[Federal Register Volume 70, Number 111 (Friday, June 10, 2005)]
[Notices]
[Pages 33932-33937]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-11537]


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DEPARTMENT OF TRANSPORTATION

Office of the Secretary


Notice on Honoring Tickets of Insolvent Airlines Pursuant to the 
Requirements of Section 145 of the Aviation and Transportation Security 
Act

AGENCY: Office of the Secretary, Department of Transportation.
SUMMARY: The Department is publishing the following notice to provide 
guidance to the aviation industry regarding the responsibility pursuant 
to section 145 of the Aviation and Transportation Security Act of 
certain air carriers to transport under certain conditions the ticketed 
passengers of a carrier that has ceased operations on a particular 
route or routes due to bankruptcy or insolvency.

FOR FURTHER INFORMATION CONTACT: Dayton Lehman, Jr., Deputy Assistant 
General Counsel, or Jonathan Dols, Supervisory Trial Attorney, Office 
of Aviation Enforcement and Proceedings (C-70), 400 7th Street, SW., 
Washington, DC 20590, (202) 366-9349.

Notice

    This Notice provides further guidance for airlines and the 
traveling public regarding the obligation of airlines under section 145 
of the Aviation and Transportation Security Act, Pub. L. 107-71, 115 
Stat. 645 (November 19, 2001) (``Act''), to transport passengers of 
airlines that have ceased operations due to insolvency or bankruptcy. 
In section 8404 of the Intelligence Reform and Terrorism Prevention Act 
of 2004 (Pub. L. 108-458 (Dec. 17, 2004)), Congress recently renewed 
the obligation of air carriers under section 145 to provide 
transportation to passengers of airlines that have ceased operations 
due to insolvency or bankruptcy. Prior to Congress's most recent 
action, the Department had issued three notices providing guidance to 
carriers and the public regarding section 145.\1\ The purpose of this 
notice is to respond to the many inquiries from airlines and the public 
regarding section 145 received since issuance of those notices, and to 
provide notice that we have reconsidered our earlier estimates of the 
direct costs to carriers of providing alternate transportation required 
by section 145 and have accordingly decided that the maximum amount 
that a carrier may charge a passenger accommodated under the law should 
be greater than originally believed.
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    \1\ Those notices were issued on August 8, 2002, (67 FR 53035, 
Aug. 14, 2002) November 14, 2002, (67 FR 69805, Nov. 19, 2002) and 
January 23, 2003 (68 FR 4266, Jan. 28, 2003).
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    Section 145 requires, in essence, that airlines operating on the 
same route as an insolvent carrier that has ceased operations transport 
the ticketed passengers of the insolvent carrier ``to the extent 
practicable.'' Our earlier notices set forth, among other things, our 
view that, at a minimum, section 145 requires that passengers who hold 
valid confirmed tickets, whether paper or electronic, on an insolvent 
or bankrupt carrier that has ceased operations on a route be 
transported on a space-available basis by other carriers that operate 
on the route for which the passenger is ticketed. We also stated our 
belief that Congress did not intend to prohibit carriers from 
recovering from accommodated passengers the amounts associated with the 
actual cost of providing such transportation. We indicated at that time 
that we did not foresee those costs exceeding $25.00 each way, or 
$50.00 on a roundtrip basis. However, we also made clear that we 
recognized that such charges might be determined to be higher, since 
the cost to a carrier of complying with section 145 could be affected 
by a variety of factors, including the number of affected passengers, 
the fuel costs to carriers in effect at the time of a cessation, and 
the markets and itineraries involved.
    Since the renewal of section 145 in December 2004, we have received 
many inquiries from the airline and travel agent industries, the media, 
and the public about various aspects of the law. These questions 
involve, among other issues, the amount carriers may charge displaced 
passengers seeking to be accommodated, as well as questions regarding 
section 145's applicability to international flights, code shared 
flights, passengers holding frequent flier tickets, and passengers 
whose transportation involves charter flights. As a result of these and 
other questions, including those raised on our own initiative, we have 
reviewed section 145 and are issuing this further notice, which updates 
and expands upon advice previously provided airlines and the public 
about the provision. This guidance is being provided in an attached 
question-and-answer format, which should assist readers in 
understanding the many issues involved.
    Questions regarding this notice may be addressed in writing to 
Dayton Lehman, Deputy Assistant General Counsel, or Jonathan Dols, 
Supervisory Trial Attorney, Office of Aviation Enforcement and 
Proceedings, 400 7th St., SW., Washington, DC 20590, or they may be 
contacted by telephone at (202) 366-9342 or by e-mail at 
[email protected] or [email protected], respectively.

    Dated: June 1, 2005.
Karan Bhatia,
Assistant Secretary for Aviation and International Affairs.
    Attachment to June 1, 2005, Section 145 Notice--Department of 
Transportation Guidance Regarding Section 145 of the Aviation and 
Transportation Security Act
    In section 8404 of the Intelligence Reform and Terrorism Prevention 
Act of 2004 (Pub. L. 108-458 (Dec. 17, 2004)), Congress renewed the 
obligation of air carriers under section 145 of the Aviation and 
Transportation Security Act (Pub. L. 107-71, 115 Stat. 645 (Nov. 19, 
2001) (``Act'')) to provide transportation to passengers of airlines 
that have ceased operations due to insolvency or bankruptcy. As 
amended, section 145 states in pertinent part:

    (a) * * * Each air carrier that provides scheduled air 
transportation on a route shall provide, to the extent practicable, 
air transportation to passengers ticketed for air transportation on 
that route by any other air carrier that suspends, interrupts, or 
discontinues air passenger service on the route by reason of 
insolvency or bankruptcy of the other air carrier.
    (b) * * * An air carrier is not required to provide air 
transportation under subsection (a) to a passenger unless that 
passenger makes alternative arrangements with the air carrier for 
such transportation within 60 days after the date on which that 
passenger's air transportation was suspended, interrupted, or 
discontinued (without regard to the originally scheduled travel date 
on the ticket).
    (c) * * * This section does not apply to air transportation the 
suspension, interruption, or discontinuance of which occurs after 
November 19, 2005.

Questions and Answers

    Question 1: What is the basic requirement of section 145?
    Answer 1: At a minimum, section 145 requires that passengers 
holding valid confirmed tickets, whether paper or electronic, on an 
insolvent or bankrupt

[[Page 33933]]

carrier that has ceased operations on a route by reason of that 
insolvency or bankruptcy be transported on a space-available basis by 
other carriers who operate on the route for which the passenger is 
ticketed.
    Question 2: If a U.S. air carrier that has not yet filed for 
bankruptcy discontinues operating on a route for reasons of 
``insolvency,'' must other air carriers operating on that route provide 
transportation to passengers ticketed by the insolvent air carrier?
    Answer 2: Yes.
    Question 3: What constitutes ``insolvency'' for purposes of section 
145?
    Answer 3: Insolvency is generally the inability to pay one's debts 
as they become due. This would probably occur with or after a 
bankruptcy filing, but such a filing need not necessarily occur to 
trigger section 145 obligations.
    Question 4: Does the law apply to passengers of foreign air 
carriers that cease operations on international routes to or from the 
United States due to bankruptcy or insolvency?
    Answer 4: No. The law only applies to passengers ticketed on U.S. 
air carriers that cease operations.
    Question 5: Do foreign air carriers have any obligation under the 
law to accommodate passengers ticketed by U.S. carriers that have 
ceased operations on an international route due to bankruptcy or 
insolvency?
    Answer 5: No. The obligation applies only to U.S. air carriers.
    Question 6: Does the law provide relief for passengers who have 
purchased transportation on a charter flight?
    Answer 6: No. We do not believe it was the intent of Congress to 
include charter transportation within the coverage of section 145. 
Although the language of section 145 does not, on its face, exclude 
charter passengers from its protections, the obligation to transport 
passengers extends only to scheduled carriers, not charter carriers, 
either direct or indirect. We do not believe Congress would have 
intended to provide protection for charter passengers without also 
providing a commensurate obligation on charter carriers, both direct 
and indirect, to accommodate the passengers of other carriers that 
might cease operations on a route.
    In addition, there are many different types of charters that do not 
readily lend themselves to the type of protection we believe Congress 
intended under section 145, including single entity charters that might 
involve a company transporting its employees or a sports team, as well 
as on-demand air taxi charters. Moreover, some charters, such as public 
charters, which may be sold by charter operators that do not operate 
their own aircraft, and single entity charters are already subject to 
required financial protections in the form of surety bonds or letters 
of credit and/or escrow accounts for passenger funds.
    We note that our Aviation Enforcement Office has in one instance 
advised carriers and the public of its opinion that section 145 applied 
to the cessation of service of a charter airline that sold 
transportation directly to the public. That situation involved 
Southeast Airlines, which ceased service on November 30, 2004. We do 
not expect our decision here to affect any of Southeast's passengers, 
whose transportation was interrupted more than 60 days ago, a period of 
time beyond section 145's coverage. (See section 145(b).)
    Question 7: Once in bankruptcy, must an air carrier cease all 
operations before section 145 obligations are triggered or are section 
145 obligations triggered by the cessation of operations only on a 
particular route or certain routes by an insolvent or bankrupt air 
carrier?
    Answer 7: The plain language of the statute covers cessation on a 
route-by-route basis. However, we would expect that a carrier that 
ceases operations on only one or several routes would itself take steps 
to ensure that its ticketed passengers are transported over other 
routings or receive a full refund, at the passenger's choice. Moreover, 
if the carrier continues to hold out for sale service between the 
points involved, i.e., in the market, the carrier would not be deemed 
to have ceased operations on ``that route.'' See Answer to Question 10 
below.
    Question 8: Because section 145 obligations are triggered by the 
cessation of service on one or more routes, rather than requiring a 
system-wide cessation of operations, are section 145 obligations 
triggered when a bankrupt air carrier simply reduces the number of 
flights it offers on a given route but does not cease all service on 
that route?
    Answer 8: No.
    Question 9: How does one determine whether a suspension, 
interruption, or discontinuation of service on a route is the result of 
bankruptcy or insolvency or of some other event not triggering section 
145 obligations, such as a seasonal suspension of service or a contract 
dispute?
    Answer 9: This will depend on the facts of each case.
    Question 10: Section 145 refers to carriers that provide scheduled 
air transportation on the ``route'' for which a passenger is ticketed. 
What constitutes a ``route''?
    Answer 10: Section 145 states simply that an air carrier that 
provides transportation on ``a route'' where service is discontinued by 
another air carrier due to bankruptcy or insolvency shall provide 
transportation on ``that route'' to passengers ticketed by the bankrupt 
air carrier. Since section 145 clearly is intended to help ensure that 
consumers' expectations are preserved and that they reach their 
destinations if reasonably practicable, the Department believes that 
Congress did not intend to limit the section 145 obligations to those 
carriers operating between the two points on a non-stop basis. Indeed, 
the service for which the passenger seeks alternate transportation may 
itself not have been non-stop service. On the other hand, travel on 
nearly every major carrier can be constructed between most pairs of 
points, provided one were willing to take a circuitous routing 
potentially involving numerous connections. We think this kind of 
substitute service was not what Congress intended. A carrier will be 
deemed to be providing transportation on ``that route'' if it holds out 
service between the two points to the public through its website or GDS 
services, regardless of the circuity involved.
    For example, Carrier A discontinues service between Chicago's 
O'Hare Airport (ORD) and Philadelphia (PHL) due to bankruptcy. Carrier 
B does not offer non-stop service ORD-PHL, but does offer for sale 
service from ORD to PHL via Pittsburgh (PIT). Under section 145, 
Carrier B must provide ``to the extent practicable'' transportation 
ORD-PIT-PHL to passengers ticketed by Carrier A between ORD and PHL. As 
a counter example, Carrier A discontinues service between San Diego 
(SAN) and Baltimore-Washington International Airport (BWI) due to 
bankruptcy. Carrier B does not offer for sale any service between SAN 
and BWI, but a person could travel on Carrier B between SAN and BWI if 
he or she were willing to combine flights that operated SAN-Albuquerque 
(ABQ)-Houston (HOU)-Birmingham (BHM)-BWI. Under section 145, Carrier B 
does not have to provide transportation to passengers ticketed by 
Carrier A between SAN and BWI, since it does not hold out service in 
the SAN-BWI market.
    Question 11: Under section 145, must an air carrier that offers 
only connecting or ``backhaul'' service on a route, transport 
passengers ticketed by a bankrupt air carrier on that route?
    Answer 11: Yes, under section 145, if an air carrier does not hold 
out or operate direct service between two

[[Page 33934]]

cities, but holds out for sale connecting service between them, it must 
provide alternate transportation under section 145 to passengers 
ticketed by another air carrier that has discontinued its service on 
that route, regardless of whether the alternate transportation involves 
a backhaul. (See Question and Answer 10 above.)
    Question 12: Under section 145, must an air carrier operating 
scheduled service on a route to one airport serving a city provide 
transportation to passengers ticketed by a bankrupt air carrier on a 
route to a different airport serving the same city?
    Answer 12: Yes, provided that the airports are considered alternate 
airports for the city and the carrier from which the passenger is 
seeking accommodation holds out for sale service to the alternate 
airport. For example, Carrier A discontinues service between Los 
Angeles International Airport (LAX) and JFK International Airport (JFK) 
due to bankruptcy. Carrier B, which offers service only between (LAX) 
and Newark International Airport (EWR), must provide transportation 
from LAX to EWR to a passenger ticketed by Carrier A between LAX and 
JFK, since JFK and EWR are considered alternate airports serving New 
York City and Carrier B holds out for sale service between LAX and EWR, 
one of the alternate airports. We recognize that the question of 
whether a particular airport is considered an ``alternate airport'' may 
need to be determined on a case-by-case basis. Carriers should note, 
however, that since a primary purpose of section 145 is to assist 
consumers in obtaining acceptable alternate transportation and our 
interpretation of that provision requires transportation only on a 
stand-by, space-available basis, we expect carriers to take a liberal 
approach if this issue arises.
    A carrier that serves only a portion of a passenger's itinerary and 
does not operate to the destination city for which the passenger is 
ticketed would not be obligated under section 145 to transport the 
passenger to another point from which the passenger might hope to 
obtain accommodations to his or her ultimate destination. For example, 
if the passenger of an insolvent or bankrupt carrier holds a ticket 
from Chicago to Phoenix, a carrier that does not offer service to 
Phoenix but does offer service to Denver is not obligated under section 
145 to provide the passenger transportation to Denver in hopes that he 
or she can then find further transportation to Phoenix. This same 
result would hold if the passenger was originally ticketed from Chicago 
to Phoenix through Denver.
    Question 13: What charge can a carrier assess for accommodating a 
passenger holding a ticket on a carrier that has ceased operations?
    Answer 13: In our first three guidance documents, we stated that we 
did not believe that Congress intended to prohibit carriers from 
recovering from accommodated passengers the amounts associated with the 
actual cost of providing such transportation. We pointed out that 
examples of such costs include the cost of rewriting tickets, providing 
additional onboard meals, and the incremental fuel cost attributable to 
transporting an additional passenger. Based on that methodology, we 
found that a reasonable estimate of such costs at that time would not 
exceed $25 each way, regardless of the number of segments involved. 
Significantly, we noted that the costs of complying with section 145 
may be affected by a variety of factors, including the number of 
passengers, the current fuel costs to carriers, and the markets and 
itineraries involved. We made no attempt at that time specifically to 
consider such factors, but indicated our willingness to do so in the 
future. It has been more than two years since our last notice was 
issued. Several carriers have requested that we reexamine this cost 
issue, asserting that increased costs, including that of fuel, the 
proven need to increase staffing to handle last-minute influxes of 
stand-by passengers after another carrier ceases operations, and the 
need to cover certain air transportation taxes, justify the Department 
permitting an increase in the maximum amount a carrier can charge to 
recover its additional expenses for providing alternate transportation 
under section 145. They have asked that we increase the maximum 
permissible amounts to $50 each way for domestic travel and travel to 
or from foreign points in North and Central America and the Caribbean 
and $125 each way for other international travel.
    We have reexamined this cost issue and conclude that an increase in 
permissible maximum rebooking charges, including any necessary taxes 
and fees, to an amount of $50 each way is reasonable. Although we 
invite carriers to provide further comments, we do not at this time 
have sufficient information to justify increasing the maximum 
permissible amount for long-haul international travel to the maximum of 
$125 as requested by certain carriers. However, as described below, 
some governments may impose substantial taxes and fees on passengers 
that are collected by carriers in the price of a ticket and turned over 
to the government only upon travel by the passenger. Where a carrier 
ceases operations without having paid such amounts on behalf of the 
passenger, the carrier providing alternate transportation may be 
required to pay the tax. Under such circumstances, the $50 maximum 
stated above may be increased by the amount a foreign government 
directly assesses a carrier providing alternate transportation under 
section 145.
    The cost of rebooking a particular passenger can vary substantially 
depending upon the particular circumstances involved. For example, at 
airports with relatively low traffic volumes, where existing 
alternatives can readily accommodate a small number of new passengers, 
the cost of doing so would be modest. On the other hand, at high 
traffic volume airports, particularly during the first few days 
following cessation of service by a major service provider at that 
airport, other carriers would likely have to significantly and quickly 
increase personnel resources in order to efficiently accommodate a 
surge of new passengers, resulting in considerable additional costs. 
These costs may be due to the need to set up new systems to verify such 
customers' existing ticket information and handle their stand-by 
status, which may require the issuance of paper tickets, a privilege 
for which many carriers today charge their own passengers $20 or 
perhaps more. These increased costs may affect carriers regardless of 
their size and can be even more pronounced where the carrier obligated 
to provide alternate transportation does not itself have a large 
presence at an airport involved. Such a situation will require 
extraordinary steps by a carrier to meet its section 145 obligation in 
handling the influx of passengers seeking to travel on a stand-by 
basis, particularly since such passengers require personal attention 
and handling, unlike a carrier's regular customers, who are likely to 
be traveling on an e-ticket and checking in over the Internet or at an 
unstaffed kiosk. For example, Delta Airlines was required to 
temporarily reassign ticket agents to its Las Vegas station from other 
stations after Vanguard, a much smaller carrier but one that had a 
relatively large presence at Las Vegas, ceased operations. Vanguard's 
passengers swamped the counters of Delta and other carriers seeking 
assistance pursuant to the requirements of section 145. Since the vast 
majority of passengers' itineraries will involve one or more high 
traffic volume airports and in light of the substantial expenses that 
may occur, we conclude that the increased maximum

[[Page 33935]]

rebooking fees of $50 discussed above are reasonable.
    With regard to long-haul international routes, in their request for 
an increase in the maximum charge that may be assessed for 
accommodating a passenger under section 145, several carriers pointed 
to the higher costs associated with such routes due to increased 
expenses for fuel, meals, security, and ground handling. While this may 
be the case, we do not at this time have sufficient information to 
believe that an increase in the maximum charge to $125 is justified. 
However, we understand that, in certain markets, carriers may collect 
as part of their ticket prices departure fees that must be paid to the 
foreign government upon departure of the passenger. Those fees may 
become the responsibility of the carrier providing alternate 
transportation under section 145 and in such cases it is reasonable for 
that fee to be charged the accommodated passenger in addition to the 
$50 charge. As we have in the past, we invite any airline or person who 
believes that our estimates of the amount necessary to cover the direct 
costs of accommodating ticketed passengers on a space available basis 
are inaccurate to provide written comments and evidence of costs in 
support of their position.
    Finally, while we are permitting the higher ceiling on fees that 
have been proposed, we are not mandating that any fee be charged and 
certainly not mandating that the ceiling fee be charged.
    Question 14: If a carrier declares bankruptcy and then, after 
section 145 expires under its sunset clause, suspends service on a 
particular route, does the law apply?
    Answer 14: Not if the law remains sunsetted. If, however, the law 
was not in effect at the time of the cessation but is later renewed, 
one must look to the language renewing the provision to determine if 
Congress intended that it not apply to cessations that have already 
occurred. In the absence of language to the contrary in the renewal 
provision, the obligation to transport qualifying passengers resumes at 
the time that the law goes back into effect, subject to the 60-day 
provision in section 145(b), without regard to when the insolvent or 
bankrupt carrier ceased operations.
    Question 15: Does the 60-day period in which a passenger must make 
alternative arrangements start on the date of the bankruptcy filing or 
does it run from the date of the ``suspension, interruption, or 
discontinuance'' of service on a particular route?
    Answer 15: The 60-day period runs from the date of the 
``suspension, interruption, or discontinuance'' of service on a 
particular route. For example, if Carrier A declares bankruptcy on 
August 1, but continues operating its SFO-LAX service until September 
1, at which time it suspends its service due to the bankruptcy, 
passengers ticketed by Carrier A on this route would have until October 
30 to make alternative arrangements.
    Question 16: Since section 145 provides a passenger 60 days in 
which to make alternate arrangements, does this mean that a carrier is 
obligated to offer standby transportation (1) on any date on which 
space may be available and on which the passenger desires to travel, so 
long as the passenger seeks such arrangements within the 60 day period, 
or (2) on the first date, including the passenger's original date of 
travel, on which space is available, or (3) only on the date the 
passenger was originally ticketed?
    Answer 16: Although Congress was not clear on this issue, in our 
initial notice dated August 2, 2002, we stated that section 145 
required at a minimum that a carrier is required to transport a 
passenger on a space-available basis on the date of travel shown on the 
ticket. There is some support for this interpretation, since section 
145(a) applies the law's protections to ``ticketed'' passengers (on a 
specified route) and the 60-day provision in section 145(b) states that 
a passenger must make alternate arrangements ``for such 
transportation'' within that time frame. A strict view of the alternate 
transportation required to be provided as a passenger is ``ticketed'' 
would limit the alternate transportation to the precise date for which 
the passenger was originally ticketed. This could, however, produce a 
harsh result not intended by Congress given the consumer-oriented 
nature of the provision, such as could occur when a passenger is 
scheduled to travel on the day a carrier ceases operations and would 
therefore have no time to make alternate arrangement for travel that 
day with another carrier, or when flights of the carrier that is 
required to provide alternate transportation are totally booked on a 
particular day. On the other hand, we do not believe the provision 
should be read so broadly as to permit the passenger to select any 
travel date in the future, regardless of his or her original ticketed 
travel date.
    We believe, therefore, that Congressional intent to assist 
consumers to the extent practicable is satisfied where consumers are 
permitted to travel on the date ticketed, or as soon thereafter as 
space is available, and that consumers whose ticketed date of travel is 
within 72 hours of the date of a cessation of operations of the carrier 
on which they are ticketed should be given a reasonable period of time 
after the cessation, not to exceed one week, in which to make such 
alternate arrangements.
    Question 17: Must the carrier subject to a section 145 obligation 
provide a passenger seeking accommodation under section 145 a confirmed 
reservation on a flight, or can the carrier place the passenger on a 
``standby'' list?
    Answer 17: The carrier may place the passenger on a standby list.
    Question 18: Assuming that the transportation provided under 
section 145 is on a standby basis and that a carrier does not normally 
create reservation records for standby passengers, how can an air 
carrier determine if a passenger had in fact made alternative 
arrangements with it within the 60-day window? If an air carrier cannot 
make such a determination, can it refuse to transport such a passenger? 
For example, Carrier A goes bankrupt and ceases all service on July 1. 
Jane Doe, who was ticketed by Carrier A on a flight scheduled for 
November 1, makes alternative arrangements with Carrier B on July 2 for 
a flight on Carrier B scheduled for November 1. Jane Doe subsequently 
presents herself as a standby passenger to Carrier B on November 1, but 
Carrier B has no record that Doe made the requisite alternative 
arrangements within the 60-day window since it did not create a 
reservation record when Jane Doe contacted it on July 2.
    Answer 18: While the burden is in the first instance on a passenger 
to prove that he or she was ticketed for travel on the carrier that has 
ceased operations and has complied with the 60-day provision, after the 
passenger has done so, the burden of proof shifts to the carrier that 
is requested to provide alternate transportation if the carrier asserts 
that it has no obligation to transport the passenger on a space-
available basis. Thus, while we do not proposed to prescribe how 
carriers are to meet that burden of proof, a carrier may not refuse 
transportation under the 60-day provision if a properly ticketed 
passenger asserts that he or she complied with that requirement and was 
promised alternate transportation on a particular day, and the carrier 
has no evidence to the contrary merely because the carrier elected not 
to institute some method of monitoring requests for alternate 
transportation required under section 145.
    Question 19: Under section 145, can an air carrier refuse to 
transport an otherwise qualified passenger ticketed

[[Page 33936]]

by a bankrupt air carrier on the basis that the passenger was issued an 
``e-ticket'' for the bankrupt carrier's flight?
    Answer 19: No. However, the carrier can request reasonable proof 
that the passenger purchased a ticket. As stated in our prior notices, 
reasonable proof of purchase could be receipts and printed itineraries.
    Question 20: Generally, an airline's contract of carriage states 
that, in the event of a change of schedule (such as a cessation of 
service in a market), the carrier's obligation is to reroute the 
passenger at no additional cost (it could be on its own service or that 
of another carrier) or, if the rerouting is unacceptable to the 
passenger, provide a full refund. Many bankruptcies involve carriers 
that continue to operate under Chapter 11 of the Bankruptcy Code and 
are authorized by the bankruptcy court to continue to operate their 
systems on a ``business-as-usual'' basis. In many or all such Chapter 
11 cases, the bankrupt carrier petitions the court to permit refunds to 
pre-petition passengers to cover situations where, absent the 
bankruptcy, a refund would have been due. Do other air carriers have a 
section 145 obligation if:
     (a) A bankruptcy court permits the carrier to provide a 
refund but the consumer does not want the refund and also does not want 
to accept being rerouted on the bankrupt carrier?
     (b) Whether or not the bankruptcy court permits a refund, 
the bankrupt carrier is able to reroute passengers affected by a 
cessation of service on certain other carriers at no additional charge 
to the passenger in the way that the airline likely would have done 
through its interline agreements in the absence of the bankruptcy?
    Answer 20: Under either circumstance, if the bankrupt airline can 
reroute the passenger to his or her destination on another of its own 
flights or pursuant to an agreement with another carrier, the passenger 
must accept this alternate arrangement, or a full refund, if 
applicable. (See Question and Answer numbers 7 and 10 above.)
    Question 21: Can a carrier that is obligated to provide alternate 
transportation on a space-available basis under section 145 to 
passengers of a carrier that has ceased operations offer those 
passengers confirmed space at any price in lieu of the space-available 
option? What if the passenger accepts the offer and learns while 
checking in for the flight that standby seats are available?
    Answer 21: A carrier may seek to accommodate passengers in such a 
manner, provided it makes clear to the passenger that the offer of a 
confirmed seat for the price set by the carrier is an alternative to 
being provided a space-available seat under section 145 and acceptance 
is the passenger's option. Where such an election is made by a 
passenger after full and accurate disclosure of his or her options 
under section 145, including (if known) the availability of stand-by 
seats, the passenger cannot later demand a refund (under terms not 
otherwise applicable to his or her ticket) and seek to travel under 
section 145 if, for example, the passenger shows up for the reserved 
flight and discovers stand-by seats will be available.

Questions 22 Through 28 Refer to Code Share Issues

    Question 22: When considering the definition of a ``route,'' does a 
carrier's obligation under section 145 to provide alternate 
transportation apply only to routes on which it operates its own 
aircraft or does it also apply to code share operations where another 
carrier operates the aircraft?
    Answer 22: The legislation does not address this issue and 
accordingly we believe that the answer depends on whether it is 
``practicable'' for the carrier to provide alternate transportation 
under the code share arrangement. As stated in section 145, Congress 
only required alternate transportation ``to the extent practicable.'' 
There are several circumstances that might make it impractical for a 
carrier to provide transportation under section 145 on routes on which 
it offers only code share service. For example, a carrier's code share 
agreement may not give it access to the inventory of the carrier 
operating the aircraft nor the authority to provide stand-by service. 
By contrast, where the code share carrier does have access to the 
inventory of the operating carrier and the ability to put passengers on 
a standby list, it likely would be ``practicable'' to provide alternate 
transportation. (It appears to the Department that this would be the 
case in most, if not all, code share relationships between domestic 
regional affiliates and major carriers.)
    There may be circumstances specific to code share arrangements, 
particularly in foreign markets, where an accommodating carrier's cost 
for providing transportation on its code share partner's aircraft may 
bear no relationship to the maximum direct costs specifically allocated 
to providing the transportation to that passenger. In such 
circumstances, the accommodating code sharing carrier may charge, in 
addition to the $50.00 fee, whatever additional amount is necessary to 
cover that specific direct transportation cost to the carrier to 
transport that passenger. Should the passenger dispute the charge, the 
carrier will have the burden of demonstrating that the additional 
amount charged is justified.
    Question 23 (Both U.S. air carriers): Carrier A and Carrier B, both 
U.S. air carriers, have a code share agreement in which Carrier A 
operates the flight. Carrier A ceases operations by reason of 
bankruptcy or insolvency. What requirements exist, pursuant to section 
145, with regard to passengers of Carrier A and Carrier B?
    Answer 23: Other U.S. air carriers have an obligation under section 
145 to provide transportation to passengers ticketed for transportation 
on Carrier A on its flight. Under section 145, no such obligation 
exists for passengers ticketed for transportation on Carrier B, because 
Carrier B was not the entity that ceased operations. Carrier B would, 
however, have obligations to the passengers holding tickets for 
transportation on it as set forth in its contract of carriage.
    Question 24 (Both U.S. air carriers): Same as question 23, with 
Carrier A operating the flight, but Carrier B ceases operations due to 
bankruptcy.
    Answer 24: Other U.S. air carriers, including Carrier A, have an 
obligation under section 145 to provide transportation to passengers 
ticketed for transportation on Carrier B. No such obligation attaches 
to passengers ticketed for transportation on Carrier A, because it has 
not ceased operations.
    Question 25 (U.S. and Foreign air carriers): Carrier A, a U.S. air 
carrier, and Carrier B, a foreign air carrier, have a code share 
agreement in which U.S. Carrier A operates the flight. U.S. Carrier A 
ceases operations by reason of bankruptcy or insolvency. What 
requirements exist, pursuant to section 145, with regard to passengers 
of U.S. Carrier A and Foreign Carrier B?
    Answer 25: Other U.S. air carriers have an obligation under section 
145 to provide transportation to a passenger ticketed for 
transportation on a flight of U.S. Carrier A. No such obligation exists 
with respect to passengers ticketed for transportation on Foreign 
Carrier B, because section 145 applies only to passengers of a U.S. air 
carrier that actually ceases operations due to bankruptcy or insolvency 
and Carrier B is a foreign air carrier. Foreign carrier B has no 
obligation under section 145 to passengers ticketed for transportation 
on U.S. Carrier A.
    Question 26 (U.S. and Foreign air carriers): Same as Question 25 
except that Carrier B, the foreign air carrier, ceases operations due 
to bankruptcy on

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a codeshare route on which U.S. Carrier A operates the flight.
    Answer 26: Other U.S. air carriers, including U.S. Carrier A, have 
no obligation under section 145 to provide alternate transportation to 
passengers ticketed by Carrier B, because it is a foreign carrier. Our 
interpretation here with respect to U.S. Carrier A is limited to its 
obligation pursuant to section 145, however, and does not consider any 
other obligation that it may have to carry the passengers of its code 
share partner, Foreign Carrier B.
    Question 27 (U.S. and Foreign air carriers): Carrier A, a U.S. air 
carrier, and Carrier B, a foreign air carrier, have a code share 
agreement in which Foreign Carrier B operates the flight. U.S. Carrier 
A ceases operations by reason of bankruptcy or insolvency. What 
requirements exist, pursuant to section 145, with regard to passengers 
of U.S. Carrier A and Foreign Carrier B?
    Answer 27: Other U.S. air carriers have an obligation under section 
145 to provide transportation to passengers ticketed by U.S. Carrier A, 
because it ceased operations on a route due to bankruptcy. Foreign 
Carrier B has no obligation under section 145 to transport the 
passengers of U.S. Carrier A, because section 145 applies only to U.S. 
carriers. Our interpretation here is limited to Foreign Carrier B's 
obligation pursuant to section 145, however, and does not consider any 
other obligation that it may have to carry the passengers of its code 
share partner, U.S. Carrier A.
    Question 28 (U.S. and Foreign air carriers): Same as Question 27, 
except that Foreign Carrier B ceases operations due to bankruptcy on a 
code share route on which it operates the flight, leaving passengers 
ticketed by U.S. Carrier A without lift.
    Answer 28: Other U.S. air carriers have no obligation under section 
145 to provide transportation to passengers ticketed by U.S. Carrier A, 
because it has not ceased operations on a route due to insolvency or 
bankruptcy and no obligation to transport passengers ticketed by 
Foreign Carrier B, since it is a foreign carrier. Carrier A would, 
however, have obligations to the passengers holding tickets for 
transportation on it as set forth in its contract of carriage.

[FR Doc. 05-11537 Filed 6-9-05; 8:45 am]
BILLING CODE 4910-62-P