. First, several foreign carriers urge the Department to
harmonize its oversales rule with the rules of other jurisdictions,
such as the European Union. The Department agrees in principle that the
U.S. oversales rule should not conflict with the rules of other
jurisdictions. The Department has worked diligently to that end, and
sees no direct conflict between our oversales rule and the rules of
other jurisdictions. We disagree with some commenters' claim that the
rule as proposed and finalized here will cause confusion among carrier
staff and passengers. With respect to both domestic and international
flights, the U.S. rule applies only to denied boardings that occur at a
U.S. airport, a relatively straightforward applicability standard that
is similar to the approach taken in the EU oversales rule for flights
of non-EU carriers. Thus, passengers are clear that when they are
denied boarding at a U.S. airport, the U.S. oversales rule applies. The
carriers have the responsibility to train their staffs to be familiar
with rules of the jurisdictions to and from which they operate. We note
that the EU oversales rule has an exception for denied boardings that
are subject to compensation requirements of other jurisdictions. To the
extent that flights of EU carriers from the U.S. to an EU state may
also be subject to the EU oversales rule, those carriers should be able
to comply with both the U.S. and EU rules (e.g., by paying the higher
compensation amount if the required amounts differ).
    CTA and FlyersRights.org both suggest that the Department should
not exempt carriers from complying with the oversales rule when the
involuntary denied boarding is caused by an equipment change due to
factors that are within carriers' control, e.g., crew schedule or
maintenance issues. We have carefully examined this suggestion but are
not convinced that this proposal is consistent with the underlying
rationale of our oversales rule. The Department's longstanding policy
of exempting carriers from paying DBC when an involuntary denied
boarding was caused by equipment change is based on the grounds that in
this situation, the resulting denied boardings were not caused by
overbooking, a practice that absent compensation is fundamentally
unfair to the passengers who have paid for confirmed seats but are not
permitted to board the flight because their promised seat was sold to
another person. Accordingly, we will not change our rule involving
oversales that result from substitution of equipment of lesser
capacity.
    Also raised by several foreign carriers is the issue of an
alternative to ``cash'' payment of DBC. These carriers are under the
impression that in order to comply with our rule, they must keep a
large amount of cash (currency) at the U.S. airports they serve for the
purpose of making cash payments to passengers denied boarding
involuntarily. These carriers assert that such a cash reserve at their
stations in U.S. airports, many of which are staffed by third-party
contractors, imposes security concerns. Thus, these carriers urge the
Department to allow them to tender DBC payments to passengers in the
form of a debit card or other forms of electronic funds. The Department
wishes to clarify that under our rule, carriers are permitted to tender
a check, in lieu of cash payment, to passengers denied boarding
involuntarily, and to do so up to 24 hours after the denied boarding
occurred. The check may be mailed to the address that a passenger has
provided. Therefore, it is not required that carriers maintain large
amounts of cash at airports. We acknowledge the convenience and
security features offered by electronic funds, but have not had the
opportunity to fully examine the benefits and limitations of using this
procedure as an alternative to cash/check DBC payments in this
rulemaking proceeding. We may further explore this issue in future
rulemaking.
    Finally, we have decided not to adopt Delta's recommendation that
the revised oversales rule should be applied only to tickets purchased
on or after the effective date of the final rule. Such application
would inevitably result in the situation where passengers bumped from
the same flight will be subject to different rules. Additional delays
may occur at the boarding gates when the gate agents have to spend
additional time to determine the purchase dates of the tickets in order
to determine which rule applies. For this reason, we will require that
all denied boardings and other DBC-related processes covered by this
rule that occur on or after the effective date of the final rule must
comply with the new rule, regardless of the transaction dates of the
ticket sales.
    We note that this final rule also includes a technical amendment
concerning reporting of oversales. We are correcting a technical
inconsistency in the oversales reporting requirements in section
250.10. One sentence in that section states ``The reporting basis shall
be flights originating or terminating at or serving, a point within the
United States.'' The last sentence of that section reads: ``No reports
need be filed for inbound international flights on which the
protections of this part do not apply.'' Apparently, when the rule was
amended many years ago to remove applicability to international flights
inbound to the United States, the second sentence quoted above was
added but the first sentence was not revised to remove the reference to
flights ``terminating in'' or ``serving a point within'' the United
States. The intent and the practice has been not to include
international flights that terminate in the U.S. (i.e., inbound
international flights) in these Form 251 data. This has been clear in
paragraphs (A) and (E) in the instructions to the form (see http://www.bts.gov/programs/airline_information/forms/pdf/form_251.pdf). We
are not aware of any instances in which data for inbound international
flights have been

inadvertently included in Form 251 reports.

7. Full Fare Advertising

A. Change in Enforcement Policy
    The NPRM: The Department's price advertising rule (14 CFR 399.84)
states that any advertised price for air transportation, an air tour or
an air tour component must be the entire price to be paid by the
customer for that transportation, tour or tour component. However, the
Department's enforcement policy with regard to this rule has permitted
sellers of air transportation to state separately from the advertised
price government-imposed taxes and fees, provided that they are not ad
valorem in nature, are collected by the seller on a per-passenger
basis, and their existence and amount are clearly indicated in the
advertisement so that the consumer can determine the full price to be
paid. The Department has prohibited sellers of air transportation from
breaking out any other seller imposed fees, including fuel surcharges
and service fees, and taxes imposed on an ad valorem basis.
    In the NPRM, the Department proposed enforcing the price adverting
rule as it is written. This proposal would change the existing
enforcement policy by ending the practice of permitting sellers to
exclude government taxes and fees from the advertised price, and would
instead require that the price advertised include all mandatory fees.
The Department invited comments on how sellers of air transportation
foresee this change in enforcement policy affecting the methods they
use to advertise fares and how consumers view the change. The
Department also requested comment on the potential cost of changing the
current advertising structures that carriers and ticket agents have in
place in order to adhere to the proposed policy shift.
    Comments: Individuals and consumer organizations such as
Flyersrights.org, in addition to individuals who participated on
Regulation Room, support the proposal that advertisements for air
transportation state the total price to be paid by the consumer. Some
commenters participating in discussions through Regulation Room
reported that there were occasions when they thought they were going to
pay one price for air transportation, but the final price was much
higher due to additional taxes and fees. Regulation Room commenters
also stated that the current advertising method borders on bait-and-
switch tactics. Some individual commenters expressed similar
sentiments, noting how they have been surprised by the total amount to
be paid at the end of a purchase online and their preference to know
the total amount to be paid earlier. Some consumers and consumer groups
go further by suggesting that the Department should require that the
true cost of travel, including ancillary fees, be disclosed earlier in
the booking process. For example, CTA states that even if the price
advertising rule requires the disclosure of all mandatory fees,
consumers may still have trouble finding out the true cost of travel
due to the proliferation of many kinds of ancillary fees for optional
services.
    U.S. carriers and carrier associations generally oppose the
Department changing its enforcement policy to enforce the full price
advertising rule as written. ATA states that its members support fare
transparency, but notes that the Department declined to revise its
full-fare rule four years ago and contends that the airfare advertising
landscape has not changed since that time in a manner that would
justify a change in 25 years of enforcement policy. ATA notes that
several other industries advertise without including government-imposed
taxes and fees, and states that the air transportation industry should
not be treated differently. It asserts that this policy shift would
suppress valuable information to consumers about how much of their
total price consists of government-imposed taxes and fees. In addition,
ATA argues that this policy shift would negatively impact competition
because government-imposed taxes and fees vary from airport to airport
and routing to routing. ATA contends that this means that an airline
that has a competitive fare, but also has a routing that subjects the