[Federal Register Volume 59, Number 189 (Friday, September 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24168]


[[Page Unknown]]

[Federal Register: September 30, 1994]


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DEPARTMENT OF TRANSPORTATION
Office of the Secretary

14 CFR Part 254

[Docket No. 49330; Notice 94-14]
RIN 2105-AC07

 

Domestic Baggage Liability

AGENCY: Office of the Secretary, Department of Transportation.

ACTION: Notice of Proposed Rulemaking (NPRM).

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SUMMARY: The Department is proposing to amend its rule governing the 
amount by which certain U.S. air carriers may limit their liability to 
passengers for lost, damaged, and delayed baggage. This action is in 
response to a petition by Public Citizen and Aviation Consumer Action 
Project to increase the minimum liability limit from $1,250 to $1,850 
per passenger. The Department is also requesting comment on two 
alternate proposals: (1) to raise the minimum limit to $1,850 with a 
mechanism that automatically provides for periodic future increases, or 
(2) to raise the minimum liability limit to $2,000.

DATES: Comments are requested by November 29, 1994. Late-filed comments 
will be considered only to the extent practicable.

ADDRESSES: Comments should be sent, preferably in triplicate, to Docket 
Clerk, Docket No. 49330, Department of Transportation, 400 7th Street, 
SW, Room 4107, Washington, DC 20590. Comments will be available for 
inspection at this address from 9 a.m. to 5:30 p.m., Monday through 
Friday. Commenters who wish the receipt of their comments to be 
acknowledged should include a stamped, self-addressed postcard with 
their comments. The Docket Clerk will date-stamp the postcard and mail 
it back to the commenter.

FOR FURTHER INFORMATION CONTACT: Diane Mobley or Joanne Petrie, Office 
of Regulation and Enforcement, Office of the General Counsel, U.S. 
Department of Transportation, 400 7th Street SW, Room 10424, 
Washington, DC 20590. (202) 366-9306.

SUPPLEMENTARY INFORMATION:

Background

    Consumer baggage problems in air travel remain a common occurrence. 
Reports submitted to the Department by the major airlines indicate that 
over 2.2 million mishandled baggage reports were filed by passengers in 
1993, although it is unknown how many of those reports resulted in 
claims for compensation. When baggage is lost, damaged, or delayed, the 
airlines are prohibited by federal regulation (14 CFR Part 254) from 
limiting their liability to less than $1,250 per passenger for provable 
damages.\1\
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    \1\The rule applies to flights on large aircraft (aircraft 
designed to carry more than 60 passengers), and to any flight 
segment included on the same ticket as a flight segment using large 
aircraft.
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    The amount of the minimum liability limit was last amended by a 
final rule effective April 10, 1984, issued by the Civil Aeronautics 
Board (CAB) before its ``sunset'' (ER-1374, 49 FR 5065, February 10, 
1984). The $1,250 figure was calculated based upon the percentage 
increase in the Consumer Price Index for all Urban Consumers (CPIU) 
between the date of the previous amendment and September 1983. When 
setting the limit, the CAB attempted to balance the amount necessary to 
cover the value of most passengers' baggage while still allowing the 
airlines to protect themselves from extraordinary claims.
    On December 22, 1993, the Department received a petition for 
rulemaking from Public Citizen and Aviation Consumer Action Project to 
increase the minimum liability limit in order to account for inflation 
since the 1984 amendment. The petitioners suggest that the limit should 
be raised to $1,850, calculated by increasing the current $1,250 limit 
proportionate with the increase in the CPIU from 1983 until the 
approximate time a new final rule would take effect (estimated to be 
one year from the date of the petition). A letter in support of the 
petition was filed by Mr. Michael Kees, a consumer who recently 
suffered a loss in excess of the liability limit, who asserts that a 
more realistic limit today would be $2,500.
    The Bureau of Labor Statistics reports that in September 1983, the 
CPIU was 100.7 (using a 1982-84 = 100 reference base). As of April 
1994, the CPIU had increased by 46.4 percent to 147.4. Stated 
differently, the purchasing power of a $1,250 maximum baggage claim 
award in 1983 had eroded to $854 in April 1994 dollars. To keep up with 
the 46.4 percent increase in the CPIU as of April 1994, the minimum 
liability limit would have to increase to $1,830. The Department 
believes that in addition to the direct monetary effect on consumers, 
an unrealistically low minimum liability limit invites the airlines 
simply to pay the claims rather than to address the causes of lost, 
damaged, and delayed baggage. The Department therefore proposes to 
raise the minimum liability limit to $1,850 as suggested in the 
petition, and seeks comment on this proposal. Carriers are requested to 
submit the following data on domestic baggage claims for calender year 
1993 as well: (1) the total number of domestic\2\ baggage claims for 
reimbursement and the total amount claimed (i.e., the amount that the 
claimants requested); (2) the total amount paid by the carrier in 
settling those claims; and (3) the number and total dollar amount of 
such claims that exceeded $1,250, and the number and total dollar 
amount that exceeded $1,850. This information will help the Department 
to assess the economic burden of the proposal on the affected airlines.
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    \2\A ``domestic'' claim for this purpose is one that is subject 
to Part 254. For example, a claim concerning a problem that occurred 
on a domestic segment of an international trip would not be included 
since such transportation is governed by the Warsaw Convention 
rather than by Part 254.
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    In addition to the proposal to increase the minimum baggage 
liability limit to $1,850, the Department requests comment on two 
alternate proposals: (1) to raise the minimum limit to $1,850 with a 
mechanism that automatically provides for periodic future increases, or 
(2) to raise the minimum liability limit to $2,000.
    The first alternate proposal is an automatic adjustment of the 
minimum liability limit every other year, calculated in proportion to 
any change in the CPIU. When the minimum liability limit was last 
amended in 1984, the CAB considered and rejected a rule that would 
automatically adjust the liability limit based on some specified 
economic measure. The CAB believed that such an approach might be 
unduly confusing for consumers and that it would be administratively 
burdensome on carriers to constantly revise tickets and internal 
guidance. The Department requests comment on whether, with the 
increasing sophistication of and reliance on computers, periodic 
adjustment of the minimum liability limit would pose less of a burden 
on the industry today. A more frequent adjustment would make the limit 
more responsive to changes in the economy. Comment is also requested on 
whether there would be a need to provide for additional public comment 
before each adjustment rather than simply announcing each new rate by 
publication in the Federal Register, and whether there is some other 
method that would be preferable to changes in the CPIU for calculating 
appropriate future changes in the minimum liability limit. As indicated 
above, the CPIU was the basis used by the CAB to calculate the 1984 
increase to $1,250. Prior to 1984, the CPIU was considered, along with 
actual baggage claim data, to set the minimum liability limit. That 
data has not been collected since the deregulation of the airline 
industry.
    The Department also requests comment on its second alternate 
proposal, to increase the minimum baggage liability limit to $2,000. 
Under the current system, which includes notice requirements, 
passengers are expected to be aware of the minimum limit and not pack 
any items of greater value in their luggage unless they desire to 
purchase excess valuation or are personally willing to incur the risk. 
This is not to say that carriers would automatically pay $2,000 to 
passengers claiming lost, damaged, or delayed baggage. We wish to make 
clear that, as is the case today, our proposal would set the amount 
below which carriers could not limit their potential liability for 
provable damages. Thus, carriers could still decline to pay unjustified 
claims or pay only for damages actually shown. A $2,000 limitation 
would have the advantages of covering most items passengers are likely 
to pack in baggage, and being easy for passengers to remember because 
it is a round number. A collateral benefit of a $2,000 minimum limit 
would be that, in the event of future inflation, the limit would not 
become obsolete soon after issuance. It would also allow longer-term 
planning than an $1,850 limit, which might reduce administrative costs 
to the airlines for training, ticket stock, and computer programming.
    The Department recognizes that carriers will require some period of 
time to use up existing ticket stock, print new tickets, and implement 
other necessary changes under any of the alternatives. The Department 
seeks comment on whether 60 days from issuance of a final rule is a 
sufficient time for implementation. In the case that excess ticket 
stock poses a particular problem for the airlines, the Department 
requests comment on whether the use of a sticker or an addendum stuffed 
in the ticket envelope would provide adequate notice of the new limit. 
The Department also seeks comment on whether a bifurcated 
implementation would be feasible (e.g., new minimum dollar limit 
effective in 30 days; implementation of revised notice requirement 
effective in 60 days, or upon exhaustion of existing ticket stock). In 
the case that the automatically adjusting limit is selected, the 
Department requests comment on whether a 30-day implementation period 
would be sufficient for future adjustments under that proposal. In any 
event, in view of the publication of the instant proposal, the 
Department encourages carriers to exercise prudence in placing large 
orders for ticket stock or ticket jackets.
    The notice requirement has been clarified to better explain that 
written notice of the liability limit must be provided whenever air 
transportation is sold, whether or not the airline actually issues a 
ticket to the passenger. This is in response to the recent switch to a 
ticketless system by a few carriers. Written notice must still be 
provided to the passenger in conjunction with the sale of the travel, 
even though there is no traditional ``ticket'' that the notice can be 
printed on.

Regulatory Analyses and Notices

    The Department has determined that this action is not a significant 
regulatory action under Executive Order 12866 or under the Department's 
Regulatory Policies and Procedures. A regulatory evaluation that 
examines the projected costs and impacts of the proposal has been 
placed in the docket. The Department certifies that this rule, if 
adopted, would not have a significant economic impact on a substantial 
number of small entities. Few airlines are classified as small 
entities. However, since the rule could apply to small carriers to the 
extent that they interline with large carriers, the Department seeks 
comment on whether there are unidentified small entity impacts that 
should be considered. If comments provide information that there are 
significant small entity impacts, the Department will prepare a 
regulatory flexibility analysis at the final rule stage. The Department 
does not believe that there would be sufficient federalism implications 
to warrant the preparation of a federalism assessment.

List of Subjects in 14 CFR Part 254

    Air carriers, Consumer protection, Freight, Reporting and 
recordkeeping requirements.

    For the reasons set forth in the preamble, the Department proposes 
to amend 14 CFR Part 254 as follows:

PART 254--[AMENDED]

    1. The authority citation for Part 254 continues to read as 
follows:

    Authority: Secs. 204, 403, 404, and 411, Pub. L. 85-726, as 
amended, 72 Stat. 743, 758, 760, 769; 49 U.S.C. 1324, 1373, 1374, 
1381.

    2. Section 254.4 would be revised to read as follows:


Sec. 254.4  Carrier liability.

    On any flight segment using large aircraft, or on any flight 
segment that is included on the same ticket as another flight segment 
that uses large aircraft, an air carrier shall not limit its liability 
for provable direct or consequential damages resulting from the 
disappearance of, damage to, or delay in delivery of a passenger's 
personal property, including baggage, in its custody to an amount less 
than $1850 for each passenger.
    3. Section 254.5 would be revised to read as follows:


Sec. 254.5  Notice requirement.

    On any flight segment using large aircraft, or on any flight 
segment that is included on the same ticket as another flight segment 
that uses large aircraft, an air carrier shall provide to passengers, 
by conspicuous written material included on or with its ticket or other 
written notice that is issued in conjunction with the sale of the 
transportation, either:
    (a) Notice of any monetary limitation on its baggage liability to 
passengers; or
    (b) The following notice: ``Federal rules require any limit on an 
airline's baggage liability to be at least $1850 per passenger.''

 Alternative Proposal 1

    4. Section 254.4 would be revised to read as follows:


Sec. 254.4  Carrier liability.

    On any flight segment using large aircraft, or on any flight 
segment that is included on the same ticket as another flight segment 
that uses large aircraft, an air carrier shall not limit its liability 
for provable direct or consequential damages resulting from the 
disappearance of, damage to, or delay in delivery of a passenger's 
personal property, including baggage, in its custody to an amount less 
than the current Federal Minimum Liability Limit per passenger that is 
in effect on the date of the flight. The Federal Minimum Liability 
Limit will be re-calculated every other year, based on the percentage 
change in the Consumer Price Index for All Urban Consumers since the 
previous adjustment, and published in an announcement in the Federal 
Register.
    5. Section 254.5 would be revised to read as follows:


Sec. 254.5  Notice requirement.

    On any flight segment using large aircraft, or on any flight 
segment that is included on the same ticket as another flight segment 
that uses large aircraft, an air carrier shall provide to passengers, 
by conspicuous written material included on or with its ticket or other 
written notice that is issued in conjunction with the sale of the 
transportation, either:
    (a) Notice of any monetary limitation on its baggage liability to 
passengers; or
    (b) The following notice: ``Federal rules currently require any 
limit on an airline's baggage liability to be at least [insert the 
current Federal Minimum Liability Limit in effect on the date the 
notice is provided] per passenger.'' This limit is periodically revised 
by the Department of Transportation based on changes in the Consumer 
Price Index for All Urban Consumers. Therefore, a different limit may 
be in effect on the date of your flight.

Alternative Proposal 2

    6. Section 254.4 would be revised to read as follows:


Sec. 254.4  Carrier liability.

    On any flight segment using large aircraft, or on any flight 
segment that is included on the same ticket as another flight segment 
that uses large aircraft, an air carrier shall not limit its liability 
for provable direct or consequential damages resulting from the 
disappearance of, damage to, or delay in delivery of a passenger's 
personal property, including baggage, in its custody to an amount less 
than $2000 for each passenger.
    7. Section 254.5 would be revised to read as follows:


Sec. 254.5  Notice requirement.

    On any flight segment using large aircraft, or on any flight 
segment that is included on the same ticket as another flight segment 
that uses large aircraft, an air carrier shall provide to passengers, 
by conspicuous written material included on or with its ticket or other 
written notice that is issued in conjunction with the sale of the 
transportation, either:
    (a) Notice of any monetary limitation on its baggage liability to 
passengers; or
    (b) The following notice: ``Federal rules require any limit on an 
airline's baggage liability to be at least $2000 per passenger.''

    Issued in Washington, DC on September 26, 1994.
Patrick Murphy,
Acting Assistant Secretary for Aviation and International Affairs.
[FR Doc. 94-24168 Filed 9-29-94; 8:45 am]
BILLING CODE 4910-62-P