US airlines may soon face cash penalties for delayed flights

IF YOU have flown domestic in the United States in the last four years, you have likely faced at least one or two flight delays or cancellations-or worse, complete system outages-and found yourself footing the bill, without recourse from the airlines.

But there’s potential relief on the horizon. The Biden Administration is working full steam ahead on a proposed rule that would require US airlines to provide compensation to passengers for controllable cancellations or delays of three hours or more. It may be issued as early as January 2025 and is expected to be a game changer for US passengers and the US aviation industry.

“This is not radical-we are late to the game on this as a country,” said Michael Negron, special assistant to the President for economic policy at the White House, speaking at an invitation-only meeting in Washington on Sep 10.  

This proposed compensation scheme would mean US airlines would have to pay a set cash payment amount to each passenger on a disrupted flight, in addition to compensation for meals and lodging. The exact details and amounts are still being worked out.

A similar scheme has been in existence in the European Union for the past 20 years, which is applicable to US airlines when they operate internationally. EU rules require airlines to compensate travellers between US$275 to US$660 for controllable cancellations and extended delays, depending on the flight distance.

“When an airline cancels a flight because of mechanical or staffing issues, the passengers should receive compensation for their troubles,” said Senator Edward Markey (D-Mass), who serves on the US Senate Committee on Commerce, Science and Transportation.

Delay compensation rules are already in place in other countries such as Canada, India, Saudi Arabia, Turkey, Brazil and China, and Australia is set to pass one this year, said Tomasz Pawliszyn, chief executive officer at European consumer rights group AirHelp, who has been advising the US government. If airlines were to choose to pass on the cost of these potential passenger refunds to the ticket price, it would amount to less than one euro (S$1.44) or US$1 per ticket, he added.

Passenger complaints against US airlines have quadrupled in the last four years, reaching a record in 2023 with just more than 61,000 filed. “The complaints in 2023 increased by 29 per cent even though passenger volume increased by only 11-that reflects how ticked off people are when they feel like things don’t go well,” said Teresa Murray, consumer watchdog director at US Public Interest Research Group.

Of those complaints, 35 per cent were for flight issues, 20 per cent related to refunds, and 16 per cent related to baggage. Although, she added, overall cancellations have improved so far this year as have on-time rates.

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Major US airlines have disparate rules when it comes to how they handle delays. All 10 of them will rebook you on the same airline when your flight is disrupted or cancelled and provide meals. Nine out of 10 will provide hotels and ground transportation, while just six will rebook you on another airline, and just three in 10 will provide a voucher. Currently, none pay cash for any kind of cancellation or delay.

The Biden Administration’s ultimate goal is to incentivise the airlines to provide better service. In Europe, flights have a higher on-time rate, which Negron said indicates there may be a strong correlation with the fact that European airlines are required to compensate travellers. Last year just 1 to 2 per cent of all travellers were compensated due to disruptions, AirHelp data confirms.

“Where there’s a clear standard, that is good for the industry and that is good for consumers because everybody understands what’s required,” Negron said. “That information can lead to improved services.”

This latest discussion on air travel delay compensation comes on the heels of a slew of regulations under the Biden Administration that have aimed to protect travellers and hold US airlines more accountable. There’s the clarification of travellers’ rights on FlightRights.gov, a proposed rule to improve air access for passengers with disabilities, the recent rule requiring airlines to provide automatic and prompt refund to passengers in the original form of payment, affirmed in the FAA Reauthorization Act, and the proposed rulemaking to impose a ban on family seating fees.

“This is all part of trying to provide passengers with more assurances that, you will be OK,” says Negron, who adds they are working as quickly as they can to iron out specifics. “We can’t make up for the fact that you had to spend nine hours away from your family stuck in an airport or hotel-but we can make sure the airlines are held accountable when it’s something they could have prevented.” BLOOMBERG