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U.S. airlines could owe passengers cash compensation for flight cancellations and delays as early as January, 2025. The Biden Administration will propose a rule requiring airlines to compensate passengers for controllable cancellations or delays of three hours or more. “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, in prepared remarks given at an invitation-only meeting on 9/10/24. “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 continued. “That information can lead to improved services.”
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What are Controllable Delays?
Controllable delays are still to be defined in the U.S. proposed rule. We'd expect these to be similar, however, to those that European Union EC 261/2004 have held airlines liable for in the compensation context, which have included not only staffing issues, but also cancellations or delays due to mechanical issues. The European Court of Justice has deemed cancellations and delays due to mechanical issues liable for compensation, since keeping aircraft well-maintained and building in some redundancy is part of the airline's operations and not an “extraordinary circumstance.” Delays and cancellations that are due to extreme weather conditions, security risks/terrorism, labor strikes that don't involve the airline's own employees, and similar would NOT be considered controllable delays.
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How Much Compensation Would Passengers Receive?
The exact amount of compensation hasn't yet been released, but the EC 261/2004 amounts could guide the proposed rule. For the EU regulation, compensation depends on the flight length as well as the time delayed:
- For flights <1500 km. that are delayed 2+ hours: €250 per passenger
- For flights within the EU of 1500+ km or flights 1500-3500 km that are delayed 3+ hours: €400 per passenger
- For flights outside the EU >3500 km that are delayed 4+ hours: €600 per passenger
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The Upshot
We agree with Negron and the administration that a U.S. equivalent to EC 261/2004 is long overdue. U.S. airline protests that this will incentivize unsafe flying decisions don't hold water: in Europe, EC 261-2004 hasn't resulted in poor safety records among European airlines, and it's airlines, not pilots personally, who will pay for decisions that result in unnecessary delays and cancellations.
Specifically, as in Europe, it will disincentivize airlines from over-scheduling flights and cancelling low load flights at the last minute. Currently, U.S. airlines' Conditions of Carriage only obligate them to get a passenger from one destination to another at some point. Not on the specific date. If the airline cancels your ticket, you have only two choices: get rebooked on another flight (which may be the next day or several days in the future, if it's a busy period and flights are full) or receive a refund, which may mean not traveling at all, as ticket costs are likely to be far higher than when the original ticket was purchased.
While compensation amounts for any individual passenger may not be much, in aggregate they can be a powerful way of focusing U.S. airlines on the importance of customer satisfaction, with the customer's time as something of value.
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