DOT considering whether to increase denied boarding compensation

Way back in 1978, the CAB increased to $400 the maximum amount of compensation due from an airline that involuntarily denies a passenger boarding due to overbooking.  At the time of the increase, Jimmy Carter was president and the most popular TV show in the U.S. was “Laverne & Shirley” (followed closely by “Happy Days” and Three’s Company”).  On July 10, 2007, DOT issued an advance notice of proposed rulemaking seeking comment on whether it should increase the $400 limit, as well as make its denied boarding compensation regulations apply to aircraft seating 30 to 60 passengers, which are currently exempt from such regulations.

The regulations regarding “oversales” are set forth in 14 C.F.R. Part 250.  They apply to both domestic and foreign airlines but only to flights originating in the U.S. (and utilizing aircraft with more than 60 seats).  If a flight is oversold, the airline is required to seek volunteers willing to accept compensation in exchange for their seats.

If the airline needs to bump passengers, each bumpee is entitled to compensation “at the rate of 200 percent of the sum of the values of the passenger’s remaining flight coupons up to the passenger’s next stopover, or if none, to the passenger’s final destination, with a maximum of $400.  However, the compensation shall be one-half the amount described above, with a $200 maximum, if the carrier arranges for comparable air transportation, or other transportation used by the passenger that, at the time either such arrangement is made, is planned to arrive at the airport of the passenger’s next stopover or if none, at the airport of the passenger’s destination, not later than 2 hours after the time the direct or connecting flight on which confirmed space is held is planned to arrive in the case of interstate air transportation, or 4 hours after such time in the case of foreign air transportation.”  The bumped passenger is also entitled to a refund of the unused portion of the ticket.

A passenger is ineligible for denied boarding compensation under certain circumstances, most notably when “the passenger does not comply fully with the carrier’s contract of carriage or tariff provisions regarding ticketing, reconfirmation, check-in, and acceptability for transportation.”

Last year, the 18 largest U.S. airlines bumped at a rate of 1.01 passengers per 10,000 enplanements, resulting in a total of 55,828 bumped passengers.  Comments to DOT are due by September 10, 2007.

Note:  As one commenter on this post correctly pointed out, if a bumped passenger declines the airline’s payment of denied boarding compensation, “the passenger is entitled to ’seek to recover damages in a court of law or in some other manner’ under 14 C.F.R. § 250.9(b), which language is universally regarded as permitting a claim for contract damages which may exceed the amount of compensation offered by an airline.”  Stone v. Continental Airlines (N.Y. City Civ. Ct. 2005).  Section 250.9(b) also provides that acceptance of the denied boarding compensation “may relieve [the airline] from any further liability to the passenger caused by its failure to honor the confirmed reservation.”

Tardy passengers’ state common law “bumping” claims held preempted

Igwe v. Northwest Airlines, Inc. and KLM Royal Dutch Airlines (S.D. Tex. Jan. 4, 2007).  Because the passengers failed to check in at the gate counter in a timely manner, KLM gave their seats to other passengers.  The passengers were “irate” and refused the airline’s offer of transportation on a later flight on a different airline (plus two $500 credit vouchers).  Instead, the passengers bought tickets on a different airline (on an even later flight).

The passengers filed a lawsuit in which they alleged an array of state common law causes of action.  In its summary judgment motion, KLM contended that these claims were preempted by the Montreal Convention because its Article 19 provides the exclusive remedy for delays in international air transportation.  The critical question was whether the passengers’ ”bumping” claims were for contractual non-performance and thus not covered by the Convention (as the passengers argued) or for delay and thus covered by the Convention (as the airline argued).

When the “bumping” airline proves that the passenger refused the airline’s reasonable offer of alternative transportation, the passenger’s lawsuit begins to emit a “giant sucking sound.”  Hearing that sound, the court held that the passengers’ bumping claims were for delay, and thus preempted by the Convention, because the passengers had repudiated the airline’s effort to perform its contractual obligations.  The court also noted that even if the passengers’ claims were not preempted, they still failed because “[a]ll of [the passengers'] troubles were the direct result of their own tardiness.”  Accordingly, the court granted KLM’s summary judgment motion.