US seeks comment on airline passenger cash compensation proposal

The U.S. Department of Transportation said on Thursday it was seeking public comment on whether airlines should be required to pay passengers cash compensation when flight disruptions are caused by carriers.

The USDOT is giving the public 60 days to comment as it launches the rulemaking process but stopped short of issuing a formal proposal. It will be up to President-elect Donald Trump's administration to decide whether to pursue regulations. Trump has vowed to slash regulations broadly.

"It's very reasonable to say you have some compensation for your time and some protections," U.S. Transportation Secretary Pete Buttigieg said in an interview at an aviation event.

He said compensation rules for delays "would change the economic incentive in a way that motivates airlines to do more."

In May 2023, President Joe Biden said his administration would write rules requiring airlines to compensate passengers for disrupted flights and said the USDOT would issue a proposal by the end of 2023.

Canada, Brazil, the European Union and the United Kingdom all have airline delay compensation rules but Buttigieg said the USDOT is not "copypasting" Europe's rules.

The USDOT wants comment on whether airlines should be required to pay $200-$300 for domestic delays of at least three hours, $375-$525 for six-hour delays, and $750-$775 for nine-hour delays.

Airlines for America, a trade group representing American Airlines, Delta Air Lines, United Airlines and others, sharply criticized the proposal. Airlines have sparred with USDOT over flight disruptions and sued to block USDOT's fee disclosure rules.

"Mandating additional cash compensation - beyond what airlines already provide - will drive up ticket prices," the group said. "This proposal is simply one in a long string of ill-conceived and rushed rules from an administration intent on reregulating the U.S. airline industry."

Airlines must refund passengers for canceled flights, but are not required to compensate customers for delays. Major carriers have committed to paying for meals, hotel stays and other expenses when they cause significant flight disruptions.

Buttigieg noted, however, that the USDOT had required and prodded airlines to do more.

"I'm not terribly surprised that when we require them to treat passengers better they're going to fight back," he said.

The USDOT is considering whether small airlines should pay less, if compensation should be required when passengers are notified well in advance, and if airlines must cover meals, hotel stays and other costs after carrier disruptions.

The USDOT is also considering requiring airlines to rebook passengers on their next available flights, or if flights are unavailable for 24 hours, potentially requiring them to use competitors.

It is unclear if the USDOT needs additional authority from Congress to mandate delay compensation.

Buttigieg has taken an assertive approach to investigating airlines. He said the USDOT is working to finalize family seating and wheelchair rules by Jan. 20.