The U.S. Department of Transportation, under pressure from Congress and consumer groups, on Monday proposed tripling payments to airline passengers involuntarily bumped, which would be the first increase in nearly 30 years.
Under the proposal, passengers would be paid $624, up from $200, in cases in which the airline is able to arrange an alternate flight that arrives within two hours of the original flight. The rate would climb to $1,248 from $400 if the airline finds an alternate flight that arrives within four hours of the original itinerary.
The proposal comes as the rate of denied boardings has risen steadily during the past five years. According to Transportation Department statistics, 1.45 percent, or 19,260 passengers who showed up for their flights, were denied seats during the first quarter of this year.
"Overbooking is the major cause of oversales and the people who are inconvenienced are not those who do not show up for their flights, but passengers who have conformed to all carrier rules," the department said in explaining its proposal.
An airline industry spokesman noted that only 1 percent of the more than 555 million passengers were involuntarily bumped last year.
The department has been under pressure to increase the compensation rates since 2000. Legislation was introduced this year in the Senate requiring the department to consider revising the rates at which bumped passengers are compensated.
The department, citing changes in the consumer price index since the $200 and $400 maximums were imposed nearly 30 years ago, said $400 in 1978 now is worth about $128.
"Inflation has eroded the $200 and $400 limits," the department said. "In order to have the same purchasing power today as in 1978, the $400 limit would need to be $1,248."
That kind of hike is unlikely given the state of the industry's finances. As a result, the department suggested doubling the compensation rates to $400 and $800 or increasing it by the same amount that airline revenues have risen during the past 30 years. Under that formula, the compensation rates would increase to $290 and $580.
In addition, the department is proposing eliminating an exemption that has allowed some operators of 30-seat to 60-seat planes to avoid paying any compensation.
The proposal stops short of addressing the increasing levels of oversales by airlines, and specifically passengers who volunteer to give up their seats.
In the first quarter, 158,830 passengers, less than 1 percent of the 133 million who flew in the period, volunteered to be bumped to accommodate other passengers, according to transportation department figures. Airlines routinely offer travel vouchers to passengers volunteering to take later flights. In 2006, airlines asked 620,500 people to voluntarily agree to be bumped, compared with 551,000 in 2005.
David Castelveter, a spokesman for the Air Transport Association, said the system is working. "We have been very successful as an industry in dealing with the denied boarding compensation on a voluntary basis," he said. "Only 1.45 percent were denied involuntarily."
But Castelveter acknowledged that some airline reservation systems could be contributing to the problem.
"There needs to be some tweaking" in the reservation computer programs, "but overall the system has worked pretty well," he said noting that out of 740 million passengers in 2006, 55,828 were denied seats involuntarily.
But Terry Trippler, an airline critic whose comments are found at TripplerTravel.com, said there "definitely seems to be a problem with overbooking."
"We all know the airlines are going to oversell knowing full well that there are going to be no-shows," he said.
Trippler said the Transportation Department rule does not cover tickets sold by third parties, such as Orbitz.com or Expedia.com, or tour operators.
"We have too many side deals that airlines are making with tour operators that do not involve the protections of canceled flights," he said referring to passengers who are forced to buy a full-fare return ticket if their flight purchased through a tour operator is canceled.
He suggested that the department raise the compensation 50 percent, to $300 and $600.
But he said any change needs to also deal with those passengers who voluntarily agree to be bumped. "Let's get the numbers and really look at them and find out what the average compensation that airlines are paying," he said. "This is like a shot in the dark."
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