U.S. Airline Passengers May Get Paid 63% More When Bumped

U.S. airline passengers, who will face crowded airplanes this summer, may collect higher payments for being forced to give up a seat on an overbooked flight.

Transportation Secretary Ray LaHood proposed today raising the maximum compensation by 63 percent, to $650, if “bumped” fliers arrive at their destination within two hours of their intended schedule, and $1,300 if not, the first increase in two years. The payments are among U.S. actions to give passengers additional rights, he said.

“Anybody that’s flown knows what the problems are with flying,” LaHood said during a conference call with reporters. “We tried to incorporate the most egregious, the most serious, in this rule.”

LaHood is proposing added protection for passengers after the U.S. summer travel season began May 28 with the Memorial Day holiday weekend. Continental Airlines Inc. yesterday reported record loads for May flights, with 83.8 percent of seats filled on average during the month.

LaHood’s proposal also would let passengers cancel reservations within 24 hours of booking a flight without penalty, require carriers to refund baggage fees when luggage is delivered late and bar price increases after tickets are purchased.

“We applaud Secretary LaHood,” Kate Hanni, executive director of Napa, California-based FlyersRights.org, said in a statement. “This proposed rule is both sensible and necessary.”

Airlines Evaluate Proposals

Airlines want “to provide a safe, efficient, reliable and economically viable” systems, the Air Transport Association trade group said in a statement. The proposal “will be evaluated against that standard.”

The Washington trade group’s members include Delta Air Lines Inc., AMR Corp.’s American Airlines, UAL Corp.’s United Airlines and Southwest Airlines Co.

The rules, which are subject to public comment, require carriers to include their plans for long tarmac delays into the “contracts of carriage,” a step that would give passengers legal grounds to sue. The rule also would expand to international carriers the requirement to have plans for such delays, and it would no longer let carriers exclude government taxes and fees from fare advertisements.

The rules will take effect by the U.S. fall after a comment period, LaHood said. The agency estimates airlines will pay $26 million in the next 10 years to comply, while providing benefits of $87.6 million to passengers in the same period.

Overselling Flights

Airlines often sell more seats than available on a flight, betting that some travelers won’t show up. When a flight is oversold, carriers typically try to find volunteers by offering inducements including vouchers before forcing fliers to give up their seats.

The rate of involuntarily bumping reached a 13-year high in 2009, or 1.19 per 10,000 passengers, according to Transportation Department figures, as airlines scheduled fewer flights resulting in more seats being filled.

The planned regulation would adjust the bumping amount for inflation every two years. The 2008 increase, to $400 and $800, was the first since 1978.

A rule advanced by LaHood that went into effect April 29 imposes fines as high as $27,500 per customer when airlines fail to let passengers off planes stuck on tarmacs for three hours.

The rule requires airlines to provide water and snacks, such as pretzels, when the delay is from two to three hours and to assure that bathrooms on the plane are functioning.

To contact the reporter on this story: John Hughes in Washington at jhughes5@bloomberg.net.

Passengers check-in at the Continental Airlines Inc. counter at San Francisco International Airport. Photographer: Kim White/Bloomberg