IATA Says Proposed U.S. Passenger Compensation Rule Will Raise Costs for Travelers

In a not entirely surprising move, the International Air Transport Association (IATA) is criticizing the decision from the Department of Transportation (DOT) and the Biden Administration to mandate airlines provide financial compensation beyond refunds for “controllable” flight delays and cancellations.

The new law would require airlines to compensate for any airline-related delays or cancellations; provide meals or meal vouchers; and make it mandatory to have timely customer service during and after widespread flight irregularities. The law would also define a delay or cancellation as waiting three hours or more from the scheduled departure time.

“When an airline causes a flight cancellation or delay, passengers should not foot the bill,” U.S. Transportation Secretary Pete Buttigieg said on May 8 when announcing the new measure. “This rule would, for the first time in U.S. history, propose to require airlines to compensate passengers and cover expenses such as meals, hotels, and rebooking in cases where the airline has caused a cancellation or significant delay.”

It was anticipated that there would be pushback from the airline industry, so IATA’s criticism is not unexpected. The organization said in a statement that the mandate will ultimately raise the cost of air travel for consumers.

“Airlines work hard to get their passengers to their destinations on time and do their best to minimize the impacts of any delays. Airlines already have financial incentives to get their passengers to their destination as planned,” Willie Walsh, IATA’s Director General, said in the statement. “Managing delays and cancellations is very costly for airlines. And passengers can take their loyalty to other carriers if they are not satisfied with service levels. The added layer of expense that this regulation will impose will not create a new incentive, but it will have to be recouped –which is likely to have an impact on ticket prices.”

IATA also said the regulation could “raise unrealistic expectations among travelers that are unlikely to be met.”

According to IATA, most situations that trigger flight delays and cancellations would not be covered by the new regulation, as weather is responsible for the bulk of such issues.

Air traffic controller shortages played a major role in last year’s delays and are also likely to be an issue in 2023—as the Federal Aviation Administration has acknowledged with its recent request that airlines reduce flight schedules to the New York metropolitan area in order to accommodate such staff shortages.

Runway closures and equipment failures also contribute to delays and cancellations, said IATA. Additionally, supply chain issues in the aircraft manufacturing and support sectors have resulted in aircraft delivery delays and parts shortages “over which airlines have little or no control but which impact reliability,” the organization said.

“While the DOT carefully notes that airlines will only be responsible for compensating passengers for delays and cancellations for which the airline is deemed responsible, severe weather and other issues can have knock-on effects for days or even weeks later, at which point it can be difficult to impossible to isolate a single causal factor,” the IATA statement continued.

Punitive regulations, such as financial compensation, will have no impact on the level of flight delays and cancellations, said IATA.

Under Buttigieg’s tenure the DOT has also expanded its Airline Customer Service Dashboard at FlightRights.Gov, a website that shows travelers which airlines currently offer compensation in cash, travel credits, vouchers or frequent flier miles to passengers impacted by airline-created cancellations and delays.

The scoreboard shows that 10 US carriers offer meals or cash vouchers to customers during extended delays, and nine also offer complimentary hotel accommodations for passengers affected by an overnight cancellation.