Gilbert Carrillo
Executive Editor
Loyola University Chicago School of Law, JD 2017

 

The Obama administration has recently announced new regulation proposals to address common passenger complaints about airline service. Some of these rules would: allow passengers to obtain refunds for delayed baggage, provide customers with more accurate information about performance of the airlines passengers fly, and provide more transparency when booking tickets with online travel services. While these rules would seem to benefit the passengers, what would these rule changes mean for compliance departments going forward?

When the Obama administration first took office, they pledged to impose tough consumer protection rules on the country’s airlines. These recent regulation proposals are just the latest effort to promote competition and protect customers at a time when airline mergers have left customers with fewer choices. The goal of these new regulations is to provide even more transparency and allow customers to make well-informed decisions when planning air travel.

Currently, the Department of Transportation requires airlines to refund baggage fees when luggage is lost. However, one of the new regulations would require airlines to refund baggage fees when luggage is “substantially delayed,” though the term has yet to be defined. Moreover, one of the regulations would require airlines to disclose all costs associated with a ticket, such as baggage fees, seat assignment fees, as well as change and cancellation fees.

Additionally, one of the rule proposals would target travel-booking websites that offer comparison-ticket shopping. Typically, these websites rank airlines higher or lower based on undisclosed payments or other business incentives. The rule proposal would require these websites to be neutral or reveal potential bias to the consumers, allowing the consumers to know all the facts before trusting and booking travel on these websites.

Another focal point of the recent rule proposals is the airlines’ on-time record. Currently, airlines are only required to disclose on-time performance data for flights they operate (i.e. United only must disclose data for United). However, the new regulation would also require airlines to report on-time performance for all flights airline companies contract.

Compliance

While these rules would appear very beneficial to consumers, the impact on compliance departments would be interesting to follow. One important aspect regarding these new regulations would be to have a better understanding of the definitions of the terms. For example, the regulation regarding reimbursement of baggage fees for luggage that is “substantially delayed” must be defined. The term “substantially delayed” is relative based on the point of view from the consumer and the airline carrier.

Assuming the passage of these regulations, compliance departments will need to update their training, written policies and procedures, and internal auditing and monitoring. Specifically for the regulation regarding reimbursement of late baggage fees, the training would have to focus on insuring personnel keep better track of luggage.

Airline carriers may wish to institute their own policy about the term “substantially delayed” that would fall just shy of the regulation’s definition (when the term is defined) in hopes of emphasizing the importance of the federal regulation to the carrier’s employees. Additionally, compliance departments may wish to audit and monitor the personnel tasked with insuring baggage is delivered promptly.

The penalties for failing to comply with the new regulations are still unclear. What is clear is these regulations will be sure to add more stress (and financial resources) to airline carriers, specifically their compliance departments.