DOT ISSUES CONSUMER PROTECTION PENALTIES AGAINST DELTA, FRONTIER, AND AMERICAN
August 3, 2017
Delta Air Lines
On July 21, 2017, the United States Department of Transportation (DOT) fined Delta Air Lines $200,000 and, after reviewing the airline’s Standard Operating Procedures (SOP) for Damage and Liability for Baggage Recovery, directed it to cease and desist from misclassifying and misreporting mishandled baggage claims filed by passengers.
As background, 9 U.S.C. § 41708 authorizes the Secretary of Transportation to require air carriers to submit reports to the Department and 14 C.F.R. Part 234 requires each reporting carrier to file with the Department, on a monthly basis, information about the number of mishandled baggage reports (MBRs) it receives from passengers. This information is then compiled and published in the Department’s monthly Air Travel Consumer Report, which ranks the reporting carriers based on various performance criteria, including the rate of MBR per 1,000 enplaned passengers.
Delta’s SOP stated that if an agent was unable to settle a mishandled baggage claim with a customer they were to create an entry in Delta’s “WorldTracer” for the claim. Delta uses World Tracer to calculate its mishandled baggage reports as required by Part 234. A DOT investigation determined that certain reports were not properly entered into WorldTracer. This affected the accuracy of Delta’s data on mishandled baggage and, by extension, the Department’s Air Travel Consumer Report that is available to the public. DOT stated that Delta’s actions in this regard contradict DOT’s mandatory reporting requirements, and is an unfair and deceptive practice and an unfair method of competition in violation of 49 U.S.C. § 41712.
Frontier Airlines
DOT fined Frontier Airlines $400,000 on July 21, 2017, for violations of the Department’s oversales and denied boarding rules (14 C.F.R. Part 250), as well as a rule that requires air carriers to provide passengers with disabilities assistance in enplaning and deplaning, preboarding and moving within the terminal (14 C.F.R. Part 382).
As background, Part 250 permits airlines to sell more tickets for a flight than there are seats available on the aircraft to be used for that flight. This allows carriers to fill seats that would otherwise have remained empty due to “no shows,” thereby achieving operational efficiencies including revenue enhancement for carriers, and resulting in benefits for passengers as a whole by enabling carriers to offer them lower fares. However, in the event a flight is oversold and passengers are unable to fly, DOT regulations mandate compensation and other protections for passengers who are involuntarily denied boarding.
Here, in the course of an investigation, DOT staff reviewed approximately 200 complaints received by the carrier in calendar years 2014 and 2015. Among these files, it identified a significant number of instances in which the complaint file indicated that Frontier involuntarily denied boarding to eligible passengers but failed to do the following: advise them of their rights to cash or check DBC payments, furnish a written notice to these passengers as required by §250.9, provide proper DBC in a timely manner, or solicit volunteers before denying boarding of passengers involuntarily. Additionally, during on-site airport inspections conducted in September 2016 by DOT Enforcement Office staff, some Frontier agents, when asked about the handling of oversale situations, informed Enforcement Office staff that only vouchers, rather than cash or a check, are offered as involuntary denied boarding compensation.
For Frontier’s Part 382 violations, DOT staff reviewed approximately 375 disability-related complaints from calendar years 2014 and 2015, including complaints received by the carrier and directly by the Department. Its investigation revealed that a disproportionate amount of complaints involving Part 382-required wheelchair assistance showed that Frontier admitted a violation to the passenger’s allegations in the carrier’s written response to that passenger. This resulted in an “exorbitantly high rate of violations”. Specifically, the Enforcement Office found a high percentage of instances in which Frontier acknowledged that the carrier failed to provide adequate and timely wheelchair assistance to passengers with disabilities in moving within the terminal, in preboarding the aircraft, and in enplaning and deplaning the aircraft. DOT determined that Frontier’s actions violated Part 382’s requirements that passengers with disabilities receive “prompt” enplaning and deplaning assistance, which inherently includes assistance in moving within the terminal and connecting assistance, if requested.
DOT ultimately determined that the array of violations warranted a $400,000 fine and ordered Frontier to cease-and-desist from future violations.
American Airlines
Also on July 21, 2017, DOT fined American Airlines $250,000 for allegedly failing to process a “significant” number of refund requests in a timely manner, in violation of the Truth in Lending Act’s Regulation Z (12 C.F.R. Part 226). Regulation Z, and DOT’s implementing rule, 14 C.F.R. Part 374, require that airlines transmit a credit statement for a passenger refund to the credit card issuer within seven business days of receipt of full documentation for the refund requested.
Furthermore, American adopted a customer commitment regarding refunds, which was made available on its website. In its customer commitment, American stated that refunds would be provided within seven business days of receipt of the required refund information for credit card transactions, and within 20 business days of receipt of the required information for cash purchases.
A DOT investigation determined that American failed to adhere to this commitment on numerous occasions (i.e. it failed to process refunds in a timely manner). While American asserted that the delays resulted from integration issues with the American Airlines and US Airways Refunds and Customer Relations, the Department nevertheless determined that American’s failure to timely process refunds constituted an unfair and deceptive practice and an unfair method of competition in violation of 49 U.S.C. § 41712.
If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com, 202-659-6622) or Drew Derco (dderco@eckertseamans.com, 202-659-6665).
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