US Chamber of Commerce Warns of Negative Impact of New Passenger Compensation Rule

The US Chamber of Commerce has warned that a new proposed regulation by the Department of Transportation (DOT) that would require airlines to compensate passengers for travel disruptions could have negative consequences for consumers and the industry.

The proposed rule, which was published in the Federal Register on June 15, would require airlines to provide monetary compensation to passengers who experience delays or cancellations of flights, involuntary bumping, lost or damaged baggage, or tarmac delays of more than three hours. The compensation amounts would range from $125 to $1,350 depending on the type and duration of the disruption.

The DOT said the rule aims to improve the treatment of passengers and enhance competition among airlines by creating incentives for better service quality. The rule would also implement provisions of the FAA Reauthorization Act of 2018 that mandated the DOT to establish minimum standards for passenger compensation.

However, the US Chamber of Commerce, which represents more than three million businesses and organizations, said the rule would have unintended and harmful effects on the airline industry and travelers.

“Sterling Wiggins, senior director of transportation, infrastructure and supply chain policy at the US Chamber of Commerce, said: “While this proposal appears laudable at first glance, the reality is that it ignores many facts about today’s passenger airline industry and could result in higher fares and fewer choices for many American travelers.”

Wiggins said the rule would impose significant costs on airlines that are already struggling to recover from the COVID-19 pandemic, which caused a historic decline in air travel demand and revenue. He said airlines would have to pass on these costs to consumers in the form of higher fares or reduced service.

He also said the rule would create a disincentive for airlines to operate flights in uncertain weather conditions or during peak periods, leading to more cancellations and fewer options for travelers. He added that the rule would interfere with existing contracts between airlines and passengers that already provide compensation and remedies for travel disruptions.

Wiggins urged the DOT to reconsider the rule and conduct a more thorough analysis of its impact on the industry and consumers. He said the US Chamber of Commerce supports efforts to improve passenger rights and service quality, but not at the expense of affordability and accessibility of air travel.

The DOT is seeking public comments on the proposed rule until August 16. The rule is expected to take effect one year after its final publication.