[Federal Register Volume 72, Number 223 (Tuesday, November 20, 2007)]
[Proposed Rules]
[Pages 65237-65246]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-5761]


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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Part 250

[Docket No. DOT-OST-01-9325]
RIN No. 2105-AD63


Oversales and Denied Boarding Compensation

AGENCY: Office of the Secretary (OST), Department of Transportation 
(DOT).

ACTION: Notice of Proposed Rulemaking (NPRM).

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SUMMARY: The Department of Transportation (DOT or Department) is 
proposing to amend its rules relating to oversales and denied boarding 
compensation to increase the limits on the compensation paid to 
``bumped'' passengers, to cover flights by certain U.S. and foreign air 
carriers operated with aircraft seating 30 to 60 passengers, which are 
currently exempt from the rule, and to make other changes. Such changes 
in the rule, if adopted, would be intended to maintain consumer 
protection commensurate with developments in the aviation industry.

DATES: Comments are requested by January 22, 2008. Late-filed comments 
will be considered to the extent practicable.

ADDRESSES: You may file comments identified by the docket number DOT-
OST-01-9325 by any of the following methods:
     Federal eRulemaking Portal: go to http://www.regulations.gov and follow the online instructions for submitting 
comments.
     Mail: Docket Management Facility, U.S. Department of 
Transportation, 1200 New Jersey Ave., SE., West Building Ground Floor, 
Room W12-140, Washington, DC 20590-0001.
     Hand Delivery or Courier: West Building Ground Floor, Room 
W12-140, 1200 New Jersey Ave., SE., between 9 a.m. and 5 p.m. ET, 
Monday through Friday, except Federal Holidays.
     Fax: (202) 493-2251.
    Instructions: You must include the agency name and docket number 
DOT-OST-01-9325 or the Regulatory Identification Number (RIN) for the 
rulemaking at the beginning of your comment. All comments received will 
be posted without change to http://www.regulations.gov, including any 
personal information provided.
    Privacy Act: Anyone is able to search the electronic form of all 
comments received in any of our dockets by the name of the individual 
submitting the comment (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.). You may review DOT's 
complete Privacy Act statement in the Federal Register published on 
April 11, 2000 (65 FR 19477-78), or you may visit http://DocketsInfo.dot.gov.
    Docket: For access to the docket to read background documents or 
comments received, go to http://www.regulations.gov or to the street 
address listed above. Follow the online instructions for accessing the 
docket.

FOR FURTHER INFORMATION CONTACT: Tim Kelly, Aviation Consumer 
Protection Division, Office of the General Counsel, Department of 
Transportation, 1200 New Jersey Ave., SE., Washington, DC 20590, 202-
366-5952 (voice), 202-366-5944 (fax), [email protected] (e-mail).

SUPPLEMENTARY INFORMATION: 

Background

    Part 250 establishes minimum standards for the treatment of airline 
passengers holding confirmed reservations on certain U.S. and foreign 
carriers who are involuntarily denied boarding (``bumped'') from their 
flights because they have been oversold. In most cases, bumped 
passengers are entitled to compensation. Part 250 contains limits on 
the amount of compensation that is required to be provided to 
passengers who are bumped involuntarily. The rule does not apply to 
flights operated with aircraft with a design capacity of 60 or fewer 
passenger seats.
    In adopting the original rule in the 1960's, the Civil Aeronautics 
Board (the Department's predecessor in aviation economic regulation) 
recognized the inherent unfairness in carriers selling more 
``confirmed'' ticketed reservations for a flight than they have seats. 
Therefore, the CAB sought to reduce the number of passengers 
involuntarily denied boarding to the smallest practicable number 
without prohibiting deliberate overbooking or interfering unnecessarily 
with the carriers' reservations practices. Air travelers

[[Page 65238]]

receive some benefit from controlled overbooking because it allows 
flexibility in making and canceling reservations as well as buying and 
refunding tickets. Overbooking makes possible a system of confirmed 
reservations that can almost always be honored. It allows airlines to 
fill more seats, reducing the pressure for higher fares, and makes it 
easier for people to obtain reservations on the flights of their 
choice. On the other hand, 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 current rule allocates the risk of denied boarding among 
travelers by requiring airlines to solicit volunteers and use a 
boarding priority procedure that is not unjustly discriminatory.
    In 1981, the CAB amended the oversales rule to exclude from the 
rule all operations using aircraft with 60 or fewer passenger seats. 
(ER-1237, 46 FR 42442, August 21, 1981.) At the time of that 
proceeding, the impact of the rule on carriers operating small aircraft 
was found to be significant. If a passenger was denied boarding on a 
typical small aircraft short-haul flight and subsequently missed a 
connection to a long-haul flight, the short-haul carrier usually had to 
compensate the passenger in an amount equal to twice the value of the 
passenger's remaining ticket coupons to his or her destination, subject 
to a maximum limitation. For example, if the short-haul fare was $50 
and the connecting long-haul fare was $500, the first carrier often had 
to pay the passenger denied boarding compensation in an amount far 
greater than $50, depending on whether alternate transportation could 
be arranged to arrive within a short time, despite the minimal fare 
that the first carrier received for its flight. The problem was 
exacerbated by the fact that most commuter airline flights at the time 
were on small turboprop and piston engine aircraft which were affected 
by weight limitations in high temperature/humidity conditions to a 
greater extent than jets and, therefore, might require bumping even 
when the carrier did not book beyond the seating capacity of the 
aircraft.
    Part 250 has tended to reduce passenger inconvenience and financial 
loss occasioned by overbooking without imposing heavy burdens on the 
airlines or significant costs on the traveling public. In focusing only 
on the treatment of passengers whose boarding is involuntarily denied, 
we have avoided regulating carriers' reservations practices. Overall, 
it appears that the rule has served a useful purpose; however, in light 
of recommendations from various sources, including Congress and major 
airlines themselves, we are proposing to revise certain aspects of the 
rule that may be outdated. In view of the passage of time since the 
rule was last revised and changes in commercial air travel over that 
time, we are seeking comment on whether we should increase the 
compensation maximums and extend the rule to cover a broader range of 
aircraft, or whether we should adopt other more fundamental changes to 
the rule. The Department is also seeking comment on certain other 
changes of lesser impact that are under consideration.

The Current Denied Boarding Compensation Rule

    The purpose of the Department's denied boarding compensation rule 
is to balance the rights of passengers holding reservations with the 
desirability of allowing air carriers to minimize the adverse economic 
effects of ``no-shows'' (passengers with reservations who cancel or 
change their flights at the last minute). The rule sets up a two-part 
system. The first encourages passengers to voluntarily relinquish their 
confirmed reservations in exchange for compensation agreed to between 
the passenger and the airline. The second requires that, where there is 
an insufficient number of volunteers, passengers who are bumped 
involuntarily be given compensation in an amount specified in the rule. 
In addition, the Department requires carriers to give passengers notice 
of those procedures through signs and written notices provided with 
tickets and at airports, and to report the number of passengers denied 
boarding to the Department on a quarterly basis.
    The Civil Aeronautics Board (CAB) first required payments to bumped 
passengers 45 years ago. In Order No. E-17914, dated January 8, 1962, 
the CAB conditioned its approval of ``no-show penalties'' for confirmed 
passengers on a requirement that bumped passengers be compensated. An 
oversales rule was adopted in 1967 as 14 CFR Part 250 (ER-503, 32 FR 
11939, August 18, 1967) and revised substantially in 1978 and 1982 
after comprehensive rulemaking proceedings (ER-1050, 43 FR 24277, June 
5, 1978 and ER-1306, 47 FR 52980, November 24, 1982, respectively). The 
key features of the current requirements are as follows:
    (1) In the event of an oversold flight, the airline must first seek 
volunteers who are willing to relinquish their seats in return for 
compensation offered by the airline.
    (2) If there are not enough volunteers, the airline must use non-
discriminatory procedures (``boarding priorities'') in deciding who is 
to be bumped involuntarily.
    (3) Most passengers who are involuntarily bumped are eligible for 
denied boarding compensation, with the amount depending on the price of 
each passenger's ticket and the length of his or her delay. If the 
airline can arrange alternate transportation that is scheduled to 
arrive at the passenger's destination within 2 hours of the planned 
arrival time of the oversold flight (4 hours on international flights), 
the compensation equals 100% of the passenger's one-way fare to his or 
her next stopover or final destination, with a $200 maximum. If the 
airline cannot meet the 2 (or 4) hour deadline, the compensation rate 
doubles to 200% of the passenger's one-way fare, with a $400 maximum. 
This compensation is in addition to the value of the passenger's 
ticket, which the passenger can use for alternate transportation or 
have refunded if not used.
    (4) There are several exceptions to the compensation requirement. 
Compensation is not required if the passenger does not comply fully 
with the carrier's contract of carriage or tariff provisions regarding 
ticketing, reconfirmation, check-in, and acceptability for 
transportation; if an aircraft of lesser capacity has been substituted 
for operational or safety reasons; if the passenger is offered 
accommodations in a section of the aircraft other than that specified 
on the ticket, at no extra charge (a passenger seated in a section for 
which a lower fare is charged is entitled to an appropriate refund); or 
if the carrier arranges comparable transportation, at no extra cost to 
the passenger, that is planned to arrive at the passenger's next 
stopover or final destination not later than 1 hour after the planned 
arrival time of the passenger's original flight.
    (5) A passenger who is denied boarding involuntarily may refuse to 
accept the denied boarding compensation specified in the rule and seek 
monetary or other compensation through negotiations with the carrier or 
by private legal action.
    (6) Carriers must post counter signs and include notices with 
tickets to alert travelers of their overbooking practices and the 
consumer protections of the rule. In addition, they must provide a 
detailed written notice explaining their oversales practices and 
boarding priority rules to each passenger involuntarily denied 
boarding, and to any other person requesting a copy.

[[Page 65239]]

    (7) Every carrier must report, on a quarterly basis, data on the 
number of denied boardings on flights that are subject to Part 250.

Discussion

    On July 10, 2007, the Department published an Advance Notice of 
Proposed Rulemaking (ANPRM) seeking comment on several issues 
associated with the oversales rule. We received over 1,280 comments in 
response to the ANPRM. About 20 of the comments were from 
organizations, with the rest from individuals. Most of the comments 
from the organizations, including those from air carriers and 
organizations representing air carriers, expressed the opinion that the 
rule serves a useful purpose and had benefited the industry and the 
public. Many of the individual comments did not express an opinion on 
the specific issues discussed in the ANPRM but rather urged that 
overbooking be banned, described their own negative air travel 
experiences, or commented on other issues (e.g., flight delays).
    In this Notice of Proposed Rulemaking we are not proposing to ban 
overbooking as many individual commenters urged. As indicated in the 
section above entitled ``The Current Denied Boarding Compensation 
Rule,'' air travelers receive some benefit from controlled overbooking. 
Overbooking makes possible a system of confirmed reservations that can 
almost always be honored. It allows airlines to fill more seats, 
reducing the pressure for higher fares, and makes it easier for people 
to obtain reservations on the flights of their choice. We are not aware 
of levels of consumer harm that require such a sweeping solution at 
this time, and banning overbooking is beyond the scope of our 
objectives in this proceeding. We believe that the additional oversale 
protections that we are proposing here will address the principal 
issues related to this regulation that require action by the 
Department.
    The issues that were presented in the ANPRM and a summary of the 
comments appear below.

The Maximum Amount of Denied Boarding Compensation

    It has been over 20 years since the rule was last revised, and the 
existing $200 and $400 limits on the amount of required denied boarding 
compensation for passengers involuntarily denied boarding have not been 
raised since 1978. The Department has received recommendations from 
various sources that it reexamine its oversales rule and, in 
particular, the maximum amounts of compensation set forth in the rule. 
In this regard, in a sense-of-the-Senate amendment to the Department of 
Transportation and Related Agencies Appropriations Act of 2000, Public 
Law 106-69, the Senate noted its sense that the Department should amend 
its denied boarding rule to double the applicable compensation amounts. 
Legislation has also been introduced in Congress to require the 
Department to review the rule's maximum amounts of compensation. (See 
S. 319, reported in the Senate April 26, 2001.) In addition, in his 
February 12, 2000, Final Report on Airline Customer Service 
Commitments, the Department's Inspector General (IG) recommended, among 
other things, that the airlines petition the Department to increase the 
amount of denied boarding compensation payable to involuntarily bumped 
passengers. In response thereto, and citing the length of time since 
the maximum amounts of denied boarding compensation were last revised, 
the Air Transport Association (the trade association of the larger U.S. 
airlines) filed a petition with the Department on April 3, 2001, 
requesting that a rulemaking be instituted to examine those amounts.\1\ 
(Docket DOT-OST-01-9325). Most recently, the IG on November 20, 2006, 
issued his ``Report on the Follow-up Review Performed of U.S. Airlines 
in Implementing Selected Provisions of the Airline Customer Service 
Commitment'' in which the IG recommended that we determine whether the 
maximum denied boarding compensation (DBC) amount needs to be increased 
and whether the oversales rule needs to be extended to cover aircraft 
with 31 through 60 seats.
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    \1\ It is important to note that the maximum involuntary denied 
boarding amounts set forth in Part 250 are amounts below which 
carriers cannot set their maximum compensation. Airlines have been 
and continue to be free, as a competitive tool, to set their maximum 
compensation levels at amounts greater than that provided in the 
Department's rule. With the exception of JetBlue Airways, whose 
recently changed policy is described below, we are not aware of any 
carrier that has elected to do so.
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    The CAB's decision in 1978 to double the maximum amount of denied 
boarding compensation to $400 was based on its determination that the 
previous maximum was inadequate to redress the inconvenience to bumped 
passengers and that the increase would provide a greater incentive to 
carriers to reduce the number of persons involuntarily bumped from 
their flights. Following promulgation of the amendment to the rule in 
1978 requiring the solicitation of volunteers and doubling the 
compensation maximum, the overall industry rate of involuntary denied 
boardings per 10,000 enplanements in fact declined for many years. 
Until 2007, the rate for the past decade has been slightly below the 
level of involuntary bumping reported 10 years ago. In this regard, 
55,828 passengers were involuntarily bumped from their flights in 2006 
on the 19 largest U.S. airlines (carriers whose denied boarding rate is 
tracked in the Department's monthly Air Travel Consumer Report \2\). 
Additional passengers were bumped by other airlines, whose denied 
boarding rate is not tracked in this report but whose bumped passengers 
are subject to the maximum compensation rates in the DOT rule. The 
annual rate of involuntary denied boardings per 10,000 enplanements in 
2006 for the carriers tracked in the report is the highest since 2000, 
and that trend continues in the rate for 2007 to date. Involuntary 
denied boarding rates from the Air Travel Consumer Report for the past 
ten years and 2007 to date appear below:
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    \2\ This report tracks the denied boarding rate of air carriers 
that each account for at least 1% of domestic scheduled-service 
passenger revenues for the previous year. Consequently, the list of 
carriers whose performance is tracked in this report can change from 
year to year.

------------------------------------------------------------------------
                                                             Invol. DB's
                            Year                              per 10,000
                                                              passengers
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1997.......................................................         1.06
1998.......................................................         0.87
1999.......................................................         0.88
2000.......................................................         1.04
2001.......................................................         0.82
2002.......................................................         0.72
2003.......................................................         0.86
2004.......................................................         0.86
2005.......................................................         0.89
2006.......................................................         1.01
2007 through 3rd quarter...................................         1.21
------------------------------------------------------------------------
(The table above has been updated from the one published in the ANPRM to
  include data for 2007 to date.)

    Likely contributing to this upward trend is the fact that flights 
are fuller: from 1978 to 2006 the system-wide load factor (percentage 
of seats filled) for U.S. airlines increased from 61.5% to 79.2%, with 
most of this increase taking place since 1994. The most-recently 
reported monthly load factors have hovered in the mid-80% range.
    With respect to the denied boarding compensation limits, inflation 
has eroded the $200 and $400 limits that were established in 1978. 
Using the Consumer Price Index for All Urban Consumers (CPI-U, the 
basis for the inflation adjustor in the Department's domestic baggage 
liability rule, 14 CFR 254.6), the July 2007 ANPRM noted that

[[Page 65240]]

$400 in 1978 was worth $128 as of February 2007 ($125 as of October 
2007). See the Bureau of Labor Statistics Inflation Calculator at 
http://www.bls.gov/cpi/home.htm. Stated another way, in order to have 
the same purchasing power today as in 1978, $400 would have needed to 
be $1,248 in February 2007 and $1,279 as of October 2007.
    At the same time, however, air fares have not risen to the same 
extent as the CPI-U. While historical comparisons of air fares are 
problematic, one frequently-used index for changes in air fares is 
passenger yield. Yield is passenger revenue divided by revenue 
passenger miles--the revenue collected by airlines for carrying one 
passenger for one mile. According to the Air Transport Association, 
system-wide nominal yield (i.e., not adjusted for inflation) for all 
reporting U.S. air carriers was 8.29 cents per revenue passenger mile 
in 1978 and 12.00 cents per revenue passenger mile in 2005 (latest 
available data at the time of the ANPRM)--an increase of 44.8%. The 
figure for 2006, which became available after the ANPRM was published, 
is 12.69 cents, an increase of 53.1% from the 1978 figure.
    Applying the CPI-U calculation to the current $200 and $400 DBC 
limits that were established in 1978 would produce updated limits of 
$624 and $1,248 respectively at the time of the ANPRM. However, the 
ANPRM noted that applying the 44.8% increase in passenger yield through 
2005 to the current $200 and $400 limits would produce updated limits 
of $290 and $580 respectively ($306 and $612 if the 2006 yield figure 
is used). It is important to note that the $200 and $400 figures in 
Part 250 are merely limits on the amount of denied boarding 
compensation; the actual compensation rate is 100% or 200% of the 
passenger's fare (depending on how long he or she was delayed by the 
bumping). In the ANPRM, the Department requested comment on whether the 
maximums in the rule should be increased so that that a higher 
percentage of denied boarding compensation payments are not ``capped'' 
by the limits.
    Consequently, in the ANPRM we sought comment on five options with 
respect to the limits on the amount of denied boarding compensation, as 
well as any other suggested changes:
    (1) Increase the $200/$400 limits to approximately $624 and $1,248 
respectively, based on the increase in the CPI as described above;
    (2) Increase the $200/$400 limits to approximately $290 and $580 
respectively, based on the increase in passenger yield as described 
above;
    (3) Double the maximum amounts of denied boarding compensation from 
$200 to $400 and from $400 to $800;
    (4) Eliminate the limits on compensation altogether, while 
retaining the 100% and 200% calculations;
    (5) Take no action, i.e. leave the current $200/$400 limits in 
place.
    It is important to note that none of these proposals would 
necessarily require carriers to offer more compensation to the great 
majority of passengers affected by overbooking because most such 
situations are handled through voluntary compensation, typically at the 
departure gate. Nor would they affect the significant proportion of 
involuntarily bumped passengers--possibly the majority--with fares low 
enough that the formula for involuntary denied boarding compensation 
would not reach the proposed new limits. Finally, even with respect to 
involuntarily bumped passengers whose denied boarding compensation 
might increase with higher maximums, many such passengers accept a 
voucher for future travel on that airline (usually in a face amount 
greater than the legally required denied boarding compensation) in lieu 
of a check. Carriers make such offers because vouchers do not have the 
same value as cash compensation given high rates of non-use and 
inventory-management restrictions.
Comments
    The vast majority of the comments in the docket are from 
individuals (as opposed to organizations). On the issue of the denied 
boarding compensation monetary limits, 79 of these individual 
commenters favored option 1--increase these limits to 
approximately $624 and $1,248 based on the increase in the CPI. 20 of 
the individual commenters were in favor of option 3, doubling 
the current limits to $400 and $800. Another 146 individual commenters 
expressed the opinion that the current limits should be increased but 
did not cite a specific amount. Two individual commenters favored an 
increase in the limits based on the increase in passenger yield (air 
fares), and three said that the limits should be eliminated (option 
4). None of the individual comments indicated that the 
Department should take no action (option 5).
    In its comments, the Air Transport Association (which represents 
the larger U.S. airlines) presented arguments it said justify the 
practice of overbooking and keeping compensation level as they now are. 
ATA noted that on most oversold flights there are enough volunteers and 
consequently no involuntary denied boardings. The organization stated 
that the real cost of air fares (i.e., adjusted for inflation) has 
fallen since the denied boarding compensation limits were last 
adjusted. According to ATA, the current caps are likely to exceed the 
required compensation levels (i.e., 100% or 200% of the bumped 
passenger's fare) in the large majority of cases. ATA believes that no 
adjustment in the compensation caps is warranted at this time, but if 
there is an adjustment, it should be based on the change in yield (air 
fares) because, the association asserted, denied boarding compensation 
amounts have always been tied to the passenger's fare.
    The International Air Transport Association, which represents 
international airlines worldwide, supported ATA's position that there 
should be no change in the limits. The Regional Airline Association 
shared this view as well. Like ATA, RAA went on to say that if the 
Department does adjust the limits it should do so based on the air 
fare/yield index rather than the CPI because denied boarding 
compensation has always been tied to airline ticket prices. The 
Association of Asia Pacific Airlines supported an increase in the caps 
based on the fare/yield index, for the same reasons cited by ATA and 
RAA.
    The National Air Carrier Association commented that no change in 
the compensation limits is necessary. If the Department were to make a 
change, this organization said that it would reluctantly support an 
increase based on fares/yields (option 2) or eliminating the 
caps altogether (option 4). NACA noted that adopting option 
4 would remove the need for periodic adjustments in the caps, 
which was another issue on which the ANPRM had sought comment.
    The American Society of Travel Agents states that adjusting the 
compensation limits based on the CPI is workable but acknowledges a 
disconnect between air fares and the CPI. Consequently, ASTA favors 
doubling the current limits, to strike a balance between the CPI and 
yield options and because of the simplicity of this approach.
    The Airports Council International--North America also favors 
doubling the caps, to $400 and $800. ACI-NA was concerned that the CPI 
option would set a limit that is inappropriately high while a limit 
based on air fares would capture only passengers with an ``average'' 
fare.
    Qantas Airways and Qatar Airways supports an increase on the caps 
that is

[[Page 65241]]

based on fares/yields. Air Pacific, JetBlue Airways, and Air Tahiti Nui 
oppose any increase, with the latter carrier emphasizing the industry's 
costs and slim profits. JetBlue, which notes that it does not 
intentionally oversell flights, points out that when it must 
unexpectedly deny boarding involuntarily, it pays the passenger 
$1,000--considerably more than the current regulatory formulas and 
limits and more than most of the proposed limits. JetBlue urges the 
Department to allow carrier competition to govern denied boarding 
compensation limits in this manner.
    The International Airline Passengers Association advocates option 
3, doubling the current limits. Like other commenters, it 
submits that air fares are not generally tied to inflation.
    The Air Crash Victims Families Group advocated increasing the 
compensation limits ``to the standard/value existing at the time the 
Regulation is put into force'' without specifying a methodology for the 
update. This group also urged the Department to ban overbooking with 
respect to prepaid tickets, harmonize its rule with the oversales rule 
of the European Community, mandate uniform boarding priorities for all 
carriers, and eliminate the exception to compensation for passengers 
bumped as a result of substitution of aircraft of lesser capacity.
    The Coalition for an Airline Passengers Bill of Rights suggests 
that the Department mandate denied boarding compensation in a flat 
amount of $1,000 regardless of the passenger's fare or the length of 
his/her delay--essentially the JetBlue policy.
    As indicated earlier, in 2006 over 55,000 passengers were denied 
boarding involuntarily by the 19 carriers that were tracked at that 
time in the Department's Air Travel Consumer Report (i.e., the 17 
largest U.S. air carriers and two voluntarily reporting carriers). We 
assume that an increase in the regulatory maximums would result in an 
increase in amounts paid to such passengers but we requested comment on 
the likely financial impact, including both the direct impact 
(increased cash compensation), and the indirect impact resulting from 
either lower overbooking rates or higher voluntary compensation levels. 
Although we received useful general comments, commenters provided very 
little data supporting the conclusion that any of the increases in 
denied boarding compensation on which we requested comment would have a 
significant financial impact on any segment of the industry.
Response to Comments
    The Department has decided to propose to amend its oversales rule 
to double the limits on involuntary denied boarding compensation from 
$200 to $400 for passengers who are rerouted within two hours (four 
hours internationally) and from $400 to $800 for passengers who are not 
rerouted within these timeframes. As many commenters pointed out, there 
is a significant air-fare component to the denied boarding compensation 
formula (100%/200% of the bumped passenger's fare), and air fares have 
risen less than the CPI. As indicated above, system-wide nominal yield 
(not adjusted for inflation) for all reporting U.S. air carriers, which 
is a frequently used index for changes in air fares, was 8.29 cents per 
revenue passenger mile in 1978 and 12.69 cents per revenue passenger 
mile in 2006, an increase of 53.1%. Nonetheless, we will not propose 
the ``fares/yield'' option from the ANPRM as the sole method for 
updating the compensation caps.
    Denied boarding compensation is intended in part to compensate for 
the passenger's inconvenience, lost time, and lost opportunities. The 
value of these considerations is linked to general inflation as well as 
to the cost of air fares. Therefore, the arguments of the carrier 
organizations about the decline in real (i.e., inflation-adjusted) air 
fares during that period are somewhat off the mark, because consumers 
live with some of the consequences of denied boarding in today's 
dollars, not 1978 dollars. As we indicated in the ANPRM, 30 years of 
inflation have also taken their toll on the value of the existing 
limits. As noted above, $400 in 1978 is worth $128 today, based on the 
change in the CPI-U. Therefore, we propose to base part of an increase 
in the compensation caps on the CPI-U.
    By proposing to double the existing limits we would blend these two 
approaches. The proposed limits fall between the higher figures that 
would be produced by the CPI option and the lower numbers that would 
result from the ``fares/yield'' option. We seek comment on this 
proposal, including any comments and justifications that were not 
already provided in response to the ANPRM about alternative amounts or 
methodologies.

Periodic Adjustment of the Limits

    In the ANPRM we also requested comment on whether we should amend 
the rule to include a provision for periodic adjustments to the denied 
boarding compensation maximums, as is required by our baggage liability 
rule (14 CFR part 254). As in the case of the baggage rule, we stated 
that the Department could review the CPI-U every two years, and adjust 
the maximum amounts accordingly. The new maximum DBC amounts could be 
rounded to the nearest $50, for simplicity. We suggested that any 
increase could be announced by publishing a notice in the Federal 
Register rather than first publishing a proposed rule to effectuate an 
increase. We requested comment on this approach.
Comments
    All 34 of the individuals who commented on this issue believed that 
the compensation limits should be adjusted on a regular basis.
    Many of the comments from organizations noted that denied boarding 
compensation is based on the bumped passenger's air fare and that air 
fares have risen more slowly than the CPI-U. RAA in particular stated 
that CPI can and often does move in the reverse direction of airline 
``yields'' (average fares). ATA opposed any periodic adjustment in the 
compensation caps. ASTA supports periodic adjustment based on the CPI 
as described in the ANPRM. The Association of Asia Pacific Airlines 
opposes adding an adjustment mechanism to the rule and recommends 
amending the caps only when necessary. The Air Crash Victims Families 
Group and the Coalition for an Airline Passengers Bill of Rights 
support regular CPI-based adjustment of the caps. The International 
Airline Passengers Association states that the caps ``should be tied to 
a periodic review process to enable adjustments if necessary.''
Response to Comments
    If the rule is adopted as proposed, we plan to institute a 
procedure of reviewing the compensation caps every two years. As part 
of this review, the Department would determine if the compensation caps 
should be adjusted based on both the CPI and the change in fare yields 
as we did in proposing the doubling of the caps to $400 and $800 in 
this NPRM (see above). We are, however, not proposing the approach 
described in the ANPRM of the periodic adjustment in the compensation 
caps being automatic (no additional comment period provided). Instead, 
we plan to institute a de novo rulemaking each time we seek to adjust 
the DBC maximum amount to allow the public an opportunity to provide 
input to the Department as to whether there are any reasons (not 
anticipated at the time of this rulemaking) not to increase the DBC

[[Page 65242]]

maximum amounts based on DOT's analysis. We seek comment on the 
advantages or disadvantages of the Department continually adjusting the 
denied boarding compensation maximum amounts through notice and comment 
rulemaking. Also, commenters who think that the proposed two-year 
period for considering adjustments to the compensation caps is not 
appropriate, or believe the frequency should be more or less than two 
years, should explain why and suggest alternate approaches.

The Small-Aircraft Exclusion

    The oversales rule originally issued by the CAB did not contain an 
exclusion for small aircraft. In 1981 that agency amended Part 250 to 
exclude operations with aircraft seating 60 or fewer passengers. The 
CAB determined that without this exclusion the denied boarding rule 
imposed a proportionately greater financial and operational burden on 
these small-aircraft operators than on carriers operating larger 
aircraft. In addition, because of the lower revenues generated by these 
small aircraft, the financial burden of denied boarding compensation 
placed certificated carriers operating aircraft with 60 or fewer seats 
at a competitive disadvantage relative to commuter carriers (non-
certificated) operating similar equipment and on similar routes which 
were not subject to Part 250. The number of flights that was excluded 
by the amendment was small and most such flights were operated by small 
carriers that operated small aircraft exclusively. Thus, Part 250 
currently applies to certificated U.S. carriers and foreign carriers 
holding a permit, or exemption authority, issued by the Department, 
only with respect to operations performed with aircraft seating more 
than 60 passengers.
    While largely exempt from the denied boarding rule, the regional 
airline industry has experienced tremendous growth. According to the 
Regional Airline Association \3\, passenger enplanements on regional 
carriers have increased more than 100% since 1995, and regional 
airlines now carry one out of every five domestic air travelers in the 
United States. RAA states that revenue passenger miles on regional 
carriers have increased 40-fold since 1978 and increased 17 percent 
from 2004 to 2005 alone. Regional jets have fueled much of the recent 
growth. According to RAA, from 1989 to 2004 the number of turbofan 
aircraft (regional jets) in the regional-airline fleet increased from 
54 to 1,628 and regional jets now make up 59% of the regional-carrier 
fleet. Although many regional jets have more than 60 passenger seats 
and thus are subject to Part 250, the ubiquitous 50-seat and smaller 
regional jet models have driven much of the growth of the regional-
carrier sector. Moreover, most regional jets are operated by regional 
carriers affiliated with a major carrier via a code-share agreement 
and/or an equity stake in the regional carrier. RAA asserts that 99% of 
regional airline passengers traveled on code-sharing regional airlines 
in 2005.
---------------------------------------------------------------------------

    \3\ See www.raa.org.
---------------------------------------------------------------------------

    DOT statistics demonstrate the growth in traffic on flights 
operated by aircraft with 31 through 60 seats. The ANPRM provided 
statistics through the fourth quarter of 2005, but information for 2006 
has subsequently become available. From the fourth quarter of 2002 
(earliest available consistent data) to 4Q 2006 the number of flights 
using aircraft with 31 through 60 seats increased by 13.5% while the 
number of flights using aircraft with more than 60 seats rose only 
3.4%. The number of passengers carried on flights using aircraft with 
31 through 60 seats increased by 34.9% from 4Q 2002 through 4Q 2006, 
while the number of passengers carried on flights using aircraft with 
more than 60 seats rose by only 12.1% during that period.\4\
---------------------------------------------------------------------------

    \4\ DOT Form 41, schedule T-100.
---------------------------------------------------------------------------

    The increased use of jet aircraft in the 30-to-60 seat sector 
accompanied by the increase in the ``branding'' of those operations 
with the codes and livery of major carriers has blurred the distinction 
between small-aircraft and large-aircraft service in the minds of many 
passengers. There would seem to be little, if any, difference to a 
consumer bumped from a small aircraft or a large aircraft--the effect 
is the same. The Department therefore sought comment on whether we 
should extend the consumer protections of Part 250 to these flights 
(including flights of non-certificated commuter air carriers) and thus 
scale back the small-aircraft exception that was added to the rule in 
1981. Specifically, the Department requested comment on whether it 
should reduce the seating-capacity exception for small aircraft from 
``60 seats or less'' to ``less than 30 seats'' and add commuter 
carriers to the list of carriers to which Part 250 applies. Since the 
Department is aware that many regional carriers already voluntarily 
provide DBC to passengers bumped from their 30-to-60-seat aircraft, 
commenters were specifically asked to include in their comments data 
regarding oversales and denied boarding compensation in operations with 
aircraft having 30 through 60 seats by both certificated and non-
certificated carriers, to the extent it is available.
Comments
    All 155 individuals who commented on this issue advocated extending 
the rule to aircraft with 30 through 60 seats. A couple of these 
commenters said it should only be extended to aircraft that operate 
flights in the name of a major carrier. More than half of the 155 
individual commenters on this issue said that the rule should also 
apply to aircraft with fewer than 30 seats.
    Among the organizations that commented, ATA urges the Department 
not to change the current exception for aircraft with 60 or fewer 
seats. It asserts that these aircraft not only are more susceptible 
than larger airplanes to unpredictable operational constraints, but 
that these aircraft often operate at smaller airports where shorter 
runways can limit capacity on hot days. RAA echoed the latter comment 
and also quoted from the preamble to the Civil Aeronautics Board's 1981 
oversales exemption for aircraft with 60 or fewer seats that 
acknowledged that these aircraft were ``assuming an increasingly 
significant role in the national air transportation system'' but 
concluded that the denied boarding compensation levels in the 
regulation would be a disproportionate penalty relative to the typical 
short-haul fare. RAA also noted the costs of complying with the same 
FAA rules as operators of larger aircraft and the disproportionate cost 
impact of suggested per-aircraft user fees.
    The Air Carrier Association of America (which represents certain 
low-fare airlines), the American Society of Travel Agents, the 
Association of Asia Pacific Airlines and JetBlue Airways are in favor 
of extending the oversales rule to operations using aircraft with 30 
through 60 seats for the reasons described in the ANPRM. JetBlue notes 
that even large aircraft are susceptible to load limits based on heat 
and altitude, and it asserts that 57% of the flights operated in August 
2007 for American, Continental, Delta, Northwest, United and U.S. 
Airways were on regional jets. [Some of those regional jets no doubt 
have more than 60 seats and thus are already subject to the oversales 
rule, but many are not.] ACAA provided data showing that regional jets 
account for half or nearly half of all departures at most hub airports. 
It notes that regional jets with more than 60 seats are subject to the 
rule while those with 60 or fewer seats are not.
    Peninsula Airways urges the Department not to extend the rule to

[[Page 65243]]

commuter operations solely within the state of Alaska, or in the 
alternative to expand the rule only to regional jets, e.g., by 
extending the regulation to aircraft with 35 or more seats rather than 
30 or more, thereby continuing to exempt the vast majority of propeller 
aircraft. Hawaii Island Air recommended that the rule only be extended 
to 30-through-60 seat aircraft operated by a carrier that also operates 
large aircraft.
Response to Comments
    For the reasons described in the ANPRM, we are proposing to extend 
the applicability of the oversales rule to flights using aircraft with 
30 or more seats. Since the time that the CAB exempted this sector of 
the industry from the rule in 1981, the vast majority of operations at 
this level have become affiliated and integrated with the ``brand'' of 
a major carrier. A higher percentage of these flights than was the case 
in 1981 are operated with larger aircraft in this under-60 seat 
exempted range (to a large extent regional jets), and are affected by 
weather constraints less frequently than aircraft with less than 30 
seats. In recent times, aircraft with 30 through 60 seats have been 
substituted for larger airplanes on numerous routes. The vast majority 
of the traffic that would be covered by this initiative is carried by 
airlines that are owned by or affiliated with a major carrier or its 
parent company. Moreover, a significant amount, if not most, of the 
service on such flights is provided under a ``fee-for-service'' 
arrangement, where a major carrier dictates the market, the schedule, 
and the price of the flight, and the tickets may not even be sold under 
the regional carrier's code so that the passenger's contract of 
carriage covering the transportation is solely with the major carrier. 
In such circumstances, the flights are for all legal and practicable 
purposes flights of the major carrier, not the regional airline, in 
which case the major carrier is responsible for providing denied 
boarding compensation on the flights of the smaller carrier. While we 
are sensitive to the operational challenges faced by operators of 
aircraft with 30 through 60 seats, we now believe that consumers who 
purchase transportation in this aircraft class are entitled to the 
protections of the oversales rule. Because this is a proposal, however, 
we invite additional comment on the issue of the seating capacity of 
the aircraft to which the rule should apply.

Boarding Priorities and Notice to Volunteers

    Boarding priority rules determine the order in which various 
categories of passengers will be involuntarily bumped when a flight is 
oversold. Part 250 states that boarding priority rules must not provide 
any undue or unreasonable preference. The IG in his 2000 report 
identified possible ambiguities in the Department's requirements 
regarding boarding priority rules, and he recommended that we provide 
examples of what we consider to be an undue or unreasonable preference. 
The IG was also concerned that the amounts of compensation provided 
passengers who are involuntarily bumped was in some cases less than the 
face value of vouchers given to passengers who volunteer to give up 
their seats. He therefore recommended, in addition to raising the 
maximum compensation amounts for involuntarily bumped passengers, as 
discussed above, that we require carriers to disclose orally to 
passengers, at the time the airline makes an offer to volunteers, what 
the airline is obligated to pay passengers who are involuntarily 
bumped.
    Our boarding priority requirement was designed to give carriers the 
maximum flexibility to set their own procedures at the gate, while 
affording consumers protection against unfair and unreasonable 
practices. Thus, the rule (1) requires that airlines establish their 
own boarding priority rules and criteria for oversale situations 
consistent with Part 250's requirement to minimize involuntary bumpings 
and (2) states that those boarding priority rules and criteria ``shall 
not make, give, or cause any undue or unreasonable preference or 
advantage to any particular person or subject any particular person to 
any unjust or unreasonable prejudice or disadvantage in any respect 
whatsoever.'' (14 CFR 250.3(a))
    Although we are not aware of any problems resulting from this rule 
as written, we agree that guidance regarding this provision would be 
useful to the industry and public alike.
    Accordingly, in the ANPRM we requested comment on whether the 
Department should list in the rule, as examples of permissible boarding 
priority criteria, the following:
     A passenger's time of check in (first-come, first-served);
     Whether a passenger has a seat assignment before reaching 
the departure gate for carriers that assign seats;
     A passenger's fare;
     A passenger's frequent flyer status; and
     Special priorities for passengers with disabilities, 
within the meaning of 14 CFR part 382, or for unaccompanied minors.
    We stated in the ANPRM that the five examples proposed here are 
illustrative only, and not exclusive. We did not intend by these 
examples to foreclose the use by carriers of other boarding priorities 
that do not give a passenger undue preference or unjustly prejudice any 
passenger.
    Accurately notifying passengers of their rights in an oversale 
situation is important, so that they can make an informed decision. 
Part 250 already contains requirements designed to accomplish that 
objective and to protect passengers from being involuntarily bumped if 
they have not been accorded adequate notice. Section 250.2b(b) 
prohibits a carrier from denying boarding involuntarily to any 
passenger who was earlier asked to volunteer without having been 
informed about the danger of being denied boarding involuntarily and 
the amount of compensation that would apply if that occurred. While 
this provision would appear to provide adequate incentive for airlines 
to provide complete notice to passengers who are asked to volunteer, 
and to protect those passengers not provided such notice, we see some 
merit in making this notice requirement more direct. Accordingly, we 
seek comment on whether we should amend section 250.2b to affirmatively 
require that, no later than the time a carrier asks a passenger to 
volunteer, it inform that person whether he or she is in danger of 
being involuntarily bumped and, if so, the compensation the carrier is 
obligated to pay.
Comments
    There were only a handful of individual comments on the issue of 
boarding priorities; most of them favored the Department's proposal. 
There was virtually no comment from individuals about the volunteer 
notice.
    Most of the commenters from the airline industry and IAPA stated 
that it is not necessary to list specific permissible boarding 
priorities. Some of the industry commenters said that they do not 
oppose this as long as it's clear that the list is illustrative and 
does not restrict carriers from having other boarding priorities. 
(Boarding priorities must be disclosed in the written notice required 
by section 250.9 of the rule.) The Air Crash Victims Families Group 
urged the Department to mandate uniform boarding priorities for all 
carriers. The Coalition for an Airline Passenger Bill of Rights stated 
that carriers should be required to make

[[Page 65244]]

boarding priorities more widely available; it also urges the Department 
to prohibit boarding priorities that are based on the passenger's fare.
    The industry commenters as a group opposed the proposal to provide 
additional notice to volunteers, stating that it was unduly 
restrictive. The consumer organizations did not comment on this issue.
Response to Comments
    For the reasons articulated in the ANPRM and summarized above, and 
consistent with the recommendation of the IG, we propose to revise the 
rule to affirmatively require that, no later than the time a carrier 
asks a passenger to volunteer, it inform that person whether he or she 
is in danger of being involuntarily bumped and, if so, the compensation 
the carrier is obligated to pay, and to list the following examples of 
permissible boarding priority criteria:
     A passenger's time of check in (first-come, first-served);
     Whether a passenger has a seat assignment before reaching 
the departure gate for carriers that assign seats;
     A passenger's fare;
     A passenger's frequent flyer status; and
     Special priorities for passengers with disabilities, 
within the meaning of 14 CFR part 382, or for unaccompanied minors.
    As we stated in the ANPRM, we propose that these five examples be 
illustrative only, and not exclusive.

Reporting

    Section 250.10 of the current rule requires all carriers that are 
subject to Part 250 to file a quarterly report (Form 251) on oversale 
activity. Due to staffing limitations, for many years the only carriers 
whose oversale data have been routinely reviewed, entered into an 
automated system, or published by the Department are the airlines that 
are subject to the on-time performance reporting requirement. Those are 
the U.S. carriers that each account for at least 1 percent of total 
domestic scheduled-service passenger revenues--currently 20 airlines 
(see 14 CFR 234). For a current list of these carriers, see the 
Department's Air Travel Consumer Report at http://airconsumer.ost.dot.gov/reports/index.htm. This report provides data 
for these airlines in four areas: On-time performance, baggage 
mishandling, oversales, and consumer complaints. The oversale data for 
that report are derived from the Form 251 reports mandated by Part 250. 
The data in the Form 251 reports filed by the other carriers is not 
keypunched, summarized, published, or routinely reviewed.
    In the ANPRM the Department requested comment on whether it should 
revise section 250.10 to relieve all carriers of this reporting 
requirement except for the airlines whose data is being used, i.e., 
U.S. carriers reporting on-time performance under Part 234. Those 
airlines account for the vast majority of domestic traffic and 
bumpings, so the Department will still receive adequate information and 
the public will continue to have access to published data for the same 
category of carriers as before. Such action would be consistent with 
the Paperwork Reduction Act and the Regulatory Flexibility Act. It 
would also result in consistent carrier reporting requirements for all 
four sections of the Air Travel Consumer Report.
Comments
    Only four of the individual commenters expressed an opinion on this 
issue; all four of them favored the Department's proposal. ATA and 
JetBlue believe that this reporting requirement should be retained. The 
other industry commenters supported the proposal to eliminate this 
requirement for all but the ATCT-reported carriers. The consumer 
organizations did not weigh in on this issue.
Response to Comments
    For the reasons articulated in the ANPRM and summarized above, we 
propose to revise the rule to relieve all carriers of this reporting 
requirement except for ``reporting carriers'' as defined in 14 CFR 
234.2 and any carrier that voluntarily submits data pursuant to section 
234.7 of that part. At the present time this is 20 airlines.

Regulatory Notices

A. Executive Order 12866 (Regulatory Planning and Review) and DOT 
Regulatory Policies and Procedures

    This action has been determined to be significant under Executive 
Order 12866 and the Department of Transportation Regulatory Policies 
and Procedures. It has been reviewed by the Office of Management and 
Budget under that Order. A preliminary discussion of possible costs and 
benefits of the proposed rule is presented above and in the 
accompanying Regulatory Evaluation. The Regulatory Evaluation concluded 
that the benefits of the proposals appear to exceed the costs. A copy 
of the Regulatory Evaluation has been placed in the docket.

B. Executive Order 13132 (Federalism)

    This Notice of Proposed Rulemaking has been analyzed in accordance 
with the principles and criteria contained in Executive Order 13132 
(``Federalism''). This notice does not propose any regulation that: (1) 
Has substantial direct effects on the States, the relationship between 
the national government and the States, or the distribution of power 
and responsibilities among the various levels of government; (2) 
imposes substantial direct compliance costs on State and local 
governments; or (3) preempts state law. Therefore, the consultation and 
funding requirements of Executive Order 13132 do not apply.

C. Executive Order 13084

    This notice has been analyzed in accordance with the principles and 
criteria contained in Executive Order 13084 (``Consultation and 
Coordination with Indian Tribal Governments''). Because none of the 
options on which we are seeking comment would significantly or uniquely 
affect the communities of the Indian tribal governments and would not 
impose substantial direct compliance costs, the funding and 
consultation requirements of Executive Order 13084 do not apply.

D. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires an 
agency to review regulations to assess their impact on small entities 
unless the agency determines that a rule is not expected to have a 
significant economic impact on a substantial number of small entities. 
Certain elements of these proposed rules may impose new requirements on 
certain small air carriers, but the Department believes that the 
economic impact would not be significant. All air carriers have control 
over the extent to which the rule impacts them since they control their 
own overbooking rates. Carriers can mitigate the cost of denied 
boarding compensation by obtaining volunteers who are willing to give 
up their seat for less compensation than what the rule mandates for 
passengers who are bumped involuntarily, and by offering travel 
vouchers in lieu of cash compensation.
    The vast majority of the traffic that would be covered by the 
oversales rule for the first time as a result of the options on which 
we seek comment is carried by airlines that are owned by or affiliated 
with a major carrier or its parent company. Moreover, a significant 
amount, if not most, of the service on such flights is provided under a 
``fee-for-service'' arrangement, where a major

[[Page 65245]]

carrier dictates the market, the schedule, and the price of the flight, 
and the tickets may not even be sold under the regional carrier's code 
so that the passenger's contract of carriage covering the 
transportation is solely with the major carrier. In such circumstances, 
the flights are for all legal and practical purposes flights of the 
major carrier, not the regional airline, in which case the major 
carrier is responsible for providing denied boarding compensation on 
the flights of the smaller carrier. The monetary costs of most of these 
options result in a corresponding dollar-for-dollar monetary benefit 
for members of the public who are bumped from their confirmed flights 
and for small businesses that employ some of them. The options provide 
an economic incentive for carriers to use more efficient overbooking 
rates that result in fewer bumpings while still allowing the carriers 
to fill seats that would go unsold as the result of ``no-show'' 
passengers. It is worth noting that one of the options on which we are 
seeking comment relieves an existing reporting requirement for all but 
the largest carriers. For all these reasons, I certify that this rule, 
if adopted, would not have a significant economic impact on a 
substantial number of small entities.

E. Paperwork Reduction Act

    The provisions that we are proposing impose no new information 
reporting or recordkeeping necessitating clearance by the Office of 
Management and Budget. They relieve a reporting requirement for many 
carriers that are currently subject to that requirement. One required 
handout that airlines distribute to bumped passengers would require 
minor revisions.

F. Unfunded Mandates Reform Act

    The Department has determined that the requirements of Title II of 
the Unfunded Mandates Reform Act of 1995 do not apply to this notice.

List of Subjects in 14 CFR Part 250

    Air carriers, Consumer protection, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, we propose to amend 14 
CFR part 250 as follows:

PART 250--[AMENDED]

    1. The authority citation for part 250 continues to read as 
follows:

    Authority: 49 U.S.C. chapters 401, 411, 413, 417.

    2. Section 250.1 is amended by removing the definition of ``large 
aircraft'' and revising the definition of ``Carrier'' to read as 
follows:


Sec.  250.1  Definitions.

* * * * *
    Carrier means:
    (1) A direct air carrier, except a helicopter operator, holding a 
certificate issued by the Department pursuant to 49 U.S.C. 41102 or 
that has been found fit to conduct commuter operations under 49 U.S.C. 
41738, authorizing the scheduled transportation of persons; or
    (2) A foreign route air carrier holding a permit issued pursuant to 
49 U.S.C. 41302, or an exemption from that provision, authorizing the 
scheduled foreign air transportation of persons.
* * * * *
    3. Section 250.2 is revised to read as follows:


Sec.  250.2  Applicability.

    This part applies to every carrier, as defined in Sec.  250.1, with 
respect to flight segments using an aircraft that has a designed 
passenger capacity of 30 or more passenger seats, operating in 
interstate air transportation or foreign air transportation with 
respect to nonstop flight segments originating at a point within the 
United States.
    4. In Sec.  250.2b paragraph (b) is amended by removing the last 
sentence and adding a new first sentence to read as follows:


Sec.  250.2b  Carriers to request volunteers for denied boarding.

* * * * *
    (b) Every carrier shall advise each passenger solicited to 
volunteer for denied boarding, no later than the time the carrier 
solicits that passenger to volunteer, whether he or she is in danger of 
being involuntarily denied boarding and, if so, the compensation the 
carrier is obligated to pay if the passenger is involuntarily denied 
boarding.
    5. Section 250.3(b) is added to read as follows:


Sec.  250.3  Boarding priority rules.

* * * * *
    (b) The Department has determined that acceptable boarding priority 
factors may include, but are not limited to, the following:
    (1) A passenger's time of check in;
    (2) Whether a passenger has a seat assignment before reaching the 
departure gate for carriers that assign seats;
    (3) The fare paid by a passenger;
    (4) A passenger's frequent-flyer status; and
    (5) A passenger's disability or status as an unaccompanied minor.
    6. Section 250.5(a) is revised to read as follows:


Sec.  250.5  Amount of denied boarding compensation for passengers 
denied boarding involuntarily.

    (a) Subject to the exceptions provided in Sec.  250.6, a carrier to 
whom this part applies as described in Sec.  250.2 shall pay 
compensation to passengers denied boarding involuntarily from an 
oversold flight at the rate of 200 percent of the fare (including any 
surcharges and air transportation taxes) to the passenger's next 
stopover, or if none, to the passenger's final destination, with a 
maximum of $800. However, the compensation shall be one-half the amount 
described above, with a $400 maximum, if the carrier arranges for 
comparable air transportation [see section 250.1], or other 
transportation used by the passenger that, at the time either such 
arrangement is made, is planned to arrive at the airport of the 
passenger's next stopover, or if none, the airport of the passenger's 
final destination, not later than 2 hours after the time the direct or 
connecting flight from which the passenger was denied boarding is 
planned to arrive in the case of interstate air transportation, or 4 
hours after such time in the case of foreign air transportation.
* * * * *
    7. Section 250.9(b) is revised to read as follows:


Sec.  250.9  Written explanation of denied boarding compensation and 
boarding priorities.

* * * * *
    (b) The statement shall read as follows:

Compensation for Denied Boarding

    If you have been denied a reserved seat on (name of air 
carrier), you are probably entitled to monetary compensation. This 
notice explains the airline's obligation and the passenger's rights 
in the case of an oversold flight, in accordance with regulations of 
the U.S. Department of Transportation.

Volunteers and Boarding Priorities

    If a flight is oversold (more passengers hold confirmed 
reservations than there are seats available), no one may be denied 
boarding against his or her will until airline personnel first ask 
for volunteers who will give up their reservation willingly, in 
exchange for a payment of the airline's choosing. If there are not 
enough volunteers, other passengers may be denied boarding 
involuntarily in accordance with the following boarding priority of 
(name of air carrier): (In this space the carrier inserts its 
boarding priority rules or a summary thereof, in a manner to be 
understandable to the average passenger.)

[[Page 65246]]

Compensation for Involuntary Denied Boarding

    If you are denied boarding involuntarily, you are entitled to a 
payment of ``denied boarding compensation'' from the airline unless: 
(1) you have not fully complied with the airline's ticketing, check-
in and reconfirmation requirements, or you are not acceptable for 
transportation under the airline's usual rules and practices; or (2) 
you are denied boarding because the flight is canceled; or (3) you 
are denied boarding because a smaller capacity aircraft was 
substituted for safety or operational reasons; or (4) you are 
offered accommodations in a section of the aircraft other than 
specified in your ticket, at no extra charge (a passenger seated in 
a section for which a lower fare is charged must be given an 
appropriate refund); or (5) the airline is able to place you on 
another flight or flights that are planned to reach your next 
stopover or final destination within one hour of the planned arrival 
time of your original flight.

Amount of Denied Boarding Compensation

    Passengers who are eligible for denied boarding compensation 
must be offered a payment equal to their one-way fare to their 
destination (including connecting flights) or first stopover of four 
hours or longer, with a $400 maximum. However, if the airline cannot 
arrange ``alternate transportation'' (see below) for the passenger, 
the compensation is doubled ($800 maximum). The fare upon which the 
compensation is based shall include any surcharge and air 
transportation tax.
    ``Alternate transportation'' is air transportation (by any 
airline licensed by DOT) or other transportation used by the 
passenger which, at the time the arrangement is made, is planned to 
arrive at the passenger's next scheduled stopover of four hours or 
longer or, if none, the passenger's final destination, no later than 
2 hours (for flights between U.S. points, including territories and 
possessions) or 4 hours (for international flights) after the 
passenger's originally scheduled arrival time.

Method of Payment

    Except as provided below, the airline must give each passenger 
who qualified for involuntary denied boarding compensation a payment 
by cash or check for the amount specified above, on the day and at 
the place the involuntary denied boarding occurs. If the airline 
arranges alternate transportation for the passenger's convenience 
that departs before the payment can be made, the payment shall be 
sent to the passenger within 24 hours. The air carrier may offer 
free or discounted transportation in place of the cash payment. In 
that event, the carrier must disclose all material restrictions on 
the use of the free or discounted transportation before the 
passenger decides whether to accept the transportation in lieu of a 
cash or check payment. The passenger may insist on the cash/check 
payment or refuse all compensation and bring private legal action.

Passenger's Options

    Acceptance of the compensation may relieve (name of air carrier) 
from any further liability to the passenger caused by its failure to 
honor the confirmed reservation. However, the passenger may decline 
the payment and seek to recover damages in a court of law or in some 
other manner.
* * * * *


Sec.  250.10  [Amended]

    8. In the first sentence of Sec.  250.10, the word ``carrier'' is 
replaced with the phrase ``reporting carrier as defined in 14 CFR 234.2 
and any carrier that voluntarily submits data pursuant to section 234.7 
of that part.''
    9. Section 250.11(a) is revised to read as follows:


Sec.  250.11  Public disclosure of deliberate overbooking and boarding 
procedures.

    (a) Every carrier shall cause to be displayed continuously in a 
conspicuous public place at each desk, station and position in the 
United States which is in the charge of a person employed exclusively 
by it, or by it jointly with another person, or by any agent employed 
by such air carrier or foreign air carrier to sell tickets to 
passengers, a sign located so as to be clearly visible and clearly 
readable to the traveling public, which shall have printed thereon the 
following statement in boldface type at least one-fourth of an inch 
high:

Notice--Overbooking of Flights

    Airline flights may be overbooked, and there is a slight chance 
that a seat will not be available on a flight for which a person has a 
confirmed reservation. If the flight is overbooked, no one will be 
denied a seat until airline personnel first ask for volunteers willing 
to give up their reservation in exchange for compensation of the 
airline's choosing. If there are not enough volunteers, the airline 
will deny boarding to other persons in accordance with its particular 
boarding priority. With few exceptions, including failure to comply 
with the carrier's check-in deadline (carrier shall insert either ``of 
---- minutes prior to each flight segment'' or ``(which are available 
upon request from the air carrier)'' here), persons denied boarding 
involuntarily are entitled to compensation. The complete rules for the 
payment of compensation and each airline's boarding priorities are 
available at all airport ticket counters and boarding locations. Some 
airlines do not apply these consumer protections to travel from some 
foreign countries, although other consumer protections may be 
available. Check with your airline or your travel agent.
* * * * *

    Issued this 15th day of November, 2007, at Washington, DC.
Michael W. Reynolds,
Deputy Assistant Secretary for Aviation and International Affairs.
[FR Doc. 07-5761 Filed 11-15-07; 4:15 pm]
BILLING CODE 4910-9X-P