Bumped Fliers May Get a Better Deal *WSJ*

  1. So have you ever been bumped from a flight? Here's the article from the Wall Street Journal.

    Regulators may change how much airlines must compensate fliers when they're bumped from flights. Among the proposals:
    • Adjusting the current caps ($200 or $400) for inflation since 1978 (when they were instituted) -- bringing them to about $624 and $1,248.
    • Tying an increase to the rise in airfares -- bringing them to about $290 and $580.
    • Eliminating caps and forcing airlines to pay the full value of a flier's ticket.
    Also under consideration: doubling the caps; eliminating the caps, or leaving them as is.

    Bumped Fliers May Get a Better Deal
    As Overbooking Worsens, Transportation Department
    Weighs Raising the Compensation for First Time in 29 Years
    July 24, 2007; Page D1

    For the first time in 29 years, the Department of Transportation is considering raising the compensation that airlines have to pay customers bumped from overbooked flights.

    The federal agency is asking travelers to weigh in on the issue and will take comments from the public until Sept. 10. After that, it will propose a new rule, which would likely be effective next year.

    Airline bumping, when passengers with confirmed reservations get left behind because of overbooking, is on the rise. In the first quarter this year, 1.45 of every 10,000 passengers were involuntarily bumped from flights on U.S. airlines, up 11% from 2006. That's a higher rate than even the late 1990s when airline service deteriorated under crowded flights and long delays, and the increase caught the DOT's attention.

    "This year things have really gone in a different direction, and this is one of several consumer issues we're dealing with," said Andrew Steinberg, the DOT's assistant secretary for aviation and international affairs. Among the issues under study: congestion, delays, and passengers kept on grounded planes for extended periods.

    With all the delays, cancellations and disruption of this summer, overbooking becomes a bigger problem for travelers. Flights are full and passengers with tickets but not seats on a flight may end up competing for seats with people from canceled or delayed flights. The competition for boarding passes grows more intense.

    One factor in overbooking is that the penalty for airlines is small, yet the inconvenience to travelers can be huge. In fact, overbooking can often be a bit of a windfall for an airline. Sell an expensive last-minute ticket on a full flight to a business traveler and then bump a cheap-fare vacationer, and the airline increases revenue because the compensation paid to the vacationer is so small.

    Under current rules -- which were set in 1978 -- consumers can get a maximum compensation of just $200 if the passenger gets re-accommodated on a flight that is scheduled to arrive within two hours of the original arrival time for domestic trips or four hours for international flights. If the passenger gets rebooked on flights that can't meet the two-hour domestic or four-hour international window, the compensation jumps to a maximum of $400. (The airline has to compensate an involuntarily bumped passenger with 100% of the value of his or her ticket for that flight -- the one-way portion, not round-trip -- but only as much as the maximum cap.) If you agree to voluntarily give up your seat, you will likely get the compensation in the form of a voucher for future travel. But if you're bumped involuntarily, you can demand cash.

    The DOT has been under pressure to raise the caps as overbooking worsened in the past year. Earlier this month, the DOT proposed several options, including raising the caps to fully account for inflation or just eliminating them, forcing airlines to pay the price of the ticket, no matter how expensive.

    Already, some travelers who have heard about the proposal have fired off comments to the DOT, all expressing anger and outrage at overbooking.

    "Where else do you get to do this? A theater can't sell 20 more seats than it really has," said Louise Helland of San Martin, Calif., still angry about being bumped from a flight from Boston with an infant in her arms 16 years ago. "The cost to them doesn't equal the inconvenience to passengers," she said in an interview.

    Dan Hepler, a retiree in Pittsburgh, urged the DOT to eliminate overbooking, period. "It's like a giant sword hanging over the heads of travelers," he said in an interview.

    John Negron, a frequent business traveler from New York, also hates overbooking because flights are often delayed while gate agents try to enlist volunteers to give up seats. "You've got a confirmed ticket and they try to take it away. The practice should be limited at best, and they should be made to pay," he said.

    There is some benefit to consumers in airline overbooking. By selling more seats than are actually on a particular plane, airlines can accommodate customers otherwise left behind. A last-minute traveler who might be told the flight is sold out if airlines didn't overbook can, in fact, get onboard. That's because people still don't show up for flights, even though most airline tickets these days are nonrefundable, or jump on different flights. By selling more tickets than there are actual seats on the plane, the DOT says overbooking probably helps hold down ticket prices. Take away overbooking and fares would likely rise.

    What's more, some people like to volunteer to give up seats on overbooked flights to snag vouchers for future trips. Airlines are required to ask for volunteers before involuntarily bumping customers, and if you aren't in a hurry, it can pay to perhaps pocket a $200 voucher toward your next ticket. Those vouchers, however, come with strings attached such as restrictions blocking their use on ultra-cheap fares or popular travel dates. Couple that with longer waits to get on another flight because planes are booked so full these days and volunteering isn't as enticing as it used to be.

    In the first quarter this year, the rate of voluntary bumps dropped by 15% while the rate of involuntary bumping was on the rise. Either fewer people wanted to volunteer for vouchers, or airlines were getting chintzier with their offers to volunteers.

    The DOT offered up several options in an "Advance Notice of Proposed Rulemaking." One option is to fully account for inflation since 1978. That would more than triple the penalties to a maximum cap of $624 from $200 and $1,248 from $400.

    Another option is to tie the increase to the rise in airfares, which have increased at a much, much slower rate than inflation because of increased airline competition and low-cost competitors. Using the average price travelers pay to fly one mile as the measure, the caps would bump up to $290 from $200 and $580 from $400.

    That's the option likely to be preferred by airlines, but not travelers.

    Airlines say they are still studying the proposal, and their main lobbying organization, the Air Transport Association, says it "welcomes the review."

    Carriers are unlikely to raise a spirited fight against some change since they are already under pressure in Washington, where Congress is considering possibly slapping a "Passengers Bill of Rights" on the industry.

    Most likely, airlines will offer to accept the small increase from the ticket-price inflation and hope that the DOT doesn't hit them with the huge inflation adjustment or elimination of caps altogether.

    Another change under consideration is including more regional jets and turbo-props planes under the denied-boarding compensation rules. Currently, airplanes with 60 seats or fewer are exempt; the DOT has proposed dropping that to 30 seats. The DOT excluded small-plane carriers in 1981 because it thought the rules placed a heftier financial burden on them, and small planes often have to bump passengers for safety reasons on hot days when takeoff performance is diminished.

    In practice, most small-plane airlines voluntarily abide by the rules because they are partners of bigger carriers. In fact, it's usually the big airline that is selling tickets, setting prices and deciding how much to overbook the regional airline flights.

    The Regional Airline Association says its board hasn't met yet to decide a position, but it likely will support dropping the exclusion to 30 seats and tying compensation to ticket prices. "The measurement ought to be the value of airfares, not the cost of living," said Roger Cohen, president of the group.

    The DOT is taking comments from the public at a Web site, http://dms.dot.gov, by fax at 202-493-2251, or mail to 1200 New Jersey Ave., SE, Room W12-140, Washington, D.C. 20590. You need to include docket number OST-01-9325.

    After comments are weighed, the DOT will offer a proposed rule change, open again to comment and a lengthy regulatory evaluation. An actual change in the rule isn't expected to be enacted until next year.