Flying the Friendlier Skies: New Rules to Benefit Air Passengers

Transportation Secretary Ray LaHood announced on Wednesday several proposed consumer protections for airline passengers. The Transportation Dept.'s (DOT) new rules will be open for comment for 180 days, after which they will go into effect. The most visible change will be a significant increase in denied boarding compensation (DBC), the fee that airlines have to pay passengers who are bumped off their flights.

The DOT originally set DBC levels in 1978, when the government first began regulating airline overbooking. At the time, most plane tickets were fully refundable, which meant that passengers weren't penalized for failing to show up for their flights.

As no-shows began costing airlines more money, they responded by overbooking. To ensure that carriers wouldn't excessively inconvenience their passengers, DOT mandated reimbursement of $200 per passenger if the delay was less than two hours and $400 for those delayed by more than two hours.

Overbooking Penalties Restored to 1978 Levels

Today, most tickets aren't refundable, which means that airline no-shows have greatly dropped. In addition, denied boarding compensation levels were frozen from 1978 to 2008, thereby giving airlines financial incentive to heavily overbook.

Two years ago, the DOT doubled mandatory reimbursements to $400 and $800. While that's a considerable improvement, the increase still represented a steep drop from the 1978 levels. Today's announcement will increase the limits to $650 and $1,300, a level that's roughly equal to the 1978 standard.

In addition to compensating stranded passengers, the new rules should help travelers pay less when buying airline tickets. Under current regulations, airlines can use a variety of tricks to hide the full price of tickets.

For example, they don't have to include government taxes and fees when reporting ticket prices. They can also advertise attractive "each way" fares without mentioning that these tickets can only be purchased as part of a round-trip journey. Another trick that has gained popularity is charging extra fees for checked baggage without informing customers ahead of time.

LaHood's proposed consumer protections would close all these loopholes, as well as banning post-purchase price increases. Taken as a whole, the new rules should greatly boost the transparency of airline fares. While today's proposals won't close the door on all the hidden fees that gained popularity in the last few years -- for example, JetBlue passengers can still expect to pay for pillows and blankets -- they will go a long way toward making flying less stressful.

Rules Cover Foreign Airlines Too

The new regulations also expand last year's tarmac-delay rules. In December, DOT mandated a three-hour limit on tarmac delays for domestic flights and required that airlines at large- and medium-hub airports create contingency plans for tarmac delays. Wednesday's rules expand the requirement to small- and non-hub airports and mandate that foreign airlines operating in the U.S. must follow the same rules as domestic companies.

These latest proposals are part of a larger strategy outlined by the DOT. In last week's kickoff for the new Aviation Advisory Committee, Secretary LaHood outlined a broad range of goals, stating: "The aviation industry is at a critical crossroads" and needs to change if it hopes to remain "vital, competitive, sustainable, and...safe."