Oversales and Denied Boarding Compensation, 21026-21035 [08-1145]

Agencies

• Office of the Secretary
• DEPARTMENT OF TRANSPORTATION

[Federal Register Volume 73, Number 76 (Friday, April 18, 2008)]
[Rules and Regulations]
[Pages 21026-21035]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 08-1145]


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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: Final rule.

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SUMMARY: The Department of Transportation (DOT or Department) is 
amending 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 through 60 passengers, which 
are currently exempt from the rule, and to make other changes. These 
changes are intended to maintain consumer protection commensurate with 
developments in the aviation industry. This action is taken on the 
Department's initiative and in response to a petition from the Air 
Transport Association.

DATES: This rule is effective May 19, 2008.

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), tim.kelly@dot.gov (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 
flights that are oversold. In most cases, bumped passengers are 
entitled to compensation. Part 250 sets the minimum amount of 
compensation that is required to be provided to passengers who are 
bumped involuntarily. Until now the rule has not applied to flights 
operated with aircraft with a design capacity of 60 or fewer passenger 
seats.
    In adopting the original rule in the 1960s, the Civil Aeronautics 
Board (CAB), the Department's predecessor in aviation economic 
regulation, recognized the inherent unfairness in carriers selling more 
``confirmed'' 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 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 being 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

[[Page 21027]]

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, the Department's Inspector General, and 
major airlines themselves, we reviewed the rule and have decided to 
revise certain aspects of the rule that we believe are outdated. In 
view of the passage of time since the rule was last revised and changes 
in commercial air travel over that time, we have decided to increase 
the compensation maximums and extend the rule to cover a broader range 
of aircraft. The Department is also making certain other changes of 
lesser impact.

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, or who fail to appear and 
provide no notice). 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 over 46 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 of the airline's choosing.
    (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 1 hour of the planned 
arrival time of the oversold flight, no compensation is required. If 
the alternate transportation is scheduled to arrive between 1 and 2 
hours after the planned arrival time of the oversold flight (between 1 
and 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 he or she can 
use for alternate transportation or have refunded if not used.

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; see 72 FR 37491. 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).
    On November 20, 2007, the Department published a Notice of Proposed 
Rulemaking (72 FR 65237) in which we proposed several specific changes 
to the Oversales rule. We did not propose to ban overbooking as many 
individual commenters urged. As indicated in the ``Background'' section 
above, air travelers receive some benefit from controlled overbooking. 
We are not aware of levels of consumer harm that require such a 
sweeping solution at this time, and we believe that the additional 
oversale protections that we are adopting here will address the 
principal issues related to this regulation that require action by the 
Department.
    The issues that were presented in the NPRM and a summary of the 
comments appear below.

The Maximum Amount of Denied Boarding Compensation

    It has been 25 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-

[[Page 21028]]

2001-9325.) More 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 he 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 smaller 
aircraft.
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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 voluntarily 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 compensation rates in the DOT rule. The annual rate 
of involuntary denied boardings per 10,000 enplanements for the 
carriers tracked in the report has increased in each of the past three 
years and in 2007 was at the highest level in the past ten years. 
Involuntary denied boarding rates from the Air Travel Consumer Report 
for that period 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....................................................            1.12
------------------------------------------------------------------------

    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 been in the mid-80% range.
    With respect to the denied boarding compensation limits, inflation 
has eroded the value of 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), $400 in 1978 was worth $128 at 
the time of the NPRM ($125 today). See the Bureau of Labor Statistics 
Inflation Calculator at https://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 as of the time of the NPRM ($1,272 
today).
    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 12.69 cents per revenue passenger mile in 2006 (latest 
available data)--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 have produced updated limits 
of $624 and $1,248, respectively, at the time of the NPRM. However, the 
NPRM noted that applying the 53.1% increase in passenger yield through 
2006 to the current $200 and $400 limits would have produced updated 
limits of $306 and $612. It is important to note that the $200 and $400 
figures in Part 250 are merely limits on the amount of denied boarding 
compensation required under the rule; the 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.
    In the ANPRM the Department sought comment on five options with 
respect to the monetary limits on denied boarding compensation--
increasing the limits based on the CPI-U or on the increase in fare 
yields, doubling the current limits, eliminating the limits (i.e., so 
there would be no cap on denied boarding compensation payments), or 
making no change to the current limits. In the NPRM the Department 
proposed to amend the 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 to the ANPRM 
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 did 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 taken their toll on the value of the existing limits. As 
noted above, $400 in 1978 was worth $128 at the time of the NPRM, based 
on the change in the CPI-U. Therefore, we proposed to base part of an 
increase in the compensation caps on the CPI-U.
    By doubling the existing limits we would blend these two 
approaches. The limits proposed in the NPRM fall between the higher 
figures that would be produced by the CPI option and the

[[Page 21029]]

lower numbers that would result from the ``fares/yield'' option. We 
sought comment on this proposal, including any comments and 
justifications that were not already provided in response to the ANPRM 
about alternative amounts or methodologies.
    It is important to note that this proposal concerning limits on 
compensation for involuntary denied boardings would not necessarily 
require carriers to offer more compensation to the great majority of 
passengers affected by overbooking because most such situations are 
handled through volunteers who agree to give up their seat in exchange 
for mutually-agreed compensation, typically at the departure gate. Nor 
would it 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 exceed 
the current 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 (often 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 entail the same cost as cash 
compensation given rates of non-use and inventory-management 
restrictions.
Comments
    Our proposal to double the denied boarding compensation limits was 
endorsed by the American Society of Travel Agents (ASTA), the Airports 
Council International--North America (ACI-NA), the Aviation Consumer 
Action Project (ACAP), the Coalition for an Airline Passenger Bill of 
Rights (CAPBOR), Jet Airways (India), and all of the individuals who 
commented on this issue. ACAP also endorsed a minimum DBC amount of 
$100. ASTA remarked that the reasoning in the Regulatory Evaluation is 
sound and suggested that for lengthy delays (e.g., next day), DBC 
should be higher, e.g. perhaps based on the CPI concept. ACI-NA 
asserted that incentives against unreasonable overbooking levels must 
remain effective because current high load factors make rerouting more 
difficult. The National Business Travel Association (NBTA) favored an 
increase in DBC limits but believed that the Department's proposal did 
not go far enough--the Association noted that business travelers often 
pay high fares and book peak flights that it contended are more likely 
to be oversold and consequently favored limits of $400/$800 (the NPRM 
proposal) or half of that passenger's fare, whichever is higher. The 
Air Transport Association stated that it did not oppose the basic 
elements of the NPRM but had objections to certain proposals (see 
below) that were not related to the adjustment of the compensation 
limits.
    The proposal to double the limits was opposed by most other 
organizations that commented on this issue. (No individual commenters 
opposed the proposal, although one felt that the limits should be 
removed altogether and several said that overbooking should be banned.) 
The Air Carrier Association of America (ACAA) stated that the increased 
limits are unfair to smaller carriers that have fewer rerouting options 
that would permit them to limit DBC to the 100% rate. ACAA said that 
the limits should be increased no more than 25%, although it gave no 
basis for this figure. The Regional Airline Association (RAA) said that 
involuntary denied boardings are rare and the current system is 
working, but if the limits are increased the adjustment should be based 
on historical increases in fares/yield rather than $400/$800. The 
National Air Carrier Association said that the limits should be 
increased only for carriers that consistently bump a high number of 
passengers. Delta Air Lines stated that there is no justification for 
an increase in the limits, but echoed RAA's contention (as did China 
Eastern Airlines) that any increase that does take place should be 
based on increases in fares rather than the $400/$800 proposal. 
Philippine Airlines wanted an increase of no more than 10%.
Response to Comments
    After careful consideration of all of the comments, we have decided 
to double the current DBC limits as proposed. The limits have not been 
adjusted in nearly 30 years, and the purchasing power of the limits has 
eroded. Air fares have increased by more than 50% in that time, and 
thus a higher percentage of bumped passengers is undoubtedly having 
their DBC capped at a figure lower than the 100% or 200% DBC rate. The 
Department has been urged to reexamine the limits by the Senate, the 
Department's Inspector General, and the airlines themselves (see ATA's 
petition for rulemaking in this proceeding). As ACI-NA noted in its 
comments, unrealistic deterrents in the rule could produce more 
oversales--and indeed the rate of involuntary denied boardings has 
increased 30% in the past three years. Carriers whose schedules make it 
difficult to reroute passengers in time to limit DBC to the 100% rate 
are nonetheless in control of their overbooking rates and of the 
attractiveness of the compensation that they offer to prospective 
volunteers. With respect to the comments that urge us to base the 
increase in the limits solely on the increase in fares/yields, as noted 
above, denied boarding compensation is intended in part to compensate 
for the passenger's inconvenience, lost time, and lost opportunities, 
and the value of these considerations is linked to general inflation as 
well as to the cost of air fares.

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.
    The majority of the aircraft operated by the regional airline 
industry have 60 or fewer seats and thus are exempt from the denied 
boarding rule. However, this sector 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. As noted in the NPRM, 
regional jets have fueled much

[[Page 21030]]

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, a fee-for-service arrangement, 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.
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    \3\ See https://www.raa.org.
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    DOT statistics also demonstrate the growth in traffic on flights 
operated by aircraft with 31 through 60 seats. From the fourth quarter 
(4Q) of 2002 (earliest available consistent data) to 4Q2006, 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\
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    \4\ DOT Form 41, schedule T-100.
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    As noted in the NPRM, 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. Therefore, the NPRM proposed to 
extend the applicability of the oversales rule to flights using 
aircraft having 30 or more seats.
Comments
    This proposal was supported by the ACAA, NBTA, ACI-NA, and by the 
two individuals who commented on this issue. ACAA stated that the 
current exclusion for these aircraft is unfair to smaller carriers that 
do not have aircraft of a size that benefit from the exclusion. The 
initiative was opposed by RAA, Delta Air Lines, and Peninsula Airways. 
RAA said that the proposal would have disparate cost impact on regional 
carriers that cannot always raise fares due to competition from 
automobiles. RAA asserted that cost increases will cause marginal 
routes to be dropped, reducing competition and leaving some small 
points without service. The organization was concerned that DBC on 
connecting flight may exceed a regional carrier's fare. It noted that 
the small aircraft and short runways frequently used by regional 
carriers cause seats to be figuratively ``roped off'' (i.e., to have to 
exclude passengers from those seats) for safety-related weight/balance 
reasons more frequently than is the case for larger aircraft, but under 
the current rule DBC must still be paid. Delta also noted this latter 
issue and suggested that if this proposal is finalized, the Department 
should amend the ``substitution of equipment'' exception to DBC to 
include passengers bumped as a result of the need to limit payload for 
safety-related weight/balance reasons.
    Peninsula Airways (an Alaskan operator) stated that aircraft with 
less than 35 seats should remain excluded from the rule, but if the 
proposal to include aircraft with 30-60 seats is adopted, the rule 
should exclude commuter operations with propeller aircraft solely 
within the state of Alaska. This would capture regional jets, the 
commenter noted, while maintaining the current relief for small 
turboprops. Peninsula contended that this is justified for the same 
reasons that CAB originally excluded aircraft with 60 seats or less. 
Peninsula also disputed the statement in the NPRM that on a codeshare 
``the major carrier is responsible for providing denied boarding 
compensation on the flights of the smaller carrier.'' Peninsula says 
that this is true only on fee-for-service arrangements, and Peninsula 
uses a pro-rate system.
Response to Comments
    For the reasons described above, we are extending the applicability 
of the oversales rule to flights using aircraft with 30 or more 
passenger 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 has become affiliated and integrated with the ``brand'' of a 
major carrier. In recent times, aircraft with 30 through 60 seats (to a 
large extent regional jets) have been substituted for larger airplanes 
on numerous routes. The great 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. In its comments 
on the ANPRM, JetBlue asserted 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. In its comments on the ANPRM, ACAA 
provided data showing that regional jets account for half or nearly 
half of all departures at most hub airports.
    A significant amount, if not most, of the service on small-aircraft 
flights operated for major carriers is provided under a ``fee-for-
service'' arrangement such as Peninsula Airways referred to, where a 
major carrier dictates the market, the schedule, and the price of the 
flight. Under such an arrangement the tickets are not 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 purposes relevant to this rule 
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.
    As a result of changes in the marketplace, we now believe that 
consumers who purchase transportation in this aircraft class are 
entitled to the protections of the oversales rule. Carriers that use 
small aircraft to operate flights for a major carrier can protect 
themselves contractually by negotiating a mutually acceptable sharing 
of risk with the major airline. However, we are sensitive to the 
operational challenges faced by operators of aircraft with 30 through 
60 seats. As certain commenters noted, these aircraft are more 
susceptible than larger airplanes to the need to limit payload in 
certain situations, typically hot weather, especially at higher 
altitudes. These situations, which cannot be reliably forecast when 
reservations are being taken weeks and months in advance, sometimes 
cause passengers to have to be bumped. Consequently, as suggested by 
Delta, we will revise the existing DBC exception in our oversales rule 
for substitution of aircraft of lesser capacity to include situations 
where the aircraft is not substituted, but payload must be limited for 
safety reasons and passengers are bumped as a result. We expect 
carriers to keep adequate records that will demonstrate the legitimate 
use of this exception to DBC when it is employed. Consistent with our 
obligations under the Regulatory Flexibility Act to assess the impact 
of rules on operators of aircraft having 60 or fewer seats (see 14 CFR 
399.73), this new relief will be limited to flights operated with 
aircraft having 60 or fewer seats. Larger aircraft are affected by 
unpredictable payload restrictions

[[Page 21031]]

less often, and operators of those aircraft are not the subject of the 
Regulatory Flexibility Act.
    We will not exempt flights using aircraft with less than 35 seats 
or commuter-carrier operations using propeller aircraft solely within 
the state of Alaska, as was suggested by Peninsula Airways. We believe 
that carriers serving Alaska have sufficient experience with the 
operational considerations in that environment to be able to implement 
overbooking practices that do not expose the carrier to undue risk, and 
we are reluctant to deny Alaskan travelers the benefits of the rule. 
The new exemption for denied boardings caused by safety-related payload 
restrictions on flights using aircraft with 60 or fewer seats (see 
above) should address many of the situations about which Peninsula was 
concerned.

Boarding Priorities

    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. In the NPRM 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 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.
Comments
    Philippine Airlines and ACI-NA favored the proposal. RAA said that 
it is not necessary but that the organization did not oppose it. ASTA 
opposed the proposal, stating that passengers with low fares or no 
frequent-flyer miles on that carrier are no less inconvenienced by 
bumping and should not be singled out.
Response to Comments
    For the reasons described above, we will adopt this proposal. With 
respect to ASTA's comment, airlines set their own boarding priorities 
and the longstanding ability of airlines to have boarding priorities 
based on passengers' fares or frequent-flyer status is not at issue in 
this proceeding. Airlines have had such boarding priorities for years, 
and the Department has not found this to be inconsistent with the 
mandate in section 14 CFR 250.3(a) described above. The proposal in 
this proceeding is simply intended to clarify and provide improved 
access to this policy by including it in the rule.

Notice to Volunteers

    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 saw some 
merit in the suggestion to make this notice requirement more direct. 
Accordingly, in the NPRM we sought 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
    RAA and ATA strongly objected to this proposal. Both organizations 
said that it is unrealistic and would impede passenger processing at 
airports without providing any consumer benefit. RAA asserted that it 
would be highly burdensome to determine the risk to each prospective 
volunteer of being bumped involuntarily and would increase delays at 
the gate. Most carriers make general announcements rather than 
soliciting individual passengers, RAA claimed, and individual pre-
solicitation notice is impossible in those circumstances. ATA said that 
volunteers have already decided to give up their reservation in 
exchange for the offered compensation, and the risk of being bumped is 
irrelevant.
    The Aviation Consumer Action Project said that potential volunteers 
should be given a written statement summarizing the DOT rule, with 
monetary penalties payable to the passenger if this is not done.
    There were no individual consumer comments on this issue.
Response to Comments
    For the reasons summarized above, and consistent with the 
recommendation of the IG, we will finalize the proposal. Commenters' 
concerns about the practicality of the provision appear to result from 
a misunderstanding of what we proposed. Informing a prospective 
volunteer ``whether he or she is in danger of being

[[Page 21032]]

involuntarily denied boarding'' need not entail a precise calculation 
of the probability of that person being involuntarily bumped. Carriers 
may still make general announcements seeking volunteers and, if the 
need arises to accept the offer of any of those who indicate a 
willingness to volunteer, it would be sufficient for a carrier to tell 
a volunteer just before handing him or her the volunteer compensation 
that there is a reasonable chance that he or she may have been bumped 
involuntarily (if that is true), and if that were to be the case the 
compensation would be $X. The oversales regimen relies in large part on 
consumers being able to make informed decisions and this is no more 
than what is required under the current rule.

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 https://
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 NPRM the Department proposed to 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 would 
still receive adequate information and the public would 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
    Three airlines and two airline associations commented on this 
issue; all of them favored the proposal.
Response to Comments
    For the reasons summarized above, we will 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. The carriers that are being relieved 
of this requirement need not file a Form 251 report for the quarter 
during which this amendment goes into effect.
    All other comments on the various issues in this proceeding were 
beyond the scope of the NPRM.

Overbooking Notice

    Section 250.11 specifies the text of a notice that carriers must 
use on signs at ticket-selling locations and in notices accompanying 
tickets to disclose overbooking and describe denied boarding 
procedures. One portion of this notice states that there are exceptions 
to the requirement to pay denied boarding compensation. In the NPRM we 
proposed to revise that section of the notice to state that failing to 
comply with the carrier's check-in deadline is one such exception and 
to require carriers to either include their check-in deadline in the 
notice or state in the notice that the airline's check-in deadline is 
available upon request from the carrier.
Comments
    The Air Transport Association objected to this proposal. It said 
that check-in times can vary, especially between domestic and 
international operations; that the information is available on 
carriers' Web sites; that air travelers have become used to checking in 
early since 9/11; and that most of the notices would be displayed at 
airports and by the time a traveler sees the notice at the airport it 
is too late.
Response to Comments
    We have decided to finalize the proposal. We believe that it is 
important for consumers to be aware that missing the carrier's check-in 
deadline disqualifies them from eligibility for denied boarding 
compensation if they should be involuntarily denied boarding. A great 
deal of consumer information is available on carrier Web sites, but 
this does not obviate the usefulness of affirmatively pointing out key 
information in notices of this type. Airlines that find it burdensome 
to include their specific check-in deadline(s) in the notice can simply 
state that the deadlines are available from the carrier upon request, 
as stated in the NPRM. Finally, this revised notice is not limited to 
airports; pursuant to section 250.11(b) of the existing rule (which is 
not being revised), the sec. 250.11(a) notice described in the NPRM 
must also accompany tickets.

Technical Changes

    We are revising the definition of ``Carrier'' in section 250.1 to 
(1) explicitly include commuter air carriers (with respect to the 
extension of the rule to flights using aircraft with 30 through 60 
seats), (2) remove citations to the Federal Aviation Act, a statute 
that no longer exists under that name, and (3) reduce the range of 
sections cited in this definition as the source of DOT authority for 
foreign air carriers to the one section that is most applicable. (The 
other sections cited in the foreign-carrier citation are procedural in 
nature and are not necessary in this definition.)

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 discussion of possible costs and benefits of 
the proposed rule is presented in the preamble and in the accompanying 
Regulatory Evaluation, a copy of which has been placed in the docket. 
The Regulatory Evaluation concluded that the benefits of the rule 
appear to exceed the costs. It noted that the absolute number of 
involuntary denied boardings, the rate of such denied boardings per 
10,000 enplanements and the ratio of involuntary to voluntary denied 
boardings have all increased substantially in recent years, suggesting 
that the 30-year-old caps on involuntary denied boarding compensation 
that are being updated here have been encouraging carriers to resort to 
involuntary denied boardings more frequently. The average one-way fare 
(all domestic and international flights) was $232 in the 2nd Quarter of 
2007, above the $200 compensation limit that pertains to the 2-hour 
deadline. Due to the regulatory caps on denied boarding

[[Page 21033]]

compensation, a passenger flying at or above an above-average fare will 
not receive the full amount of compensation derived from the fare-based 
formula in the rule. Similarly, the air carriers are not subject to the 
disincentive of the loss of a higher-than-average fare if a passenger 
is bumped.
    The added cost of doubling of the denied boarding compensation caps 
would be approximately four cents per passenger even if every single 
passenger who is involuntarily denied boarding receives the maximum 
compensation (which is not the case). The monetary cost for this option 
would result in a corresponding dollar-for-dollar monetary benefit for 
the bumped passengers. It is not expected that an additional four-cent 
charge on a $200 ticket would make a material difference in ticket 
demand or air carrier net revenues from ticket sales.

B. Executive Order 13132 (Federalism)

    This Final Rule has been analyzed in accordance with the principles 
and criteria contained in Executive Order 13132 (``Federalism''). This 
amendment does not: (1) Have a substantial direct effect 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) impose substantial direct compliance costs on State and 
local governments; or (3) preempt state law because states are already 
preempted from regulating in this area under the Airline Deregulation 
Act (ADA), 49 U.S.C. 41713. Therefore, the consultation and funding 
requirements of Executive Order 13132 do not apply.

C. Executive Order 13084

    This Final Rule has been analyzed in accordance with the principles 
and criteria contained in Executive Order 13084 (``Consultation and 
Coordination with Indian Tribal Governments''). Because nothing in this 
rule 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 this rule may impose new requirements on certain 
small air carriers, but the Department believes that the economic 
impact will not be significant. All air carriers have control over the 
extent to which the rule impacts them because 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 (or different) 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 will be covered by the 
oversales rule for the first time as a result of this amendment 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. Under such an arrangement the 
tickets are not 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. At 
the same time, this final rule provides that the oversales requirements 
will not apply when a passenger is denied boarding on an aircraft with 
a designed capacity of 30 through 60 passenger seats due to a need to 
reduce the number of passengers for safety purposes (e.g., weight/
balance, maximum takeoff weight). This exemption greatly reduces the 
financial burden of the oversales rule on operators of small aircraft , 
whether by small entities (who by definition only operate aircraft of 
60 seats or fewer) or other carriers. This is particularly true with 
respect to events that are not easy to predict at the time reservations 
are taken (e.g., hot weather) that affect safety-related payload 
limits. Finally, it is worth noting that one provision in this Final 
Rule relieves an existing reporting requirement for all but the largest 
carriers. For all these reasons, I certify that this rule will not have 
a significant economic impact on a substantial number of small 
entities.

E. Paperwork Reduction Act

    DOT has long-standing OMB clearance for the reporting requirements 
in Part 250 (OMB No. 2138-0018). Prior to issuance of this final rule, 
we estimated a reporting burden of 1600 hours annually for 40 U.S. 
carriers and 600 hours annually for 100 foreign carriers. This final 
rule is reducing reporting requirements so that only 20 U.S. carriers 
will continue to report denied boarding information for a total of 800 
hours annually. We will modify our paperwork inventory for this rule 
accordingly.

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.

0
For the reasons set forth in the preamble, we amend 14 CFR Part 250 as 
follows:

PART 250--[AMENDED]

0
1. The authority citation for part 250 continues to read as follows:

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


0
2. In Sec.  250.1 the definition for ``Large aircraft'' is removed and 
the definition for ``Carrier'' is revised 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 of 
Transportation pursuant to 49 U.S.C. 41102 or that has been found fit 
to conduct commuter operations under 49 U.S.C. 41738, or an exemption 
from 49 U.S.C. 41102, authorizing the scheduled transportation of 
persons; or (2) a foreign air carrier holding a permit issued by the 
Department pursuant to 49 U.S.C. 41302, or an exemption from that 
provision, authorizing the scheduled foreign air transportation of 
persons.
* * * * *

0
3. Section 250.2 is revised to read as follows:

[[Page 21034]]

Sec.  250.2  Applicability.

    This part applies to every carrier, as defined in Sec.  250.1, with 
respect to scheduled flight segments using an aircraft that has a 
designed passenger capacity of 30 or more passenger seats, operating in 
(1) interstate air transportation or (2) foreign air transportation 
with respect to nonstop flight segments originating at a point within 
the United States.

0
4. In Sec.  250.2b, paragraph (b) is amended by removing the last 
sentence and by 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. * * *

0
5. In Sec.  250.3 paragraph (b) is added to read as follows:


Sec.  250.3  Boarding priority rules.

* * * * *
    (b) 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.

0
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 Sec.  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.
* * * * *

0
7. Section 250.6(b) is revised to read as follows:
* * * * *
    (b) The flight for which the passenger holds confirmed reserved 
space is unable to accommodate that passenger because of substitution 
of equipment of lesser capacity when required by operational or safety 
reasons; or, on an aircraft with a designed passenger capacity of 60 or 
fewer seats, the flight for which the passenger holds confirmed 
reserved space is unable to accommodate that passenger due to weight/
balance restrictions when required by operational or safety reasons;
* * * * *

0
8. 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.)

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) on a flight operated with an 
aircraft having 60 or fewer seats, you are denied boarding due to 
safety-related weight/balance restrictions that limit payload; or (5) 
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 (6) 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 4 hours or longer or, if none, 
the passenger's final destination, no later