Huffpost Business

Bumped Passengers Reimbursed Up To $800

Posted: Updated:

WASHINGTON — Like almost everything else related to air travel in recent weeks, government proposals unveiled Wednesday rankled airlines and could be bittersweet for an already sour traveling public.

Under one new rule, passengers who get bumped off overbooked flights will be eligible to receive twice as much compensation from U.S. airlines. But ticket prices are expected to spike as a result of another rule designed to ease congestion tied to the New York-area's clogged airports.

The latest government action comes on the heels of maintenance-related investigations that unveiled a cozy relationship between carriers and regulators, and led to the grounding of hundreds of planes and the grumbling of thousands of upended passengers.

The industry has its own bittersweet scenario to stomach. Although there's never been a safer period in history to travel on domestic airlines, they are buckling under record fuel prices and have fewer options available to ease financial losses. Delta Air Lines Inc. and Northwest Airlines Corp. announced their plan to combine on Monday, and many carriers already have announced cuts in capacity, higher ticket prices and extra fees for checking baggage and other features.

The Transportation Department said the passenger compensation increase is its latest effort to bolster consumer protection at a time when airline delays are flirting with record levels.

Travelers forced onto another flight that takes them to their domestic destination more than two hours after their original arrival time will be paid the full price of their fare up to $800, under a new Transportation Department rule that goes into effect next month. If bumped passengers arrive less than two hours late, the limit is $400.

The arrival time limit is four hours for international flights, and the amount of the payments are in addition to the value of the passenger's ticket, which can be used for alternate transportation or be refunded if unused.

Under the congestion-easing plan, carriers will be forced to auction off some of their existing slots at LaGuardia over the next five years and possibly retire others. While meant to provide some relief to delayed passengers, the rules are expected to raise fares.

"It will have the perverse effect of helping (airlines') bottom lines and it will lead to higher (ticket) prices," said Bob Harrell of New York-based travel and aviation consulting firm Harrell Associates.

Industry groups oppose the auctions because it "will create winners and losers within their membership ... (and) a lot of uncertainty," said Daniel Petree, dean of the College of Business at Embry-Riddle Aeronautical University in Daytona Beach, Fla.

The nation's largest carriers control most of the slots at LaGuardia and don't want to lose or sell them, analysts said.

"It is truly mystifying, with the airline industry in a financial meltdown due to overwhelming fuel prices, that DOT decides now is the time for a costly economics experiment at LaGuardia," Air Transport Association President and Chief Executive James May said in a release. "What the DOT has proposed will do nothing to reduce delays."

But passengers want less harried travel at the nation's busiest airports. "Regulators do these things the airlines are not doing," Harrell said. "And they do them because they're getting complaints."

Meanwhile, the new bumped fliers rule applies to more planes, covering most aircraft that carry more than 30 passengers.

"It's hard to compensate for a missed family occasion or business opportunity, but this rule will ensure flyers are more fairly reimbursed for their inconvenience," Transportation Secretary Mary Peters said in a statement. The previous limits had not been raised since 1978.

Roger Cohen, president of the Regional Airline Association, said the new fees will make it harder for airlines to justify serving small- and medium-sized communities based on their remote locations, airport facilities and other factors.

To further ease delays this summer, planes will be rerouted through Canadian air space to avoid storms and the government will open a second westbound route for aircraft flying from congested New York-area airports, Peters said.

In 2007, the three New York-area airports had the lowest on-time arrival rates, and aviation officials say delays there cascade throughout the system and cause 75 percent of all delays.