Final Regulatory Analysis

Consumer Rulemaking:

Enhancing Airline Passenger Protections II 

Contract No.:

GS-10F-0269K

Order No.:

DTOS59-09-F-10089

Project No.:

1029-000

Submitted To:

Office of the Assistant General Counsel

Aviation Enforcement and Proceedings

U.S. Department of Transportation

1200 New Jersey Avenue, SE

West Wing

Washington, DC 20590-0001

Submitted By:

Econometrica, Inc.

4416 East-West Highway

Suite 215

Bethesda, Maryland 20814

&

HDR Decision Economics

Silver Spring, Maryland

April 8, 2011
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Table of Contents

Executive Summary...................................................................................................................... 1

Introduction................................................................................................................................... 3

1. Discussion of Comments Received on the NPRM.......................................................... 4

1.1. General Comments.............................................................................................................. 4

1.2. Comments Relating to Specific Requirement Areas .......................................................... 6

2. An Overview of the Air Transportation Sector and Current Regulatory Structure 11

2.1. U.S. and Foreign Air Carriers........................................................................................... 11

2.2. Airports............................................................................................................................. 13

2.3. Flights and Passengers...................................................................................................... 14

2.4. Regulatory Authorities...................................................................................................... 15

2.5. Travel Agencies and Tour Operators................................................................................ 16

3. General Framework for Analysis of Benefits and Costs............................................. 17

3.1. Type of Air Travel Issues Being Addressed..................................................................... 17

3.2. Availability of Alternatives to Carrier Services or Information ....................................... 18

3.3. General Assumptions Used in Estimating Benefits and Costs......................................... 19

4. Regulatory Evaluation of Specific Requirement Areas............................................... 20

4.1. Additional Requirements for Tarmac Contingency Plans................................................ 21

4.2. Tarmac Delay Reporting................................................................................................... 31

4.3. Minimum Standards for Customer Service Plans (CSPs)................................................. 36

4.4. Posting of Contracts of Carriage, Customer Service Plans, and Tarmac Contingency 

Plans on Foreign Carrier Websites ................................................................................... 41

4.5. Requiring Foreign Carriers to Respond to Customer Complaints.................................... 44

4.6. Changes in Denied Boarding Compensation (DBC) Policy............................................. 48

4.7. Required Disclosure of Full Fares in Advertising and Prohibition on Opt-Out Provisions 

in Ticket Sales................................................................................................................... 54

4.8. Expanded Disclosure of Baggage Fees and Other Optional Fees..................................... 61

4.9. Prohibition on Post-Purchase Fare Increases.................................................................... 66

4.10. Prompt Passenger Notification of Flight Status Changes........................................... 69

4.11. Limitations on Venue Provisions in Contracts of Carriage........................................ 70

5. Results and Discussion of the Benefit and Cost Analysis............................................ 71

5.1. Overall Net Benefits of the Rule....................................................................................... 71

5.2. Net Benefits of Specific Sets of Requirements................................................................. 72

5.3. Cost-per-Passenger Analysis ............................................................................................ 76

5.4. Conclusion ........................................................................................................................ 77
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Appendix 1: Notes on Estimation of Benefits and Data Sources Used................................ A-1

Appendix 2: Estimates of Additional Benefits for Requirement Area 7............................. B-1
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List of Tables

Table ES1 - Present Value of Net Benefits for Final Rule, 2012-2021.......................................... 2

Table 1 - Scheduled Passenger Service on U.S. Carriers, 2009 ................................................... 12

Table 2 - US Carriers by Size Class, 2009.................................................................................... 12

Table 3 - Number of Foreign Carriers .......................................................................................... 13

Table 4 - Passenger Enplanements by Size of Airport, 2009 ....................................................... 14

Table 5 - Scheduled Passenger Service: Departures and Passengers, 2009 ................................. 15

Table 6 - Travel Agencies and Tour Operators, 2007 .................................................................. 16

Table 7 - Estimated Number of Lengthy Tarmac Delays for Foreign Carriers, 2009.................. 23

Table 8 - Number of Carrier-Airport Pairs with Tarmac Plan Coordination Requirement.......... 24

Table 9 - Benefits Estimates for Requirement Area 1 .................................................................. 26

Table 10 - Unit Costs for Requirement Area 1............................................................................. 30

Table 11 - Estimated Compliance Costs for Requirement Area 1................................................ 31

Table 12 - Number and Percent of Flights with Tarmac Times of 3 Hours or More ................... 32

Table 13 - Projected Numbers of Reportable 3-Hour Tarmac Delays, 2009................................ 33

Table 14 – Unit Compliance Costs for Requirement Area 2 ........................................................ 35

Table 15 - Estimated Compliance Costs for Requirement Area 2................................................ 36

Table 16 - Benefits Estimates for Requirement Area 3 ................................................................ 38

Table 17 - Unit Costs for Requirement Area 3............................................................................. 40

Table 18 - Estimated Compliance Costs for Requirement Area 3................................................ 40

Table 19 - Number of Foreign Carriers Required to Post............................................................. 42

Table 20 - Unit Costs for Requirement Area 4............................................................................. 43

Table 21 - Estimated Compliance Costs for Requirement Area 4................................................ 43

Table 22 - Passenger Service Complaints Received by the Department, 2009............................ 44

Table 23 - Number of Consumer Complaints Involving Foreign Carriers, 2009......................... 45

Table 24 – Benefits Estimates for Requirement Area 5 ............................................................... 46

Table 25 – Unit Costs for Requirement Area 5 ............................................................................ 47

Table 26 – Estimated Compliance Costs for Requirement Area 5 ............................................... 48

Table 27 – Passengers Denied Boarding on Reporting Carriers, 2009......................................... 48

Table 28 - Unit Costs for Requirement Area 6............................................................................. 53

Table 29 - Estimated Compliance Costs for Requirement Area 6................................................ 54

Table 30 - Benefits Estimates for Requirement Area 7 ................................................................ 58

Table 31 - Unit Costs for Requirement Area 7............................................................................. 60

Table 32 - Estimated Compliance Costs for Requirement Area 7................................................ 61

Table 33 - Unit Costs for Requirement Area 8............................................................................. 64

Table 34 - Estimated Compliance Costs for Requirement Area 8................................................ 65

Table 35 - Benefits Estimates for Requirement Area 9 ................................................................ 67

Table 36 - Unit Costs for Requirement Area 9............................................................................. 68

Table 37 - Estimated Compliance Costs for Requirement Area 9................................................ 68

Table 38 - Present Value of Net Benefits for Proposed Requirements, 2012-2021 ..................... 72

Table 39 - Comparison of Requirement Area Benefits and Costs, 2012-2021 ............................ 73
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Executive Summary

The Department of Transportation (DOT) is issuing a Final Rule to provide airline passengers 

with additional protections in the areas of airline service provision and consumer information.

Some of the provisions in this Rule build on regulatory requirements adopted as part of the Final 

Rule on Enhancing Airline Passenger Protections (EAPP1) that was published in the Federal 

Register on December 30, 2009. Econometrica and its subcontractor, HDR Decision Economics, 

were tasked with developing a regulatory evaluation for each of the requirements included in this 

Final Rule (referred to as “EAPP2”). This regulatory evaluation estimates the economic impact, 

in terms of benefits and costs, to passengers, U.S. and foreign air carriers, and other entities 

regulated under this proceeding, as required by Executive Order (EO) 12866.1

In this analysis, we discuss and, where possible, provide estimates of the benefits and costs for 

specific regulatory requirements in 11 areas, including extension of the EAPP1 requirements for 

tarmac contingency plans, customer services plans, and customer complaint responses to cover 

foreign carriers; expanded reporting of tarmac delays; changes in denied boarding compensation 

(DBC) requirements; elimination of the break-out of government taxes and fees from advertised 

fares for air transportation; and disclosure of baggage and other optional fees.

Most of the new requirements cover carriers offering passenger service to domestic and 

international destinations. The U.S. air carriers that account for nearly all domestic passenger 

trips and about 60 percent of international passenger trips from or to U.S. airports are already 

required to comply with several of these requirements. As many as 130 foreign carriers will also 

have to comply with the requirements for tarmac contingency plans, customer service plans

(CSPs), and customer complaint responses adopted for U.S. carriers in the EAPP1 Final Rule. In 

addition to U.S. and foreign carriers, the requirements that full fares be displayed in travel 

advertising and solicitations and that baggage and optional fees be clearly disclosed will also 

apply to as many as 15,000 travel agents and tour operators.

All quantified benefits and costs estimated for individual requirements were translated into 

current values for each year in the 10-year period beginning with calendar year 2012.

2 In 

accordance with Office of Management and Budget (OMB) guidelines, a discount rate of 7 

percent is used in the primary analysis and is supplemented with overall estimates using a 3 

percent discount rate as well.

 1 An analysis of the impact of the new requirements on small carriers, travel agents, and tour operators is provided in 

the accompanying Regulatory Flexibility Analysis.

2 In this analysis, the affected parties are assumed to be compliant with the proposed regulations by January 1, 2012, 

with the exception of the full-fare advertising provision in Requirement Area 7, which is assumed to take effect 60 

days later.
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Table ES1 - Present Value of Net Benefits for the Rule, 2012-2021

PV (millions)

Monetized Benefits 10 Years, 7% discounting $45.0

10 Years, 3% discounting $53.5

Monetized Costs 10 Years, 7% discounting $30.7

10 Years, 3% discounting $33.2

Monetized Net Benefits 10 Years, 7% discounting $14.3

10 Years, 3% discounting $20.3

The expected present value (PV) of passenger benefits from the Rule over a 10-year period using 

a 7 percent discount rate is estimated at $45.0 million. The expected present value of costs 

incurred by carriers and other sellers of air transportation to comply with the Rule is $30.7

million over 10 years, discounted at 7 percent. The PV of net benefits for a 10-year period at a 7

percent discount rate is thus $14.3 million. Using a 3 percent discount rate, the PV of net 

benefits for 2012 through 2021 is estimated at $20.3 million.

A comparison of the benefit and cost estimates for each of the 11 sets of new requirements is 

provided in Section 5.2, along with information on additional benefits and costs for which 

quantitative estimates could not be developed.

Substantial portions of the estimated benefits, costs, and net benefits from the Rule are 

attributable to the full-fare advertising provisions of Requirement Area 7. The estimated benefits 

for these requirements total $29.0 million over the 10-year period from 2012 through 2021 using 

a discount rate of 7 percent. Benefits estimated for the full-fare advertising provisions represent 

64 percent of the total benefits estimated for all 11 sets of new requirements during the period 

from 2012 through 2021.

The expected costs of complying with the full-fare advertising provisions of Requirement Area 7 

are estimated at $6.8 million. All of these costs will be incurred in 2012. Costs estimated for the 

full-fare advertising requirements represent 22 percent of the total costs estimated for all 11 sets 

of new requirements during the period from 2012 through 2021.

None of the present values of estimated benefits or estimated costs estimated for any of the other 

requirements from 2012 through 2021 (discounted at 7 percent) exceed $10 million.

This regulatory analysis indicates that adoption of the new requirements will result in projected 

benefits to the public that outweigh the estimated costs of the Rule.
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Introduction

The Department of Transportation (DOT) is issuing a Final Rule to provide airline passengers

with additional protections in the areas of airline service provision and consumer information. 

Some of the provisions in this Rule build on regulatory requirements adopted as part of the Final 

Rule on Enhancing Airline Passenger Protections (EAPP1) that became effective on April 29, 

2010.

3

Econometrica and its subcontractor, HDR Decision Economics, were tasked with developing a 

regulatory evaluation for each of the requirements included in the Final Rule. This regulatory 

evaluation estimates the economic impact, in terms of benefits and costs, to passengers, U.S. and 

foreign air carriers, and other entities regulated under this proceeding, as required by Executive 

Order (EO) 12866.

The regulatory impact analysis (RIA) is conducted to determine the economic impact, if any, of 

the Rule and to assess whether, on balance, the Rule is in the public interest. This analysis 

provides a baseline description of passenger protections, identifies the need for the Rule, and 

defines the analytic scope and parameters. It discusses the Rule’s anticipated effects and presents 

a summary of the expected benefits and costs.

The May 2010 preliminary RIA presented estimates for the benefits and costs of specific 

proposals included in the Notice of Proposed Rule Making (NPRM). The final RIA updates these 

estimates to reflect the provisions incorporated into the Final Rule, which will add new 

regulatory requirements in the following areas:

Req. Area Requirement Description

1 Expansion of tarmac delay contingency plan requirements and extension of 

EAPP1 Final Rule requirements to cover foreign carriers

2 Expanded tarmac delay reporting and application to foreign carriers

3 Establishment of minimum standards for customer service plans (CSPs) and 

extension of EAPP1 Final Rule requirements to cover foreign carriers

4 Extension of requirements to post contracts of carriage, tarmac delay contingency 

plans and CSPs on websites to cover foreign carriers

5 Extension of EAPP1 Final Rule requirements for carriers to respond to consumer 

complaints to cover foreign carriers

6 Changes in denied boarding compensation (DBC) policy

7 Full-fare advertising and prohibition on opt-out provisions

8 Expanded requirements for disclosure of baggage and other optional fees

9 Prohibition on post-purchase price increases

10 Prompt passenger notification of flight status changes

11 Limitations on venue provisions in contracts of carriage.

This document provides an economic evaluation of the Rule in each of these 11 requirement 

areas. It also summarizes the comments received in response to the NPRM that relate to the 

 3 “Final Rule on Enhancing Airline Passenger Protections,” DOT-OST-007-0022, December 30, 2009. In this 

Regulatory Impact Analysis, the Final Rule being evaluated is sometimes referred to as “EAPP2” for clarity.
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preliminary RIA and, where possible, indicates how these comments were taken into account in 

the final RIA.

For each area addressed in the Final Rule, we present the economic rationale for adopting 

additional requirements. We provide information on current regulatory requirements, 

Department enforcement policy, and industry practices; specify the nature of the benefits and 

costs associated with the Rule; and indicate the sources of data used to quantify these costs and 

benefits, where possible. Benefit and cost estimates are presented for individual requirements, 

and the aggregate benefits and costs of the requirements are aggregated to determine the present 

value of net benefits over a 10-year time period. The accompanying Regulatory Flexibility 

Analysis assesses the extent to which the costs associated with these requirements could 

potentially affect small carriers, travel agents, and tour operators.

The scope of this analysis is broad, yet it involves estimating very detailed changes that can 

occur in a wide variety of situations. It was necessary to make many estimates and assumptions 

in cases where specific data were not available or to make the estimation exercise manageable. 

The Department solicited comments to improve the analysis to the greatest extent possible. This 

evaluation summarizes comments submitted to the regulatory docket that were related to the 

Preliminary Regulatory Analysis and provides a response for each of those comments here.

1. Discussion of Comments Received on the NPRM

1.1. General Comments

Ratio of benefits to costs by provision and unquantifiable benefits

The Air Transport Association (ATA) and the International Air Transport Association (IATA), 

among others, noted that benefits were not estimated for some Rule provisions and that the 

monetized benefits were smaller than the monetized costs for the Rule provisions in some 

requirement areas. The ATA and IATA argued that the Department should not adopt the 

proposed requirements in any of the 11 requirement areas in the NPRM for which the monetized 

benefits in the preliminary RIA did not exceed estimated costs.

Adequate data do not exist to support the development of quantitative estimates for all of the 

benefits (and costs) that will result from the provisions in each of the 11 requirement areas 

included in the Final Rule. In the NPRM, the Department solicited information in several areas 

from knowledgeable parties. To the extent that such information was not available or 

forthcoming, some benefits and costs could not be quantified in the final evaluation. They are, 

nonetheless, accurately described as unquantifiable components of the Rule’s impact.

Moreover, while we were not able to make quantitative estimates of the benefits for certain Rule 

provisions, the estimated costs to carriers of complying with these requirements are projected to 

be extremely small in relation to carrier revenues from passenger service. To confirm that this is 

the case, in Section 5.3 we present a cost-per-passenger analysis for several Requirement Areas

for which quantitative estimates of benefits could not be developed. The cost-per-passenger 

analysis shows that the cost of complying with these requirements will be extremely low.
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IT costs and fees

IATA contends that the Regulatory Impact Analysis did not accurately reflect the IT costs

associated with meeting all of the requirements included in the NPRM. Among the IT costs that 

IATA believes were not properly taken into account were the following: 

• incremental costs for Web updates that occur more frequently than once a year

• IT costs incurred to update passengers on flight status changes

• submission of monthly data related to tarmac delays

• changes to reservations systems necessary to allow holds without payment for 24 hours

• disclosure of past delays and cancellations

• changes to full-fare advertising requirements for both airlines and ticket agents

• website maintenance and updating to display prominently changes in baggage and other 

optional fees

• inclusion of baggage allowance and fees on e-tickets

• mandated provision of flight status updates.

Some of these costs were in fact included in the preliminary RIA. Others have been estimated 

and included in the final evaluation, specifically:

• The incremental costs for Web updates referred to in the IATA comments relate to 

posting baggage and other optional fee disclosures. As discussed in Section 4.8.2, current 

DOT enforcement policy already requires carriers to disclose baggage fees and to post an 

alert on the home page to alert consumers about increases in these fees. There are no 

additional costs associated with permitting this alert to remain on the home page for 3 

months, rather than for some shorter period of time. However, the Final Rule does add 

other new requirements for carriers and ticket agents concerning the disclosure of 

baggage and optional fees, particularly with respect to code-share and interline flights.

Estimates of these compliance costs are presented in Section 4.8.4 below.

• It is our understanding that most carriers currently have systems in place that are used to 

update passengers on delayed or cancelled flights—the Rule requirements simply ensure 

that this information is provided promptly. Consequently, we do not anticipate that there 

will be significant costs associated with this requirement.

• System set-up and programming costs for submission of tarmac delay reports were 

included in Section 6.2 of the preliminary RIA. Updated estimates of these costs are 

presented in Section 4.2.4 of the final RIA.

• Costs associated with changes to reservations systems necessary to allow holds without 

payment for 24 hours were not included in the preliminary RIA because the Department 

does have adequate information to estimate these costs. A review of carrier and thirdparty websites indicated that most reporting U.S. carriers currently allow travelers either 

to hold a reservation for 24 hours without payment or to cancel ticket purchases within 24 

hours without penalty. Both of these options are permissible under the Final Rule 

requirements.
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• The preliminary RIA did not include any costs associated with disclosure of past delays 

and cancellations because the NPRM did not contain any proposed requirements in this 

area beyond those already included in the EAPP1 Final Rule.

• Costs associated with changes in the full-fare advertising requirements were included in 

Section 6.7 of the preliminary RIA. However, IT costs related to display of full-fare 

advertising on websites were relatively small, because our review of marketing carrier 

and large online travel agency (OTA) sites indicated that this information was already 

calculated and, in many cases, displayed on the booking selection pages. For example, 

the programming required for the four largest OTAs will consist solely of changes to the 

color, size, and placement of the full-fare price for each option offered.4 These costs are 

also included in Section 4.7.4 of the final RIA.

• Section 6.8 of the preliminary RIA included estimates of the costs for website formatting 

and maintenance for prominent display of changes to baggage and other optional fees. 

These costs are also included in Section 4.8.4 of the final RIA.

• Section 6.8 of the preliminary RIA also included estimates of the costs for inclusion of 

baggage allowance and fees on e-tickets. These costs are included in Section 4.8.4 of the 

final RIA.

• It is our understanding that most carriers currently provide flight status updates. For 

example, our February 2010 review indicated it was possible to sign up to receive text 

message updates on the websites of 9 of the 11 reporting carriers that sold tickets directly 

to the public at that time.

1.2. Comments Relating to Specific Requirement Areas

1.2.1. Requirement Area 1: Tarmac Delays and Contingency Plans

Additional flight cancellations

Industry analysts Joshua Marks and Daryl Jenkins have argued that the cancellation rate for 

flights which would otherwise have had lengthy tarmac delays in the absence of the EAPP1 Final 

Rule has actually been much higher than estimated in the preliminary RIA.5

It is important to keep in mind that some flights which previously experienced tarmac delays of 

more than 3 hours were cancelled even in absence of this regulation. In addition, an analysis we 

recently conducted for the Department indicates that while the cancellation rate for domestic 

flights experiencing tarmac delays of 21⁄2 hours or more (the time limit at which a decision to 

return to the gate must typically be made) has increased since the EAPP1 Rule requirements took 

effect, the number

 4 At least one of the four largest OTAs displayed full fares including all taxes and fees on the flight selection page 

for international flights at the time this evaluation was finalized.

of cancellations among this cohort of flights has actually decreased relative to 

5 See Marks and Jenkins’ July 20, 2010, study, “Impact of Three-Hour Tarmac Delay Rules and Fines on Passenger 

Travel Time and Welfare,” and their November 18, 2010, follow-up study, “Summer 2010 Cancellations and the 

Five-Month Impact of the Three-Hour Tarmac Delay Rule,” both of which are available at www.tarmaclimits.com. 
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the number for the same time period in previous years. Consequently, it is possible that costs that 

would have been incurred from a higher proportion of flights experiencing tarmac delays of 21⁄2 

hours or more being cancelled have been more than offset by the avoided cancellations 

attributable to the reduced overall numbers of domestic flights that are now experiencing tarmac 

delays of this length. The impact on cancellations of international flights operated by foreign 

carriers (for which tarmac delays of 4 hours trigger the contingency plan) is also projected to be 

minimal.

Carrier costs for gate returns

IATA states that the preliminary RIA cost estimate for incorporating a time limit for lengthy 

tarmac delays did not include costs of taxi time back to gate per flight (including passenger,

crew, and aircraft), the cost of using ATC (air traffic control) to taxi back to gate, per-flight cost 

of changing crew or having a spare crew waiting if necessary, and the cost of aircraft station 

expense (including ground staff and provision of external power unit for aircraft if necessary) per 

flight. Without including estimates of these costs, IATA contends that the preliminary RIA 

underestimates the true cost to the carriers of the regulation.

The preliminary RIA included estimates of the fuel costs to planes to taxi back to gate, the cost 

of providing food and water after 2 hours of delay, and passenger deplaning fees. These costs 

were relatively small because the projected number of affected flights operated by foreign 

carriers was estimated to be relatively low, but they were included. The Department does not 

have access to information on the other cost elements described in the IATA comments. In the 

absence of adequate information, these costs are listed as unquantifiable costs in the final RIA.

Costs of cancelled flights

IATA believes that the estimate of $11,600 for the incremental cost of a cancelled flight reported 

in the preliminary RIA is too low.

While this estimate was presented in the preliminary RIA section summarizing the assumptions 

used in the benefits and costs analysis, it is actually the cost figure for 1998 cancellations 

reported in the study used as the source for this estimate.6 The unit costs estimates used in the 

preliminary RIA analysis of the tarmac contingency plan requirements included an updated 

estimate of the cost for a cancellation of $14,818.

The Final Rule requires covered foreign carriers to set a tarmac delay limit of no more than 4 

hours.

7 As discussed above, the Department has analyzed data on domestic flights experiencing 

tarmac delays of 21⁄2 hours or more since the EAPP1 Rule requirements became effective and 

determined that the number of these flights which are ultimately cancelled has actually 

decreased

 6 Zalman Shavell, “The Effects of Schedule Disruptions on the Economics of Airline Operations,” The MITRE 

Corporation, April 14, 2000.

. Consequently, no costs associated with additional cancellations are projected to result 

from this requirement being extended to foreign carriers in the final RIA.

7 The tarmac contingency plans posted by U.S. carriers subject to these requirements under the EAPP1 Final Rule 

typically include a self-selected 4-hour limit on tarmac delays for international flights departing from or arriving at 

U.S. airports.
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Cost of increased refunds and cancelled passenger trips due to returns to gate during long 

delays

The ATA expects that there will be a significant increase in the number of passengers requesting 

refunds due to “significant delays” and contends that these costs should be included in the RIA.

It is not clear that an increased number of passengers seeking refunds will cause carriers as a 

whole to incur net costs, because most passengers will seek alternative air transportation after 

cancelling trips on flights with lengthy delays. In any event, the benefits to passengers who 

would request refunds to avoid being held on a flight experiencing a lengthy tarmac delay are 

likely to exceed the administrative costs of providing the refund and rebooking on another flight.

Costs to airports for contingency plans

Comments submitted by the Dallas-Fort Worth Airport contended that if tarmac delay 

contingency plans are required of U.S. airports, the costs airports may incur to implement them 

should be considered.

The Final Rule requires that covered U.S. and foreign carriers coordinate their tarmac 

contingency plans with all large hub, medium hub, small hub, and non-hub airports, a significant 

expansion from the EAPP1 requirement that covered U.S. carriers coordinate their plans with 

large and medium hubs. The numbers of carriers operating flights to and from each size-class of 

airport and the numbers of additional carrier contingency plans that authorities at each size-class 

of airports will need to receive, review, and discuss with carriers are developed and included in 

the Final RIA. These data are used to estimate costs to carriers for coordinating plans with 

airport authorities. While we were not able to develop quantitative estimates of the costs to 

airport authorities associated with this requirement, they are noted as an unquantifiable cost 

element of the Rule. (See sections 4.1.2 and 4.1.4 below).

1.2.2. Requirement Area 3: Customer Service Plans

Cost of developing and implementing customer service plans

The ATA contends that the preliminary RIA significantly underestimated the cost to extend 

customer service plans to foreign carriers and regional carriers. Using the preliminary estimate of 

$91,000 per carrier to implement such plans, the ATA calculates that the costs estimated in the 

preliminary RIA were sufficient for only 36 carriers to implement such plans, but that the 

preliminary RIA estimates that 86 foreign carriers would need to do so.

The preliminary RIA presented separate CSP compliance cost estimates for large and small 

carriers. The ATA comment assumes that all foreign carriers will incur the higher costs 

estimated for large carriers. In addition, U.S. regional carriers were already required to develop 

and self-audit CSP compliance as part of the EAPP1 Final Rule requirements.

The final RIA incorporates updated estimates of these CSP costs (See Section 4.3.4 below).
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1.2.3. Requirement Area 4: Posting Contracts of Carriage, Tarmac 

Contingency Plans, and Customer Service Plans on Carrier Websites

Litigation costs

Many comments expressed the view that litigation costs stemming from proposed requirements 

to include contingency plans and customer service plans in carriers’ contracts of carriage should 

have been taken into account in the preliminary RIA. The ATA comments referenced estimates 

submitted in the EAPP1 rule-making, which concluded that each of its members would bear an 

additional $500,000 in additional annual litigation costs.

The proposed requirements for tarmac delay plans and customer service plans to be included in 

carrier contracts of carriage have not been included in the Final Rule, so no estimates of costs 

related to these provisions need be included.

1.2.4. Requirement Area 7: Full-Fare Advertising

Consumer surplus methodology for benefits estimation

The ATA comments include several specific criticisms of the estimated benefits from the 

proposed full-fare advertising requirements that were presented in the preliminary RIA. The 

principal focus of these comments is that the use of a consumer surplus analysis to estimate the 

reduction of “dead weight loss” from consumers purchasing tickets without taking into account 

all of the included taxes and fees is somehow incorrect or inappropriate to use as a benefits 

estimation methodology.

It is important to note that this analysis was based on peer-reviewed research which showed that 

providing consumers with more complete information about the final prices of products being 

purchases did in fact reduced the quantity purchased. This is, in one sense, an unsurprising result.

An axiom of mainstream economic theory is that consumers make optimal purchasing choices 

based on the information available at the time buying decisions are made. It must therefore be 

the case that providing consumers with more accurate information about the final purchase price 

earlier in the buying process improves their welfare. In the context of air travel, ticket purchasers 

on most travel websites will be aware to varying degrees that additional taxes and fees will be 

included in the final purchase price. However, it is also clear that most consumers will not know 

the exact amount of these taxes and fees until they are provided with that information by the 

ticket agent (carrier, travel agency, etc.). A more extended exposition of the case for the 

existence of this benefit is provided in an appendix to the final RIA.

However, to address the concerns raised about various calculation issues by the ATA and in 

other comments, we have not included estimates of the increase in consumer surplus from the 

full-fare advertising requirement in net benefits calculated for the Rule. The final RIA does 

include, as an unquantifiable benefit of the full-fare advertising requirement, the value to 

consumers from avoiding purchases at prices higher than they would be willing to pay if they 

were disclosed initially.

Search time savings

The ATA also provided comments about the procedures and data used to calculate the other 

category of benefits estimated in the preliminary RIA for the full-fare advertising requirement—
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Econometrica, Inc. April 8, 2011

those accruing from the time saved by ticket purchasers who compare full-fare prices for the 

same itinerary across multiple websites. The ATA criticisms focused on several of the 

intermediate data elements used to compute the number of ticket purchasers who would benefit, 

as well as the estimate of average time saved by comparing fares from multiple sites.

The ATA comments specifically suggest that the ticket purchases are properly estimated using 

data from the Bureau of Transportation Statistics (BTS) Origin and Destination (O&D) survey.

The final RIA estimates the number of ticket purchases using the O&D survey data. The ATA 

comments also provide newly available information on the average party size for air trips, which 

was used in place of the estimate in the preliminary RIA.

ATA also disputed the estimated percentage of passengers who book a trip online (72 percent, 

according to the PhoCusWright study previously cited) that was used in the preliminary RIA and 

recommended that estimates be based on the 52 percent share found in a 2008 ATA study, which 

reportedly included business as well as leisure travel. The final RIA uses the 2008 ATA estimate 

as the share of air travelers booking online in the base year (2012) of the 10-year time period 

over which benefits are estimated. However, most observers believe that the share of tickets 

purchased online will continue to grow during the next 10 years. Accordingly, the estimates in 

the final RIA are based on the percentage of tickets booked online growing by two percentage 

points annually from 52 percent in 2012 to 70 percent in 2021.

The ATA comments also question the assumption of an average time saving of 5 minutes for 

purchasers comparing full fares across multiple websites that was used in the preliminary RIA. 

In response to this concern, we have re-estimated the amount of time saved to 3 minutes, based 

on a series of time trials performed at HDR offices. This revised estimate is lower because it 

measures only the time spent searching on additional websites to find full-fare prices but not the 

time required to complete the purchasing process (entering names, credit cards, seat preference) 

on additional websites. The revised estimate is more appropriate because a customer will only go 

through the purchasing process once, even if they check multiple websites.

Impact of full-fare advertising in print and other media on future purchases

The ATA comments noted that the research on consumer behavior and the analysis of online air 

ticket purchases presented in the preliminary RIA did not assess the possible impact of the fullfare advertising requirement on the effectiveness of travel advertising, but rather focused solely 

on the impact on online ticket purchasers.

Both the preliminary and final RIA present monetized estimates only for the benefits that would 

be realized by online purchasers of air travel. The Department does not have sufficient 

information available to assess the possible impact of the full-fare advertising requirement on the 

effectiveness of travel advertising generally.

Costs of revising websites and print media advertising

Finally, IATA contends that costs for revising websites and print media advertising were not 

included in the preliminary RIA. Estimates of these costs were provided in Section 6.7 of the 

preliminary RIA and in Section 4.7.4 of the final RIA.
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2. An Overview of the Air Transportation Sector and Current 

Regulatory Structure

This section provides an overview of important features of the passenger air travel sector: U.S. 

and foreign carriers, airports, flights and passengers, regulatory authorities, and travel agencies 

and tour operators.

2.1. U.S. and Foreign Air Carriers

Nearly 300 U.S. and foreign air carriers provide some combination of scheduled and 

nonscheduled passenger and all-cargo air service to U.S. and international destinations. All U.S. 

air carriers operating any aircraft of 60 seats or more must have a certificate under 49 USC 

41102 (or an exemption issued by DOT from that section) to provide scheduled passenger 

service. Some carriers operating fleets consisting only of smaller aircraft may also be 

“certificated carriers.” A relatively limited number of carriers operating small aircraft are 

authorized as “commuter air carriers” under the definition provided in 14 CFR 298.3(b). Foreign 

air carriers must hold permits issued under 49 USC 41302 (or an exemption issued by DOT from 

that section) to operate flights that arrive or depart at U.S. airports.

The applicability of some current regulatory requirements varies not only between U.S. and 

foreign carriers, but also among different categories of U.S. carriers, based on the carrier’s share 

of total industry revenues from scheduled passenger service on domestic routes or the seating 

capacity of the aircraft the carrier operates. 

Reporting carriers

“Reporting carriers”—those that account for at least 1 percent of domestic scheduled passenger 

service revenues—must report information to BTS monthly on lengthy tarmac delays, on-time 

performance (OTP), payment of DBC, and other aspects of carrier performance. In 2012, the 

first full year in which the Rule will be effective, the roster of reporting carriers is expected to 

include six mainline carriers (Alaska, American, Delta, Hawaiian, United, and US Airways), 

three low-cost model major airlines (Frontier, JetBlue, and Southwest), and five regional carriers 

(American Eagle, Atlantic Southeast, ExpressJet, Mesa, and SkyWest).

8

 8 There were 18 reporting carriers at the end of 2009. Since then, Air Tran has been purchased by Southwest; 

Continental and United have merged; Comair no longer must report; and Pinnacle has elected to discontinue 

reporting on a voluntary basis. It is also possible that ExpressJet will discontinue reporting voluntarily if SkyWest 

(which acquired the carrier in 2010) elects to consolidate reporting by the beginning of 2012.
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Table 1 - Scheduled Passenger Service on U.S. Carriers, 2009

Number of 

Carriers Departures Passengers

Passengers/ 

Departure

Reporting Carriers 18 7,008,602 628,155,438 90

Other U.S Carriers 79 2,517,894 86,952,529 35

Total 97 9,526,496 715,107,967 75

Reporting % of Total 18.6% 73.6% 87.9% --

Source: BTS T-100 Segment database, 2009

Aircraft size-based distinctions among U.S. carriers

Many regulatory requirements apply only to carriers that operate at least one aircraft originally 

designed to hold 30 passengers or more. Carriers that provide passenger service using at least 

one aircraft originally designed to hold 30 passengers or more, but none that have more than 60 

seats, are considered small entities for purposes of assessing impact under the relevant 

requirements of the Regulatory Flexibility Act. There are also a significant number of carriers 

that operate only aircraft with fewer than 30 seats. The regulatory requirements for these carriers 

are less extensive than those for larger carriers. Finally, there are several carriers that do not offer 

scheduled service but operate public charter flights. The majority of these carriers provide 

charter service using at least one aircraft with more than 60 seats.

Table 2 - US Carriers by Size Class, 2009

Group

Seat 

Criterion

Total in 

2009 T-100*

Charteronly**Scheduled 

Service

Contract 

Carriers Other

Large > 60 49 16 33 15 18

Small 30 - 60 12 0 12 6 6

Very Small < 30 38 10 28 1 27

Total 99 26 73 22 51

Note: 17 large carriers and 1 small carrier are reporting carriers.

*Excludes carriers that were no longer operating independently by end of 2010.

**Six charters offered some scheduled service in 2009; all are very small Alaska or sightseeing tour carriers.

The U.S. domestic airline industry continues to undergo significant consolidation. Of the 117 

U.S. carriers operating at the beginning of 2009, 20 were no longer providing service 2 years 

later. Fourteen of the remaining carriers are wholly-owned subsidiaries that do not independently 

market air transportation services but are treated as separate entities for some reporting and

regulatory compliance purposes.

Mainline and regional airlines

Several U.S. carriers, including 5 of the 14 carriers expected to be reporting carriers by the 

beginning of 2012, operate flights primarily or exclusively on a contract basis, providing service 

primarily for the largest mainline network carriers. Most of these carriers do not sell scheduled 

air transportation services directly to the general public; the flights they operate are listed on the 

contracting carriers’ schedules under code-share agreements. A few small regional carriers (e.g., 

Cape Air and Great Lakes) operate both contract and independently-marketed flights.
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Regional carriers—both contract carriers and those that market flights independently—provide 

service to a much larger network of communities than do the mainline and low-cost national 

carriers. The Regional Airlines Association (RAA) estimates that its 68 member carriers provide 

the only scheduled service available at 263 of the 428 U.S. airports in the 48 contiguous States

and at 185 of the 207 airports in Alaska, Hawaii, and Puerto Rico.

9

Regional carriers are typically subject to the same reporting and regulatory requirements as other 

airlines in the same size classes. In some instances, however, contract carriers must comply with 

their mainline partners’ commitments and compliance requirements—including relevant 

provisions in the Final Rule dealing with tarmac delay plans and customer service plans.

Foreign carriers

In contrast, foreign carriers operating flights to and from the United States are currently subject 

to a single set of regulatory requirements. Nearly all of them will be subject to the EAPP1 

requirements for domestic carriers that are being extended to cover foreign carriers in the EAPP2 

Final Rule. There are 130 foreign carriers that operate scheduled or charter service to the United 

States.

10

Table 3 - Number of Foreign Carriers

Group

Total in 2009 

T-100*

Charteronly*Scheduled 

Service

Contract 

Carriers Other

Alliance 36 0 36 1 35

EU 47 21 26 2 24

Canada 10 2 8 2 6

Total 130 29 101 12 89

*No charter service carrier operated more than three scheduled service flights in 2009.

2.2. Airports

The Federal Aviation Administration (FAA) groups airports into a set of size-based categories 

based on the number of passengers boarded (“enplanements”) annually. There were 565 U.S. 

airports with at least 2,500 passenger enplanements in 2009. More than two-thirds of domestic 

and international passengers departed from 29 major metropolitan hubs, and another one-fifth 

departed from 37 medium hub airports. On the other end of the size spectrum, there were 180

airports with between 2,500 and 10,000 passenger enplanements in 2009. More than half of these 

(91) were located in Alaska.

 9 Regional Airline Association, 2010 Annual Report. 10 Four foreign carriers operate passenger service to and from the United States exclusively with aircraft having 

fewer than 30 seats. These carriers would not have to comply with the requirements that apply only to U.S. and 

foreign carriers which provide passenger service on at least one aircraft that has 30 or more seats.
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Table 4 - Passenger Enplanements by Size of Airport, 2009

Category

Minimum %/# of 

Passengers # of Airports

Passengers 

(millions) % of Total

Passengers 

per Airport 

Large Hub >1% of total 29 491.7 69.3% 17.0 million

Medium Hub >0.25% of total 37 138.0 19.4% 3.7 million

Small Hub >0.05% of total 69 56.7 8.0% 821,000

Non-Hub >10,000/year 250 22.9 3.2% 91,000

Other 

Commercial >2,500/year 180 0.9 0.1% 5,000

Total 565 710.1 100.0% 1.3 million

Source: BTS T-100 Segment database, 2009.

International flights depart from every large and medium hub, most small hubs, and about onethird of non-hub airports. However, only 5 of the 180 airports with between 2,500 and 10,000 

passenger departures in 2009 offered scheduled international service.

2.3. Flights and Passengers

Airline passengers travel to both domestic and international destinations using both scheduled 

and nonscheduled (charter) service provided by U.S. and foreign carriers. Carrier-specific data 

on the annual numbers of domestic and international departures and passengers boarded for each 

type of flight are available from the BTS T-100 segment database.

Most passenger travel is on scheduled service flights, and seven out of every eight scheduled 

flights are to destinations within the United States. Virtually all domestic flights are on U.S. 

carriers. Foreign carriers may transport passengers between two U.S. airports only on segments 

of flights that originate from or continue on to international destinations. U.S. carriers also 

account for a significant majority of international departures, although the share of passengers on 

international flights is divided more evenly between U.S. and foreign carriers because the

average number of passengers per departure is larger on flights operated by foreign carriers.
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Table 5 - Scheduled Passenger Service: Departures and Passengers, 2009

Domestic International Combined

Departures

U.S. Carriers 8,751,178 775,885 9,527,063

Foreign Carriers 2,389 483,944 486,333

Total 8,753,567 1,259,829 10,013,396

Passengers

U.S. Carriers 631,955,369 83,152,598 715,107,967

Foreign Carriers 503,133 66,349,930 66,853,063

Total 632,458,502 149,502,528 781,961,030

Passengers/Departure

U.S. Carriers 72.2 107.2 75.1

Foreign Carriers 210.6 137.1 137.5

Total 72.3 118.7 78.1

Source: BTS T-100 Segment database, 2009

The number of passengers flown typically rises each year, but enplanements fell in 2008 and 

again in 2009. The FAA Aerospace Forecast for 2010 through 2030 projected increases of 0.4

percent and 0.9 percent, respectively, from 2009 to 2010 in the numbers of passengers flying on 

domestic and international flights. For 2011 and future years, the Forecast projects that annual 

passenger enplanements will increase by an average of 2.8 percent annually on domestic routes 

and 4.2 percent on international routes.

11

2.4. Regulatory Authorities

The OST conducts economic licensing of U.S. carriers; establishes regulatory requirements 

relating to advertising and provision of scheduled and nonscheduled passenger service; issues 

guidelines and letters to codify and clarify Department enforcement policy; and enters into 

consent orders to enforce regulations and impose penalties for noncompliance. All of the 

requirements evaluated in this regulatory analysis represent modifications of, or clarifications to,

existing OST rules and enforcement policy.

During the 3-year period from 2008 through 2010, the OST entered into 75 enforcement orders 

with U.S. and foreign carriers, travel agencies, and tour operators. More than one-third of these 

consent orders (26) involved noncompliance with established rules and policy relating to the 

advertising of air fares.

Regulatory authority for matters involving airports is vested in the FAA. Some of the 

requirements (especially those relating to tarmac contingency plans) will have a limited impact 

on airport operations, but the costs that will be incurred by airport authorities could not be 

quantified.

 11 Federal Aviation Administration, FAA Aerospace Forecast: Fiscal Years 2010-2030.
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Air travel security issues are under the jurisdiction of the Transportation Security Administration 

(TSA).

Arriving passengers on international flights need to be cleared for entry by Customs and Border 

Patrol (CBP) personnel. The Rule requires covered carriers to coordinate their tarmac 

contingency plans with CBP authorities at diversion airports. This will ensure that arriving 

international passengers can be deplaned and allowed to leave the airport in a timely fashion.

2.5. Travel Agencies and Tour Operators

While most regulation of the air transportation sector is concerned with carriers and airports, 

other sellers of air transportation must comply with OST advertising regulations and guidelines.

Travel agencies and tour operators are the two largest industry sectors (in addition to carriers) 

that sell tickets to passengers for scheduled service flights. These sales sometimes are made on a 

standalone basis and sometimes as part of a package that may include accommodations, 

activities, and ground transportation. Carrier, travel agent, and tour operator websites also offer 

packages that do not include any air transportation.

According to a recent study, about 17 percent of travel agencies have online ticketing capability.

The four largest online travel agencies—Expedia, Orbitz, Priceline, and Travelocity—reportedly 

account for 96 percent of all online sales by travel intermediaries in the leisure travel market 

segment.12 However, the travel agent and tour operator sectors consist primarily of small 

businesses with fewer than 20 employees per firm.

Table 6 - Travel Agencies and Tour Operators, 2007

Total Firms

Large 

OTAs

Online 

Sales 

Capability

Offline 

Sales Only

20+ 

Employees

<20 

Employees

Travel Agencies 11,803 4 2,003 9,796 626 11,177

Tour Operators 2,687 0 457 2,230 267 2,420

Sources: Bureau of the Census, County Business Patterns, 2007; PhoCusWright, The Role and Value of the 

Global Distribution Systems in Travel Distribution, 2009.

The three large Global Distribution System (GDS) companies—Amadeus, Sabre, and 

Travelport—provide the infrastructure to process both online and offline transactions for most 

travel agencies and tour operators. Sabre (Travelocity) and Travelport (Orbitz) also own large 

OTAs as well. GDS companies reportedly processed more than 376 million air transactions in the 

United States in 2008, accounting for 64 percent of all airline passenger revenue.13

 12 PhoCusWright, The Role and Value of the Global Distribution Systems in Travel Distribution, November 2009. 13 Ibid.
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3. General Framework for Analysis of Benefits and Costs

The Rule includes 11 sets of requirements containing more than 20 provisions that will provide 

airline passengers with additional protections. While the benefits and costs attributable to each of 

the 11 requirement areas were evaluated on a standalone basis, there are two dimensions of the 

evaluation that cut across the specific requirements: (1) the aspect of passenger air travel that 

will be addressed and (2) the ability of passengers (or prospective passengers) to obtain needed 

services or information from other sources. The first of these considerations shapes the 

methodologies used to estimate benefits; the second informs the estimation of both benefits and 

costs. We also present a listing of the general assumptions used in developing these estimates.

3.1. Type of Air Travel Issues Being Addressed

The Rule provisions address three types of passenger air travel issues:

• Carrier Service: Several of the requirements will standardize or improve aspects of 

service provision for passengers who have already booked flights (such as Requirement

Areas 9 and 10) and, in the case of tarmac delays (Requirement Area 1), have already 

boarded the aircraft. In many of these areas, some carriers typically provide the level of 

service required, but others fall short of the requirement to a degree that the service 

provided is qualitatively different from that which would be reasonable for consumers to 

expect. Adopting regulations to address these issues will reduce the amount of time 

consumers lose to delays, move some of the time spent waiting to more comfortable 

situations, and reduce uncertainty associated with air travel. There are also benefits to 

consumers at the time of purchase from limiting the frequency and consequences of 

possible service failures.

• Purchaser Information: Other requirements will improve the extent and presentation of 

information available to consumers who are in the process of making air travel purchase 

decisions. While online search tools provide potential customers with access to much 

more extensive information about carriers, flight times, and prices than was previously 

available, it is often difficult to determine the final price of the purchase being 

contemplated. Adopting additional requirements for the provision of information about 

flight pricing, fees, and likelihood of delays (Requirement Areas 2, 7, and 8) will reduce 

consumer search time and improve the chances that purchase decisions are made with 

sufficient information.

• Passenger Equity: Two types of possible requirements—those dealing with overbooking 

(Requirement Area 6) and limitations on venue provisions in contracts of carriage 

(Requirement Area 11)—primarily address carrier-passenger equity issues, but they may 

have subtle economic effects as well.14

 14 More specifically, these provisions would ensure that similarly situated passengers would be treated equitably. 

For example, requiring an increase in the maximum DBC level to account for inflation would compensate future 

passengers who are involuntarily bumped at the same (real) rate as those who are currently denied the ability to 

board oversold flights. Prohibiting restrictions on the venue for filing claims would ensure that the costs and 

Ensuring equitable treatment of involuntarily 
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bumped passengers may reduce potential passenger reluctance to purchase consolidator 

or frequent flyer tickets for trips at busy air travel times. Eliminating restrictions on 

venue may prompt airlines to be more responsive to the complaints of unsatisfied 

passengers and avoid increased litigation exposure.

In our development of benefits estimation methodologies, we have therefore grouped the Rule 

requirements into three categories based on the type of impact and benefits they are expected to 

have: (1) improving the delivery of services to passengers who have already booked air travel; 

(2) providing additional or clearer information to consumers who are making travel purchase 

decisions; and (3) assuring more equitable treatment of similarly-situated passengers. The 

expected benefits from adopting each of these three categories of requirements were estimated 

using different approaches:

• Carrier Service: In general, the benefits of requirements that will improve carrier 

delivery of services have been evaluated by assessing the impact on the aggregate amount 

of time and the quality/comfort of where that time is spent (e.g., in the terminal vs. on the 

tarmac) during travel for affected passengers. In some instances, the benefit of a 

requirement will be to increase the certainty of service delivery within expected levels of 

provision quality and timeliness. Estimating the benefits of these requirements involved 

making an assessment of the likely ranges of uncertainty premiums that passengers attach 

to air travel services. 

• Purchaser Information: A consumer surplus methodology was used to estimate the 

benefits of requirements that are expected to improve the availability and ease-of-use of 

pre-purchase air fare information. Evaluating the benefits for each requirement area 

involved developing an estimate of the number of purchasers who would make use of the 

additional information and the value to them of having this additional information

available. The estimated benefits also depend on the extent to which options are already 

available to consumers who wish to incorporate them into their purchasing decisions.

Valuing the benefits from improved information also required estimating the perpurchaser time savings from reduced search costs.

• Passenger Equity: The requirements that address passenger equity issues involve 

transfers from carriers to passengers. The amounts of these transfers are relatively 

straightforward to calculate in the case of the possible changes to the DBC policy, but the 

extent of any transfer resulting from limitations on carrier venue restrictions cannot be 

quantified.

3.2. Availability of Alternatives to Carrier Services or Information

The extent to which consumers have available alternatives to relying on the carrier to provide 

adequate service or to obtaining adequate information to inform purchase decisions also varies 

among the areas addressed by Rule provisions:

 

inconvenience associated with filing a consumer-related claim would be similar for consumers in different States, 

instead of varying with the distance between the carrier’s and the passenger’s home State. 
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• Post-Purchase Changes in Terms of Service: The requirements for tarmac contingency 

plans for foreign carriers and for all carriers to coordinate these plans with CBP at 

diversion airports are located at one end of the spectrum of situations with readily 

available alternatives, with well-publicized instances of passengers being held on the 

tarmac for prolonged periods of time. The changes in DBC requirements and the 

prohibition on post-purchase price increases also address situations where the carrier or 

ticket agent can make unilateral alterations in the terms of service. In these areas, the 

requirements will limit the range of discretion that could be taken by one party to an 

airline travel contract (the carrier) in situations where the other party (the passenger) is 

unable to make welfare loss-mitigating responses to those actions.

• Pre-Travel Services or Information Available: In contrast, some deficits in the prepurchase information available to potential purchasers of air travel on carrier websites 

may be mitigated by use of other online booking services that provide more extensive or 

more readily accessible information. Similarly, updates on flight status can be obtained 

from a variety of sources in addition to current carrier notification systems. The economic 

benefits of additional requirements in these areas depend on the extent of the time costs 

associated with the increased searching that must be undertaken to obtain the desired 

information from alternative sources, as well as the extent to which some purchasers of 

air travel will have access to information that they presently do not know how to obtain. 

The regulatory evaluation of these provisions includes an assessment of present industry 

and consumer practices to determine the incremental benefits of more extensive and 

universal information provision and the extent to which online purchasers of air travel 

make use of the information that is already available.

3.3. General Assumptions Used in Estimating Benefits and Costs

The ability to evaluate and interpret the results of an economic analysis depends to a significant 

degree on the documentation of the baseline data and assumptions used. The following general 

assumptions apply throughout the entire analysis of benefits and costs:

• In accordance with Office of Management and Budget (OMB) guidelines, a real discount 

rate of 7 percent is used in the primary analysis and is supplemented with overall 

estimates using a 3 percent discount rate as well.

• The requirements take effect on January 1, 2012, with quantifiable benefits and costs 

calculated over the 10-year period from 2012 through 2021.15

• This analysis includes benefits and costs for foreign business and citizens.

 15 Most of the Final Rule requirements will become effective 120 days after publication. The full-fare advertising 

provision of Requirement Area 7 will take effect 60 days later. However, the effective dates for all Rule provisions 

were aligned to the beginning of the 2012 calendar year in this regulatory evaluation to simplify the presentation and 

explanation of the benefit and cost estimates.
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• The numbers of flights and passengers are assumed to increase annually at the rates 

projected in the FAA Aerospace Forecast for 2010 through 2030 (See Section 2.3 above).

• The value of travel time (and the cost of air travel delay) is estimated at $28.60 per hour 

for all airline travelers.16

• Costs for domestic carriers to comply with Requirements 1 (tarmac contingency plans), 3 

(customer service plans), and 5 (complaint response) were estimated in the regulatory 

evaluation for the EAPP1 Final Rule.17 The unit cost estimates in this analysis assume 

that the per-carrier costs of compliance are equal for domestic and foreign carriers.

• Per-hour costs for applicable categories of carrier, travel agent, and tour operator 

employees were estimated using Bureau of Labor Statistics (BLS) wage rates, increased 

by 43 percent to account for the non-wage components (e.g., fringe benefits, employer 

taxes) of direct labor costs.

18 A mark-up of 100 percent was applied to these direct labor 

cost estimates to account for supervisory and management planning, communication, 

training, and oversight time.

A more detailed description and discussion of the baseline data and assumptions used in 

developing the benefit and cost estimates is provided in Section 4 below and in Appendix 1.

4. Regulatory Evaluation of Specific Requirement Areas

This section of the regulatory evaluation provides a specific assessment of the impact, benefits, 

and costs for each of the 11 specific requirement areas. For each of these, we present the 

following information:

• Current Requirements, Industry Practices, and Need for Additional Regulation. This 

section outlines relevant current regulatory requirements and DOT enforcement policy 

for each area in which additional passenger protections were developed, presents a 

summary of current industry practices, and describes the needs addressed by the Rule.

• New Area Requirements to Address Identified Needs. This section outlines regulatory 

requirements adopted as part of the Rule and provides information on the entities that will

be affected.

• Estimated Benefits of Area Requirements. This section presents the methodology used 

to evaluate benefits; estimates for the components that could be evaluated quantitatively; 

and descriptions of the benefits for which no quantitative estimates could be developed.

 16 Economic Values for FAA Investment and Regulatory Decisions, A Guide, Contract No. DFTA 1-02-C00200, 

GRA Inc., Oct. 3, 2007. 17 DOT, Final Regulatory Impact Analysis of Rulemaking on Enhanced Airline Passenger Protections, December 

17, 2009 (hereafter referred to as the “EAPP1 RIA”).

18 BLS, “Employer Costs for Employee Compensation,” June 2009.
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• Estimated Costs of Area Requirements. This section presents the methodology used to 

evaluate costs; estimates for the components that could be evaluated quantitatively; and 

descriptions of the costs for which no quantitative estimates could be developed.

In the preliminary RIA, benefit and cost estimates were also developed for four alternative 

requirement scenarios for comparison with requirements included in the rule text of the NPRM:

• Requirement Area 1 - Alternative A: The Department would require a maximum time 

limit of 4 hours, instead of a carrier-determined limit (expected to be 5 hours), for tarmac 

delays before requiring the deplaning of passengers on international flights.

• Requirement Area 1 - Alternative B: The contingency plan requirements for foreign 

carriers would apply only to those carriers with at least one flight designed to seat 61 or 

more passengers.

• Requirement Area 7 - Alternative C: The full-fare advertising requirement would apply 

to carrier websites only.

• Requirement Area 7 - Alternative D: The effective date for full-fare advertising for 

carriers and other advertisers of air travel would be within 30 days of final rule 

publication.

The preliminary RIA found essentially no differences in net benefits between the base case 

analyzed for Requirement Area 1 and Alternatives A and B. Alternative A was adopted in the 

Final Rule. It also determined that net benefits would be lower under Alternatives C and D than 

under the base case analyzed for Requirement Area 7. The full-fare advertising requirements 

proposed in the NPRM base case were adopted in the Final Rule. 

4.1. Additional Requirements for Tarmac Contingency Plans

4.1.1. Current Requirements, Industry Practices, and Need for Additional 

Regulation

The EAPP1 Final Rule requires any certificated or commuter air carrier that offers scheduled 

passenger service or public charter service using any aircraft with 30 or more seats to develop a 

contingency plan for long delays on the tarmac for all flights they operate, including those on 

aircraft containing fewer than 30 seats. For domestic flights, carriers covered by the EAPP1

Final Rule have to ensure that (1) passengers on planes delayed on the tarmac for 2 hours will 

have access to food, water, clean lavatories, and the assistance of medical personnel if needed 

and (2) passengers on planes delayed on the tarmac for 3 hours will be permitted to deplane, 

unless there is a safety or security-related impediment to deplaning passengers or air traffic 

control (ATC) advises the pilot that permitting passengers to return and deplane would 

significantly disrupt airport operations. The requirement for a tarmac contingency plan also 

applies to U.S. carriers operating international flights to and from the United States. However, 

carriers are currently allowed to set their own time limits in the contingency plans for deplaning 

international flights. Tarmac contingency plans must be coordinated with the authorities of large-
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hub and medium-hub airports (i.e., those that account for at least 1 percent, and between 0.25 

and 1 percent, respectively, of total U.S. passenger enplanements).

As noted in Section 4.2.1 below, there were 710 tarmac delays of 3 hours or longer involving 

scheduled domestic flights operated during the last 12 months (May 2009 through April 2010) 

before the EAPP1 Final Rule requirements became effective, but only 13 such delays in the first 

6 months after the Rule became effective. While current regulations mandate reporting of tarmac 

delays only at large- and medium-hub airports, it is our understanding that every reporting 

carrier has provided BTS with tarmac delay information for all of their scheduled domestic 

flights.19

The EAPP1 Final Rule does not require foreign carriers to comply with the EAPP1 Final Rule 

stipulations relating to carrier handling of lengthy tarmac delays. As Table 5 in Section 2.3 

indicates, 44 percent of all passengers on international flights departing from the United States in 

2009 flew on foreign carriers. Many of these flights departed from large-hub airports that have a 

history of problems with lengthy tarmac delays. Consequently, passengers who fly on foreign 

carriers lack the same minimum guarantee-of-service provision in the event of a lengthy tarmac 

delay that is currently afforded to travelers to and from the same destinations on covered U.S. 

carriers.

Recent BTS data on tarmac delays associated with arriving aircraft indicate that these situations 

almost always arise as a result of landings at diversion airports. This is especially likely to be an 

issue in the event that an international flight is diverted to an airport that does not have CBP 

staffing in place at the time of the arrival. Without a CBP presence, it may not be possible to 

admit (or readmit) to the United States passengers who are arriving on an international flight.

These passengers may therefore not be allowed off the airplane and into a diversion airport. The 

current EAPP1 requirements do not address this potential obstacle to avoiding or reducing the 

incidence of lengthy tarmac delays associated with inbound international flights.

The EAPP1 Rule also does not require assurance that carriers have coordinated their tarmac 

contingency plans with the authorities at the small-hub and non-hub airports they serve.

4.1.2. Area 1 Requirements to Address Identified Needs

The Department is extending the coverage of the EAPP1 tarmac contingency plan requirements 

to include foreign carriers operating scheduled and public charter passenger service flights to and 

from the United States using at least one aircraft with 30 or more seats. In addition, covered U.S. 

and foreign carriers will now be required to coordinate their contingency plans with authorities 

(including terminal operators, where applicable) at all U.S. airports with 10,000 or more 

passenger enplanements annually that the carrier services, including small-hub and non-hub 

airports that are not within the scope of the current EAPP1 requirements. Finally, while U.S. 

carriers are currently required to coordinate their contingency plans and efforts with regularly 

used airports, the recent Final Rule does not specifically require that carriers must coordinate 

these contingency plans with CBP officials to enable passengers on diverted incoming 

 19 As noted above, BTS also receives reports on tarmac delays of less than 3 hours on scheduled domestic flights 

operated by reporting carriers.
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international flights to deplane after extended tarmac delays. The Department has included a 

requirement in this Rule to ensure that carriers coordinate plans with appropriate CBP personnel 

at any U.S. airport that the carrier uses as a diversion airport for its international flights.

Because it is difficult to predict the length of a tarmac delay after which individual carrier plans 

would afford passengers the opportunity to deplane—it could be as much as 6 hours for long 

cross-Pacific flights but shorter for flights to and from Canada, Mexico, and the Caribbean—the 

Department decided to set a maximum limit of 4 hours for tarmac contingency plans to afford

passengers the opportunity to deplane.20

The number of lengthy tarmac delays that would require carrier actions under the proposed 

requirements can be projected using the distribution of tarmac delay times for reporting U.S.

carriers during the most recent 12-month period (May 2009 through April 2010) before the 

current EAPP1 tarmac delay limits became effective. These projections underscore the 

sensitivity of the benefit and cost estimates to the time limits specified in foreign carrier tarmac 

contingency plans. With the maximum time limit before allowing passengers the opportunity to 

deplane set at 4 hours, the Rule requirement will affect the waiting time experienced by 

passengers on an average of seven flights annually operated by foreign carriers.21

Table 7 - Estimated Number of Lengthy Tarmac Delays for Foreign Carriers, 2009

Canadian 

Carriers* Other Carriers Total

2+ hour delay 89 184 273

3+ hour delay 28 59 87

4+ hour delay 3 7 11

5+ hour delay 0 1 1

*Canadian carrier tarmac contingency plans are required to have 60/90-minute food/deplaning limits, so 

these flights are not expected to be delayed 2+ hours without providing passengers with the opportunity 

to deplane.

Source: Econometrica projections based on BTS tarmac delay reports for reporting carriers.

The total number of carrier-airport pairs for which coordination of tarmac contingency plans 

would be required was estimated using the BTS T-100 segment data. These tabulations show 

that the EAPP2 will nearly triple the number of carrier-airport pairs and increase the plan 

coordination requirements by nearly 200 percent to 5,637 from the 1,938 currently required 

under the EAPP1 Final Rule.

 20 Since the preliminary RIA was prepared, U.S. carriers were required to set time limits for allowing passengers to 

deplane from international flights experiencing lengthy tarmac delays. A recent review of the tarmac contingency 

plans posted on the websites of reporting carriers indicates that this limit has typically been set at the 4-hour mark.

Delays involving Canadian carrier flights are estimated separately because these carriers are already required to have 

a tarmac contingency plan in place that affords passengers protections against lengthy onboard delays which are at 

least equivalent to those guaranteed to passengers on U.S. carriers under the EPP1 and EAPP2 Final Rules (see the 

Flight Rights Canada policy at http://www.tc.gc.ca/eng/mediaroom/releases-nat-2008-08-h207e-2158.htm#bg2). 21 The projected numbers of flights projected to experience delays of more than 4+ and 5+ hour delays incorporate a 

30-minute time window for returning to the gate before reaching the carrier-specified time limit.
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Table 8 - Number of Carrier-Airport Pairs with Tarmac Plan Coordination Requirement

Carrier Size 

Classification

Airport Category

Large Hub

Medium 

Hub Small Hub Non-Hub Total

Large 822 921 1,140 1,325 4,208

Small 86 109 201 259 655

Foreign 514 119 86 55 774

Total 1,422 1,149 1,427 1,639 5,637

# of Airports 29 37 69 250 385

Carrier Plans/Airport 49.0 31.1 20.7 6.6 14.6

New Plans/Airport* 17.7 3.2 20.7 6.6 9.6

*EAPP1 required U.S. carriers to coordinate plans with large and medium hub airports (n=1,938).

4.1.3. Benefits of Area 1 Requirements

Extending the EAPP1 Final Rule’s contingency plan requirements for domestic carriers’

contingency plans to foreign carriers will provide passengers on foreign carriers’ flights 

departing from or arriving to the United States with the same benefits that passengers on flights 

of domestic carriers currently receive. 

This analysis considers two groups of benefits, divided into those which could be monetized for 

this analysis and those which could not. The first category includes the insurance value of the 

guarantee to deplane after an extended tarmac delay. As with insurance, people derive a benefit 

from the knowledge that the option exists to take advantage of the guarantees provided by this 

rule, even if they ultimately go unused. Just as consumers are willing to pay for a guaranteed 

recompense in case of an undesirable event (such as traditional travel insurance for 

reimbursement for a canceled trip), they are willing to pay some amount to ensure that if ever 

delayed on the tarmac, they will be given the option to deplane instead of having to remain on 

the tarmac for an extended period.

No data were found on exactly what this insurance value is. Therefore, we conducted a cost-perpassenger analysis for this component of benefits (See Section 5.3 below).

The second category includes the benefits that arise from a better or more comfortable 

experience while being delayed on the tarmac. The benefits from this greater comfort are 

estimated as follows:22

 22 A similar methodology was used to estimate the benefits of tarmac contingency plans for domestic carriers in the 

regulatory analysis that accompanied the EAPP1 Final RIA. There are two differences from the approach used in 

that analysis. The first is that benefits for “meeters and greeters” are not included here, as nearly all arriving 

international flights with extensive on-tarmac delays are at airports to which the planes have been diverted and 

therefore are unlikely to keep “meeters and greeters” waiting in the arrival airport. The second is that the analysis no 

longer includes an attempt to put a dollar value on the greater comfort or security a passenger will feel during any 

period of delay from knowing that a contingency plan exists. Instead, the cost per passenger analysis is conducted.
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• This requirement will shift the portion of total trip time spent in less comfortable 

conditions for passengers delayed on the tarmac for 2 hours or more. These passengers 

will now be ensured access to food, water, and adequate lavatory facilities, as well as to 

medical assistance if needed.

• While studies that specifically address consumer responses to long onboard air travel 

delays have not been located, estimates from studies of consumer behavior and user 

experience on other modes of transportation are available to use as proxies. Specifically, 

analyses on transit systems provide estimates of “premiums” on the value of user time 

based on the value people place on quicker or easier access to move from one place to 

another and on improved comfort during travel. This regulatory analysis adopts the 

premiums on the value of time used in the EAPP1 RIA to evaluate applying a similar 

requirement to covered U.S. carriers.23

• The value of the projected difference in comfort resulting from the proposed requirement 

is estimated using a percentage of the base value of travel time impacted (i.e. a

“premium”), developed from survey-based estimates of the values attached by travelers 

to different waiting, walking, and transfer conditions. Since no specific estimates of time 

values for level of service ratings for airline travel are available, values were taken from 

other modal studies. The most applicable study estimated a time-value premium based on 

differing levels of service that incorporated factors such as comfort, convenience, and 

reliability for various categories of public transportation and auto users. In this research, 

“level of service” ratings were used to determine the value of time spent in different 

conditions. Based on this study, a premium of 0.34 was used for the greater comfort 

derived from access to food, water, and clean lavatory facilities, which reflects the 

difference between different service levels (calculated as the ratio of A-C to D on a scale 

of A to F; see Appendix for details). The total value of this benefit is calculated as the 

product of the hours spent by all passengers waiting on the tarmac for more than 2 hours, 

the premium for greater comfort (assumed to be 0.34), and the DOT-specified value of 

time for air travelers.24

 23 For example, studies show that transit riders value sitting more than standing without regard to any change in 

total travel time required. Travelers also prefer to spend time in transit rather than part of the time waiting for service 

if total trip length is the same. See William Waters, The Value of Times Savings for the Economic Valuation of 

Highway Investments in British Columbia, BC Ministry of Transportation and Highways, 1992, as discussed in 

Transportation Cost and Benefit Analysis – Travel Time Costs, Victoria Transport Policy Institute, revised August 

10, 2007, and Marcus von Wartburg and W.G. Waters II, “Congestion Externalities and the Value of Travel Time 

Savings,” in Towards Estimating the Social and Environmental Costs of Transportation in Canada, Anming Khang, 

et al, eds., Center for Transportation Studies, University of British Columbia, August 2004. 24 This premium is within the range found for the value transit passengers place on being able to sit versus stand 

(0.20 and 0.87 in two studies that address the quality of travel experience). William Waters presents data that the 

difference between the value of time sitting versus standing is 0.20 of the prevailing wage rate (William Waters, The 

Value of Times Savings for the Economic Valuation of Highway Investments in British Columbia, BC Ministry of 

Transportation and Highways, 1992, as discussed in Transportation Cost and Benefit Analysis – Travel Time Costs, 

Victoria Transport Policy Institute, revised August 10, 2007). An older study (P.B. Goodwin) presents premiums 

ranging from 0.25 to 0.87 (averaging 0.50) for sitting versus standing in either a public or segregated (demand 

response only) vehicle (P.B. Goodwin, Human Effort and the Value of Travel Time, Journal of Transport Economics 

and Policy, January 1976).
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• No change in overall trip time is assumed for passengers on flights that return to the gate 

and subsequently depart.25

Conceivably, this requirement could result in some flights being cancelled that would not 

otherwise have been cancelled

The benefits of the Rule requirements for domestic and foreign carriers to coordinate 

contingency plans with airport authorities at small hub and non-hub airports and with CBP 

authorities at diversion airports are difficult to quantify. The regulatory evaluation prepared in 

support of the EAPP1 Final Rule assumed that the recently adopted regulations would be 

adequate to ensure complete compliance by domestic carriers. However, the Rule enhancements 

to the contingency plan requirements may increase the probability that covered domestic carriers 

completely comply with the EAPP1 requirements. The benefits of these enhancements are 

therefore estimated to range from 0 to 1 percent of the total benefits previously estimated for 

domestic carriers’ tarmac contingency plans.

in order to free up needed gates. If this is the case, some 

passengers would experience a negative impact in the form of a reduction in the benefits 

received from air travel. However, the Department has analyzed data on flight delays and 

cancellations in the first 6 months after the EAPP1 Rule limits on lengthy tarmac delays 

experienced by passengers on domestic flights. The results of this analysis indicate that the 

number of cancellations of flights that have experienced tarmac delays of 21⁄2 hours or more have 

not increased since the Rule took effect.

The estimates of benefits incorporate two key assumptions:

• The distribution of tarmac delays among foreign carriers’ flights to and from U.S. 

airports is identical to the distribution of reporting domestic carriers’ flights.26

• There will be no measureable rate of increase in flight cancellations due to the 

implementation of contingency plans (based up the Department’s review of length tarmac 

delays and cancellations since EAPP1 went into effect, as noted above)

The benefits from increased passenger comfort in Requirement Area 1 are estimated as follows:

Table 9 - Benefits Estimates for Requirement Area 1

2012 2012-2021

Passengers on Foreign Carrier Flight Segments 73,216,065 887,235,989 

Passengers on Foreign Carriers Already in Compliance 10,856,852 131,563,883 

Foreign Carrier Flight Segments 532,607 6,454,156 

 25 Carriers are not required to afford deplaning passengers the opportunity to reboard. It is our understanding that, in 

some cases, no passengers have elected to deplane when delayed planes have returned to the gate. It is possible that 

passengers on some flights that return to the gate and subsequently depart may experience an increase in waiting 

time. However, no suitable estimate of the potential increase in waiting time for passengers on these flights could be 

identified.

26 Carriers are not currently required to report on-time performance data for international flights to BTS, so it is not 

possible to calculate the distribution of flights by length of on-tarmac delay for foreign carriers.
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Flights of Foreign Carriers Already in Compliance 159,782 1,936,247 

Passengers who May Benefit 62,359,213 755,672,106

Number of Flights that May Benefit 396,311 5,011,261

Average Passengers per Flight that May Benefit 166 161

Benefit from Provision of Adequate Food, Drink, and Lavatory Access

Value of Time for Passengers (All-Purpose Traveling) $28.60 $28.60

Premium for Access to Food, Drink, and Lavatory 34% 34%

Incremental Benefit per Hour per Passenger with 

Access to Food, Drink, and Lavatory $9.72 $9.72

Number of Flights with 2+ hr. Tarmac Delays* 203 2,149

Share of Flights with 2+ hr. Delays that are Arrivals 10.0% 10.0%

Arriving Flights with 2+ hr. Tarmac Delays* 20.3 214.9 

Passengers on Arriving Flights with 2+ hr. Tarmac 

Delays* 3,395 35,945 

Average Hours of Waiting Time after 2+ hr. Taxi-In 

Tarmac Delay 0.31 0.31 

Average Benefit per Passenger from Access to Food, 

Drink, and Lavatory during Arrivals $3.01 $3.01

Total Benefits from Access to Food, Drink, and 

Lavatory during Arrivals $10,235 $108,355 

Share of Flights with 2+ hr. Delays that are Departures 90.0% 90.0%

Departing Flights with 2+ hr. Tarmac Delays* 183 1,934

Passengers on Departing Flights with 2+ hr. Tarmac 

Delays* 30,559 323,509

Average Hours of Waiting Time after 2+ hr. Taxi-Out 

Tarmac Delay 0.44 0.44 

Average Benefit per Passenger from Access to Food, 

Drink, and Lavatory during Departures $4.28 $4.28

Total Benefits from Access to Food, Drink, and 

Lavatory during Departures $130,747 $1,384,151 

Monetized Benefits from Carrier Coordination with CBP 

and Additional Airports $7,984 $79,844 

Total Benefits during both Arrivals and Departures $148,967 $1,572,351 

Total Benefits during both Arrivals and Departures 

(millions) Discounted $1.2 

*excludes flights on foreign carriers that already have compliant plans.

** assumed to be equal to 0.5 percent of the benefits previously estimated for these requirements in the RIA 

for the EAPP1 Final Rule.
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A more detailed description of the procedures used to calculate these benefits is provided in 

Appendix 1.

Adoption of these requirements may provide several additional categories of potential benefits 

that could not be quantified in this regulatory evaluation, including the following:

• Improved Management of Flight Delays. As with domestic carriers, there is a possibility 

that the existence of contingency plans for long onboard delays could lead to heightened 

sensitivity to additional delay costs among foreign carrier management. This could lead 

to improved management of delayed flights, diversion schedules, and other flight 

management issues, as carriers have additional incentive to avoid long onboard delays.

• Decreased Anxiety with Regard to Flying. Knowing that contingency plans exist may 

bring relief during long onboard delays and lower overall flight anxiety for some 

passengers, making some passengers less uneasy overall about traveling by air. This may 

lead to a significantly improved travel experience for some passengers (more so than is 

estimated) and may even lead to an increase in overall demand for air travel.

• Reduced Stress among Delayed Passengers and Crew. A possible decrease in passenger 

anxiety, together with improved comfort and convenience brought by contingency plans,

may lead to reduced stress among delayed passengers and crew. This may decrease minor 

conflicts and occasional altercations that arise when people are under stress for extended 

periods in close quarters.

• Improved Overall Carrier Operations. Carriers may be able to improve general 

operations based on analysis of data now required to be stored on substantive delays and 

carrier responses. This recalls the business management maxim, “What you can measure, 

you can manage.” If carriers measure substantive delays and their responses to them, the 

result will establish benchmarks for improvements. From these benchmarks, carriers can 

improve service, leading to more unquantifiable passenger benefits.

• Improved Customer Good Will toward Carriers. As the level of service provided by 

carriers improves and complaints decline, overall customer good will toward carriers 

should improve. Improved good will may lead to a slight increase in demand.

Because there are potentially significant but unquantifiable benefits that may be realized by 

passengers as a result of these requirements, a cost-per-passenger analysis is presented in Section 

5.3 below.

The Department expressly solicited comments regarding the estimation of a premium on the 

value of time for certainty/security of knowing that if carriers are required to have contingency 

plans and the premiums for time spent with access to food, water, and clean lavatories after a 2-

hour tarmac delay and for the time spent in an airport instead of on the tarmac after waiting an 

extended period of time.
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4.1.4. Cost of Area 1 Requirements

Costs were estimated in the preliminary RIA for scenarios with a 5-hour maximum limit to 

deplane passengers in foreign carrier contingency plans (base case); a 4-hour maximum limit 

mandated by the Department (Alternative A); and a variation of the base case scenario in which 

compliance with this requirement was limited to foreign carriers that operate flights to and from 

the U.S. using at least one aircraft originally designed with more than 60 seats (Alternative B).27

The final RIA cost estimates are based on foreign carrier contingency plans that contain a 4-hour 

time limit after which passengers must be afforded the opportunity to deplane. In Section 4.1.2,

we estimated that these carriers would have needed to apply these plans to respond to 203 tarmac 

delays of 2 or more hours in 2009. Eight of these delays would have extended past the 4-hour 

mark.

Foreign carriers (other than Canadian carriers) will incur one-time costs to develop and 

implement tarmac delay contingency plans and per-flight costs that vary with the length of time 

that the delayed aircraft remains on the tarmac. Specific compliance cost elements include:

• Staff and management costs to develop, post, and monitor the contingency plan and to 

collect data on actions triggered by the plan. In the EAPP1 RIA, these costs were 

aggregated with carrier costs for coordinating contingency plans with large and medium 

hub airports. In the final RIA, we have disaggregated these costs to be able to estimate 

the incremental costs that will be incurred as a result of extending the coordination 

requirement to small hub and non-hub airports. The per-carrier residual fixed cost of 

developing and posting a tarmac contingency plan is estimated to be approximately 

$7,500.

• Coordinating tarmac contingency plans with airport authorities (and terminal operators, 

where applicable) is assumed to take carriers an average of 4 hours per large hub, 3 hours 

per medium hub, 2 hours per small hub, and 1 hour per non-hub airport from which they 

operate passenger service.

• Per-person costs to provide adequate food, water, lavatory facilities, and medical 

attention. The per-person cost to provide adequate food and water was assumed to be 

$3.71.28

• Per-person costs associated with deplaning and reboarding passengers. Per-person costs 

for passengers on flights required to taxi back to the gate (instead of using buses and 

mobile stairs) are based on the average taxi time and fuel burn per minute by plane size. 

Per-person costs were also calculated for passengers deplaned on the tarmac and 

 27 Only one small foreign carrier currently provides passenger service to and from the United States using at least 

one aircraft with 30 seats but none that have more than 60 seats. This carrier would not have been required to 

develop and adhere to a tarmac contingency plan under alternative B.

28 Carrier costs for servicing toilets are expected to be minimal. This analysis assumes that no increase in onboard 

medical personnel or equipment will be needed to comply with the Rule.
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transferred to the terminal by bus. Airport boarding and deplaning fees were included in 

the unit costs for both groups of passengers.

Unit costs for foreign carriers to comply with the Rule provisions in Requirement Area 1 as 

estimated as follows:

Table 10 - Unit Costs for Requirement Area 1

Unit Cost

Fixed cost per-carrier to develop plan* $7,500

Estimated carrier personnel hours per carrier-airport coordination

large hub 4

medium hub 3

small hub 2

non-hub 1

Mean wage rate per hour** $48.77

Full labor cost per hour $139.48

Per-passenger cost (2+ hour delays) $3.71

Additional per-passenger cost (4+ hour delays with reboarding) $2.74

Fuel cost (4+ hour delays with reboarding), per-flight $176.48

*EAPP1 RIA estimate, adjusted to account for airport coordination costs separately.

**Mean wage rate for management occupations, NAICS 481000, BLS Occupational 

Employment Statistics, May 2009.

***Full cost includes benefits and other direct labor costs (43 percent of mean wage 

rate) and cost for time associated with supervisor/management review (100 percent of 

direct labor cost).

Based on these estimates and assumptions, costs incurred by affected carriers to comply with the 

Rule provisions in Requirement Area 1 are expected to be $1.9 million in 2012 and $3.4 million 

for the entire 10-year period from 2012 through 2021.
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Table 11 - Estimated Compliance Costs for Requirement Area 1

2012 2012-2021

Development of contingency plan

Number of foreign carriers that must develop plans* 103 103

Fixed cost per-carrier to develop plan $7,500 $7,500

Cost of developing contingency plans $772,500 $772,500

Cost of airport-specific plan develop/coordination

Large hubs (foreign carriers only) $286,775 $286,775

Medium hubs (foreign carriers only) $49,795 $49,795

Small hubs (U.S. and foreign carriers) $398,082 $398,082

Non hubs (U.S. and foreign carriers) $228,611 $228,611

Cost of airport-specific plan develop/coordination $963,264 $963,264

Variable costs of tarmac contingency plans*

Average number of passengers per segment 175 175

Projected tarmac delays of 2+ hours 202 2,442

Passengers affected by tarmac delays of 2+ hours 35,347 428,333

Per-passenger costs, 2+ hour delays $3.71 $3.71

Projected tarmac delays of 4+ hours 8 96

Passengers affected by tarmac delays of 4+ hours 1,385 16,780

Additional per-passenger costs, 4+ hour delays with 

reboarding $2.74 $2.74

Per-flight fuel costs, 4+ hour delays with reboarding $176.48 $176.48

Variable costs of tarmac contingency plans $136,323 $1,651,975

Total costs of tarmac contingency plans $1,872,088 $3,387,739

Total Compliance Costs (millions) $1.87 $3.39

Discounted Total Compliance Costs (millions) $2.95

*Estimates in this section exclude passengers and flights on Canadian carriers.

Note: Number of flights and passengers incurring tarmac delays increases in subsequent years 

by the growth rates for international passengers and flights projected in the 2009 FAA 

Aerospace Forecast.

4.2. Tarmac Delay Reporting

4.2.1. Current Requirements, Industry Practices, and Need for Additional 

Regulation

As noted above, reporting carriers are currently required to report flight delay data for regularly 

scheduled domestic flights, including information on all tarmac delays of 3 hours of more, to 

BTS. Since October 2008, these reports were required to include tarmac delays associated with 
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flights that returned to the gate and subsequently departed, those that were diverted from their 

destination airports, and those that were ultimately cancelled.

29

There were 710 reported tarmac delays of 3 hours or longer involving scheduled domestic flights 

operated during the last 12 months (May 2009 through April 2010) before the EAPP1 Final Rule 

requirements became effective. Most of the delays during this period involved departures. Of the 

72 delays associated with arriving flights, 65 involved landings at diversion airports.

Table 12 - Number and Percent of Flights with Tarmac Times of 3 Hours or More

Year/Month Total

Stage of Operation of the 3-Hour Tarmac Time

Prior to 

Cancellation

Multiple 

Gate 

Departure Taxi-Out Taxi-In

At Diversion 

Airport

2009

May 35 7 2 25 1 0

Jun 278 40 42 172 1 23

Jul 164 21 20 105 0 18

Aug 70 7 11 45 0 7

Sep 6 0 0 4 0 2

Oct 12 0 0 12 0 0

Nov 4 0 1 2 0 1

Dec 35 5 3 22 0 5

2010

Jan 22 0 3 14 2 3

Feb 60 0 4 54 1 1

Mar 20 1 2 14 1 2

Apr 4 0 0 1 0 3

May 5 0 0 1 0 4

Jun 2 0 0 1 0 1

Jul 0 0 0 0 0 0

Aug 2 0 0 0 0 2

Sep 4 0 2 2 0 0

Oct 0 0 0 0 0 0

May 2009 -

Apr 2010 710 81 88 470 6 65

May - Oct 

2010 13 0 2 4 0 7

Source: BTS, Monthly Summary of Tarmac Times Jan 2009 - Oct 2010

There have been only 13 reported delays of 3 hours or more in the first 6 months after the Rule 

became effective. As Table 12 shows, the number of reported tarmac delays varies substantially 

on a month-to-month basis but is highest in the summer months because of unexpected severe 

 29 Final Rule on Revision of Airline Service Quality Performance Reports, Docket No. OST 2007-28522.
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weather events. It would therefore be reasonable to expect that the number of delays in the next 

6-month period (November 2010 through April 2011) would be lower than for the most recent 6 

months (May through October 2010) for which delay reports are available.30

At present, however, the Department does not collect information on the number and 

characteristics of tarmac delays associated with domestic flights operated by non-reporting U.S. 

carriers and with international flights operated by either U.S. or foreign carriers. Information 

about these delays will improve the Department’s ability to understand the extent and causes of 

lengthy tarmac delays and provide the basis for assessing whether carriers are complying with 

current requirements for tarmac contingency plans.

4.2.2. Area 2 Requirements to Address Identified Needs

The Rule requires all covered U.S. carriers and foreign carriers to report specified information to 

BTS on all tarmac delays of 3 hours or more involving domestic flights or international flights 

departing from, or arriving at, a U.S. airport. 

Information on 3-hour tarmac delays involving domestic flights of reporting carriers is available 

since October 2008. Reporting carriers accounted for 73 percent of domestic departures and 57

percent of international departures in 2009. If tarmac delays of 3 hours or more were uniformly 

distributed among reporting carriers, non-reporting U.S. carriers, and foreign carriers, as well as 

between domestic and international flights, the numbers of reportable delays in 2009 would have 

been as follows:31

Table 13 - Projected Numbers of Reportable 3-Hour Tarmac Delays, 2009

Total Domestic International

US Carriers Reporting 166 26 140

Non-Reporting 43 10 33

Total 209 36 173

Foreign* 59 0 59

All Carriers 268 36 232

*excludes Canadian carriers, which typically will not have reportable tarmac delays.

Source: Estimated from tarmac delay reports for domestic flights operated by reported carriers.

4.2.3. Benefits of Area 2 Requirements

This requirement will provide the Department with more complete information, which could 

improve its ability to identify, analyze, and respond to issues and enforcement matters relating to 

carrier adherence to tarmac contingency plans. Passengers may also benefit from BTS making 

 30 While this analysis was being finalized, a historically unprecedented number of taxi-in delays occurred at JFK 

Airport during the last few days of 2010 due to a severe blizzard. All of the impacted flights were international 

arrivals. At the time this report was prepared, the causes of these delays had not yet been evaluated. The evaluation 

does not incorporate any projections for future occurrences of similar events. 31 These projections take into account the subsequent reductions in 3-hour tarmac delays that have taken place as a 

result of the EAPP1 Rule.
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available delay statistics from more carriers of air travel. However, it is not possible to quantify 

the benefits from these improvements in data coverage and availability.

Since these data will be used for tarmac delay reports published by BTS, it is also possible that 

benefits may accrue to consumers as they become more aware of the range of incidents of long 

tarmac delays and adjust their purchasing decisions. Such a scenario will result in improved 

performance among carriers, especially among international carriers that may set a time limit for 

tarmac delays before allowing deplaning that is greater than the 3-hour requirement for domestic 

flights. This analysis does not attempt to estimate such benefits at this point.

There is also a possibility that the publication of incidents of lengthy tarmac delays could 

generate increased negative passenger attention, in turn leading to heightened sensitivity to 

additional delay costs among carrier management. This could lead to improved management of 

delayed flights, diversion schedules, and other flight management issues, as carriers have 

additional incentive to avoid long tarmac delays.

4.2.4. Cost of Area 2 Requirements

In Section 4.2.2, we estimated that on an annual basis (using data from May 2009 through April 

2010 for international flights and from May 2010 through October 2010 for domestic flights),

there would have been 10 3-hour tarmac delays involving domestic flights operated by nonreporting U.S. carriers and 263 on international flights operated by U.S. and foreign carriers in 

2009 that would have been reportable to BTS under the Rule provisions in Requirement Area 2.

Carriers will incur one-time costs to set up and program tarmac delay data collection systems 

that produce reports in an electronic format suitable for submission to BTS. In addition, carriers 

with one or more reportable tarmac delays in a particular month will need to collect data on the 

affected flights, enter this information into the reporting system, and upload it to a BTS 

electronic submission application. For this analysis, we have assumed that it will require U.S. 

reporting carriers (which already have on-time performance reporting systems in place for 

domestic flights) 2 hours to complete and submit each report. A per-report estimate of 4 hours 

was used for other U.S. carriers and foreign carriers.

Unit costs to set up reporting systems and prepare and submit delay reports are estimated as 

follows:
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Table 14 – Unit Compliance Costs for Requirement Area 2

Direct 

Labor 

Hours

Mean 

Wage 

Rate*

Full Cost 

per 

Hour**

Cost per 

Firm

Set-up costs to record and transmit tarmac delay data in BTS format

reporting carriers

programming for data collection/reporting 4 $35.67 $102.00 $408 

onsite personnel training 40 $24.27 $69.00 $2,760 

other carriers

programming for data collection/reporting 8 $35.67 $102.00 $816 

onsite personnel training 10 $24.27 $69.00 $690 

Per-report costs for data collection, form completion and review, and forwarding to BTS

reporting carriers 2 $24.27 $69.00 $138 

other carriers 4 $24.27 $69.00 $276 

*Rates for computer programmers and first-line supervisors/managers of office and administrative support 

workers, NAICS 481000, BLS Occupational Employment Statistics, May 2009.

**Full cost includes benefits and other direct labor costs (43 percent of mean wage rate) and cost for time 

associated with supervisor/management review (100 percent of direct labor cost).

Based on these estimates and assumptions, costs incurred by affected carriers to comply with 

Rule provisions in Requirement Area 2 are expected to be approximately $350,000 in 2012 and 

$910,000 for the 10-year period from 2012 through 2021.
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Table 15 - Estimated Compliance Costs for Requirement Area 2

2012 2012-2021

Number of carriers incurring system set-up/training costs

reporting carriers 18 18

other U.S. carriers 43 43

foreign carriers* 117 117

Cost per carrier

reporting carriers $3,168 $3,168

foreign carriers* $1,506 $1,506

Total system set-up/training costs $297,984 $297,984

Newly reportable tarmac delays

international flights by reporting carriers 153 1,854

other U.S. carriers 45 511

foreign carriers* 65 783

Total reports filed 263 3,149

Cost per report filed

reporting carriers $138

other U.S. carriers/foreign carriers* $276

Total cost of filing delay reports $349,458 $911,532

Total Compliance Costs (millions) $0.35 $0.91

Discounted Total Compliance Costs (millions) $0.75

*Excludes Canadian carriers, which typically will not have reportable tarmac delays.

Note: Number of flights with reportable tarmac delays increases in subsequent years by the 

total departure growth rate projected in the 2009 FAA Aerospace Forecast.

4.3. Minimum Standards for Customer Service Plans (CSPs)

4.3.1. Current Requirements, Industry Practices, and Need for Additional 

Regulation

Under the EAPP1 Rule, any domestic certificated or commuter air carrier that operates 

scheduled passenger service with at least one aircraft originally designed with 30 or more seats is 

required to develop a customer service plan (CSP) that addresses the issues covered by the 12 

areas of the Air Transport Association’s (ATA) Customer Service Commitment (CSC). These 

carriers are also required to self-audit their adherence to this CSP. Airlines participating in the 

ATA CSC have committed to the following:

1. Offering the lowest fare available

2. Notifying customers of known delays, cancellations, and diversions

3. Delivering baggage on time

4. Setting a reasonable baggage liability limit

5. Allowing reservations to be held or canceled
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6. Providing prompt ticket refunds

7. Properly accommodating passengers with disabilities and other special-needs 

passengers

8. Meeting customers’ essential needs during lengthy tarmac delays

9. Handling “bumped” passengers with fairness and consistency

10. Ensuring good customer service from code-share partners

11. Ensuring responsiveness to customer complaints

12. Identifying the services it provides to mitigate passenger inconveniences resulting from 

cancellations and misconnects.

However, the EAPP1 Final Rule does not establish specific standards for most of these 

components (although some are already fixed by existing regulatory requirements), nor does the

ATA CSC define the meaning of terms used in some of the 12 parts (e.g., “lowest fare,” “timely 

reporting”). The current CSP requirements also do not apply to foreign carriers, which creates a 

potential disparity in the level of service guaranteed to passengers on international flights 

operated by U.S. and foreign carriers.

The lack of specified minimum standards for CSPs makes it difficult for both passengers and the 

Department to evaluate the specific guarantees of service provision that are being made by 

carriers. In addition, passengers traveling to destinations outside the United States are not 

currently assured a minimum level of customer service in the areas addressed by the ATA CSC 

and EAPP1 Final Rule requirements if they choose to fly on a foreign carrier.

4.3.2. Area 3 Requirements to Address Identified Needs

The Rule references or establishes specific standards for each of the 12 required CSP elements.

In addition, foreign carriers will be required to establish CSPs that cover passengers on their 

flights to and from the United States. They will also be required to conduct the annual self-audits 

of compliance now required of covered U.S. carriers.

The Rule also stipulates that covered U.S. and foreign carriers will have to make the results of 

the required annual self-audits of compliance available for Department review on request for 2 

years following the date on which the audit is completed.

For this analysis, we have assumed that subsidiaries of foreign carriers will not be required to 

develop independent CSPs. Foreign carriers offering scheduled service that are not subsidiaries 

of other foreign carriers with flights to and from the United States will need to develop, adhere 

to, and self-monitor compliance with their CSPs.

4.3.3. Benefits of Area 3 Requirements

The Department believes that the minimum standards specified in the Rule will assist carriers in 

better preparing their customer service plans and decrease confusion among carrier and 

consumers as to the CSP requirements.

It is reasonable to assume that adoption of a customer service plan with specific performance 

standards will improve the level of service provided. As noted in the RIA for the EAPP1 Final 
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Rule, a review of data from domestic carriers that were self-auditing compliance with customer 

service plans previous to the EAPP1 Final Rule showed a greater reduction in customer 

complaints beginning in the 2 years after adoption of self-auditing than for carriers that did not 

audit in the same timeframe.32

Table 16 - Benefits Estimates for Requirement Area 3

The historical difference in complaint rates between carriers that 

self-audited and those that did not is used to estimate the decline in complaints for carriers that 

will now audit compliance.

2012 2012-2021

Complaints involving Foreign Carriers Received by DOT, 

2009 1,566 19,335

Ratio of complaints received by carriers to number 

received by DOT 61 61

Number of Complaints Received by Foreign Carriers 95,537 1,179,453

Percent Reduction of Complaints from by 

Implementing CSP 20% 20%

Reduction in Complaints 19,107 235,891

Benefits from Premium on Complaint Free Air Travel

Average Price of Airfare (Domestic) $228 $228 

Average Price of Airfare (International) $1,781 $1,781 

Percentage of Foreign Carriers Passengers that on 

Domestic Routes 0.75% 0.75%

Weighted Average Air Fare $1,769.31 $1,769.31 

Premium on Foreign Flights for Complaint-Free Travel 5% 5%

Average Savings per Complaint Free Flight per 

Complaining Passenger $88.47 $88.47 

Total Benefits from Increase in Complaint-Free Trips $845,171 $10,434,093 

Total Component Benefits (millions) $0.85 $10.43 

Total Component Benefits (millions) Discounted $7.65 

Adoption of these requirements may provide several additional categories of potential benefits 

that could not be quantified in this regulatory evaluation, including the following:

• Decreased Confusion and Uncertainty Regarding Department Requirements. The 

specification of standards for the provisions required in carrier customer service plans 

should lead to a decrease in confusion among carriers and passengers as to what 

protections are actually provided by the customer service plans. The decrease in 

 32 For carriers implementing self-audits of adherence to customer service plans, complaints declined in the 2 years 

following implementation by 39 percent. During the same time period, carriers that did not do self-audits 

experienced a drop in complaints of only 19 percent. We have assumed that carriers who initiate self-audits of 

customer service plans in response to the Rule requirements will have a 10 percent decrease in complaints.
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confusion may also lead to cost savings for carriers from a reduction in the amount of 

time required for employees to answer consumer questions regarding the plans.

• Value of Improved Customer Service Based on Self-Auditing of Adherence to 

Customer Service Plans for Foreign Carriers. Historical data on complaints filed with 

DOT show that carriers which implement customer service plans and self-audit 

adherence to the plan have fewer complaints than other carriers. This presumably is based 

on an improvement in services from carriers to passengers, including better baggage 

handling, fewer ticketing errors, less discrimination, and fewer other problems for 

passengers. Carriers are providing service in a better manner to consumers, but the value 

of this change is difficult to estimate.

• Improved Customer Good Will toward Carriers. Having specific standards to which 

carriers can refer may result in higher customer satisfaction than would be the case 

without the standards. This effect could increase customer good will and possibly 

decrease costs as carriers implement and manage adherence to their customer service 

plans.

Because there are potentially significant but unquantifiable benefits that may be realized by 

passengers as a result of these requirements, a cost-per-passenger analysis is presented in Section 

5.3 below.

4.3.4. Cost of Area 3 Requirements

Foreign carriers that are not subsidiaries of other foreign carriers will have to develop, 

implement, and self-audit compliance with CSPs that meet the minimum standards set forth in 

the Rule. The preliminary RIA included separate compliance cost estimates for large and small 

foreign carriers. The Department solicited comments as to whether this type of size-based 

distinction appropriately captures the likely extent of variation in compliance costs among 

foreign carriers. Having received no comments on this issue, the final RIA assumes that the 

seven foreign carriers which boarded or deplaned at least 2 million international passengers in 

the United States in 2009 will need to develop and implement more extensive CSPs than will 

smaller foreign carriers.

Unit costs to develop, implement, and maintain compliant CSPs are estimated as follows:
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Table 17 - Unit Costs for Requirement Area 3

2012

Develop and implement CSP

large foreign carriers* $35,000

other foreign carriers $3,850

Annual cost of CSP support (large carriers)

large foreign carriers* $41,800

other foreign carriers $4,598

Annual cost of CSP self-audit (large carriers)

large foreign carriers* $15,000

other foreign carriers $1,650

*More than 2 million passengers annually departing from/arriving in the 

United States.

Source: EAPP1 RIA estimates for U.S. carriers.

Based on these estimates and assumptions, costs incurred by affected carriers to comply with 

Rule provisions in Requirement Area 3 are expected to be $1.5 million in 2012 and $9.6 million

for the entire 10-year period from 2012 through 2021.

Table 18 - Estimated Compliance Costs for Requirement Area 3

2012 2012-2021

Number of foreign carriers by U.S. passenger enplanements, 2009

large foreign carriers* 7

other foreign carriers 81

First-year implementation

large foreign carriers* $245,000 $245,000

other foreign carriers $311,850 $311,850

Annual plan support

large foreign carriers* $292,600 $2,926,000

other foreign carriers $372,438 $3,724,380

Annual self-audits

large foreign carriers* $105,000 $1,050,000

other foreign carriers $133,650 $1,336,500

Total cost of customer service plans $1,460,538 $9,593,730

Total Compliance Costs (millions) $1.46 $9.59

Discounted Total Compliance Costs (millions) $7.35

*More than 2 million passengers annually departing from/arriving in the United States.

It is possible that one or more specific components of the Rule requirements for CSPs will 

cause carriers that do not currently meet the specified minimum level of service to incur 
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additional compliance costs. However, the Department does not have adequate information to 

be able to determine the numbers of carriers that would need to make substantive changes to 

comply with each of the various aspects of service provision specified under this requirement,

nor is it possible to develop carrier-specific unit cost estimates for any such changes.

4.4. Posting of Contracts of Carriage, Customer Service Plans, and 

Tarmac Contingency Plans on Foreign Carrier Websites

4.4.1. Current Requirements, Industry Practices, and Need for Additional 

Regulation

Under the EAPP1 Final Rule, covered U.S. carriers are required to develop tarmac contingency 

plans and to post them on their websites. Another section of the EAPP1 Final Rule requires 

covered U.S. carriers to develop, follow, and self-audit compliance with CSPs. These plans must 

also be posted on carrier websites.

A February 2010 review of the websites of reporting U.S. carriers that sell air transportation to 

the general public indicated that all have posted their CSPs on their websites, either on a 

standalone basis or as part of their contracts of carriage. A subsequent review of these websites 

in December 2010 confirmed that the tarmac contingency plans required by the EAPP1 are also 

posted on all reporting U.S. carrier websites.

Of the foreign carriers who have websites accessible to U.S. consumers, all but 30 currently have 

their contracts of carriage posted. However, only 15 foreign carriers offering service to and from 

the United States currently have a CSP posted on their website; five of these are in a form that is 

comparable to the ATA CSC plan. Finally, while all carriers based in member countries of the 

European Union (EU) must adhere to the EU tarmac delay regulation (261/2004), and most have 

either a link to or summaries of the regulation on their websites, none have U.S.-specific tarmac 

delay plans posted on their websites.

4.4.2. Area 4 Requirements to Address Identified Needs

The Rule provisions in Requirement Area 4 will require foreign carriers to post contracts of 

carriage, customer service plans, and tarmac contingency plans on websites targeted to U.S. 

ticket purchasers.
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Table 19 - Number of Foreign Carriers Required to Post

Document

Total in 2009 

T-100* Exempt*

NonExemptCurrently 

Compliant** Other

Contract of Carriage 130 19 111 81 30

CSP 130 40 90 15 75

Tarmac Delay Plan 130 23 107 0 107

*Includes wholly-owned subsidiaries (14), other carriers without English-language websites (5), and for 

CSPs only, other charter carriers (20). In addition, small carriers operating only aircraft with fewer than 

30 seats are also exempt from CSP (1) and tarmac delay plan (4) requirements.

**Compliant carriers may need to upload updated or revised plans.

4.4.3. Benefits of Area 4 Requirements

It was not possible to develop quantitative estimates of benefits for this requirement. It is 

possible that making this information and these service plans more accessible online will lead to 

some improvement in customer service or in some time-savings to consumers who are seeking 

this information.

Because there are potentially significant but unquantifiable benefits that may be realized by 

passengers as a result of these requirements, a cost-per-passenger analysis is presented in Section 

5.3 below.

4.4.4. Cost of Area 4 Requirements

Foreign carriers that are not already compliant with the requirements to post contracts of 

carriage, tarmac contingency plans, and customer service plans on websites marketed to 

passengers to and from the United States will incur administrative and website programming 

costs. On a per-carrier basis, these costs were assumed to be equal to those estimated for posting 

the baggage and optional fee disclosure notices in Section 4.8.4.

Unit costs for foreign carriers to comply with the posting requirements are estimated as follows:
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Table 20 - Unit Costs for Requirement Area 4

Direct 

Labor 

Hours

Mean 

Wage 

Rate*

Full Cost 

per 

Hour**

Cost per 

Firm

Website programming to post/update documents

initial programming for new documents 8 $35.67 $102.00 $816 

updated links/website text (annual) 4 $35.67 $102.00 $408 

*Rates for computer programmers, NAICS 481000, BLS Occupational Employment Statistics, May 2009.

**Full cost includes benefits and other direct labor costs (43 percent of mean wage rate) and cost for time 

associated with supervisor/management review (100 percent of direct labor cost).

Based on these estimates and assumptions, costs incurred by affected carriers to comply with 

Rule provisions in Requirement Area 4 are expected to be $0.2 million in 2012 and $1.3 million 

for the entire 10-year period from 2012 through 2021.

Table 21 - Estimated Compliance Costs for Requirement Area 4

2012 2012-21

Posting contracts of carriage

Additional foreign carriers required to post 30 30

Unit cost to post (first time) $816 $816

Foreign carriers required to update 111

Unit cost to post update $408

Total cost of posting contracts of carriage $24,480 $432,072

Posting customer service plans (CSPs)

Additional foreign carriers required to post 75 75

Unit cost to post (first time) $816 $816

Foreign carriers required to update 90

Unit cost to post update $408

Total cost of posting customer service plans $61,200 $391,680

Posting tarmac delay plans

Additional foreign carriers required to post 107 107

Unit cost to post (first time) $816 $816

Foreign carriers required to update 107

Unit cost to post update $408

Total cost to post tarmac delay plans $87,312 $480,216

Total costs for website posting requirements $172,992 $1,303,968

Total Compliance Costs (millions) $0.17 $1.30

Discounted Total Compliance Costs (millions) $0.99
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4.5. Requiring Foreign Carriers to Respond to Customer Complaints

4.5.1. Current Requirements, Industry Practices, and Need for Additional 

Regulation

The EAPP1 Final Rule requires covered U.S. carriers to acknowledge customer complaints in 

writing and to provide substantive responses to the concerns raised within specified time limits.

In 2009 the Department received reports of 7,233 problems concerning service on U.S. carriers 

and an additional 1,450 complaints related to problems on foreign carriers. The complaint rate 

per 100,000 passengers on foreign carriers is 50 percent higher than the rate for U.S. carriers.

Table 22 - Passenger Service Complaints Received by the Department, 2009

Complaint Category Domestic Foreign Total

Flight cancellations, delays, etc. 1,870 164 2,034

Baggage 1,281 323 1,604

Reservations/ticketing/ boarding 1,085 437 1,522

Customer service 974 120 1,094

Refunds 460 174 634

Disability 465 51 516

Oversales 332 38 370

Fares 348 75 423

Discrimination 107 23 130

Advertising 38 12 50

Animals 5 0 5

Other (includes frequent flier) 268 33 301

Total 7,233 1,450 8,683

Passengers Boarded 631,955,369 83,152,598 715,107,967

Complaints per 100,000 

Passengers 1.14 1.74 1.21

Source: OST, Air Travel Consumer Reports, Jan-Dec 2009; BTS, T-100 Segment database, 2009.

The Department currently lacks the regulatory authority to require that foreign carriers respond 

to customer complaints within a specified timeframe. As airline passengers become increasingly 

familiar with the CSPs mandated in the EAPP1 Final Rule for domestic carriers, they are 

unlikely to be aware that these requirements do not apply to flights operated by foreign carriers 

when making decisions about booking international travel.

4.5.2. Area 5 Requirements to Address Identified Needs

The Rule extends the requirements for covered U.S. carriers in the EAPP1 Final Rule relating to 

designation of an advocate for customers’ interests; acknowledgement of customer complaints in 

writing; and provision of a substantive response to the concerns raised within specified time 

limits to provide passengers on foreign carrier flights to and from the United States with the 

same guarantee of response.
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For this analysis, we have assumed that all foreign carriers which are not subsidiaries of other 

foreign carriers with flights to and from the United States would need to respond to customer 

complaints in a manner that complies with the Rule requirements. The total number of customer 

complaints requiring responses is estimated to be 61 times the number of complaints reported 

directly to the OST, based on a 2001 report by the DOT Inspector General.33

Table 23 - Number of Consumer Complaints Involving Foreign Carriers, 2009

Improved carrier 

responsiveness to complaints was estimated to reduce the level of complaints by 20 percent in 

the EAPP1 RIA.

Variable Estimate

Number of Complaints Received by DOT 1,450

Ratio of Total to Reported Complaints 61

Estimated Total Complaints 88,450

Percent Reduction from CSP Implementation 20%

Expected Number of Complaints with CSP 70,760

Source: OST, Air Travel Consumer Reports, Jan-Dec 2009; EAPP1 RIA.

4.5.3. Benefits of Area 5 Requirements

The benefits of this provision include reduced barriers to filing a complaint which in turn leads to 

time savings for some travelers, and increasing satisfaction due to more prominently displayed 

complaint filing information. This analysis considers two components of benefits. The first of 

these reflects the time consumers save from carriers posting information for filing a complaint on 

their websites. This benefit is measured and quantified. The second component of benefits 

consists of the value to consumers who filed complaints of receiving a more specific, targeted 

response or acknowledgement of the complaint. Since estimates of the dollar value to consumers 

of improvements in the quality of acknowledgements and responses to complaints could not be 

located, a cost-per-passenger analysis was conducted. The results are presented in Section 5.3 

below.

Quantitative benefits associated with reducing the time required to file a complaint are estimated 

using the same procedure used to estimate these benefits for the same requirements imposed on 

domestic carriers in the EAPP1 Final Rule.

34

 33 DOT, “Final Report on Airline Customer Service Commitment,” Office of the Inspector General, report AV2001-020, February 12, 2001.” See the Source Notes section of the Appendix for further details. 34 This includes the time spent locating the appropriate address to send the letter or e-mail but does not include the 

resolution of complaints.
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Table 24 – Benefits Estimates for Requirement Area 5

2012 2012-2021

Number of Complaints (Foreign Carriers) 1,566 19,335

Complaint Multiplier (# of Complaints not filed actually 

received by Carriers) 61 61

Number of “Ground Level” Complaints to Foreign 

Carriers 95,537 1,179,453

Benefits from Increase in Consumer Surplus

Percent Change in Cost of Complaining 3.23% 3.23%

Elasticity of Cost of Complaining

 

1.07 

 

1.07 

Percentage Increase in Complaints 3.47% 3.47%

Incremental Increase in Number of Complaints 3,315 40,919

Decrease in the Cost of Complaining $0.32 $0.32 

Benefits from Increase in Consumer Surplus $530 $6,547 

Total Component Benefits (millions) $0.00 $0.01 

Total Component Benefits (millions) Discounted $0.00 

As with passengers on domestic carriers covered under the EAPP1 Final Rule, passengers on 

flights of foreign carriers who file complaints may experience greater reassurance and less 

agitation while awaiting resolution of a complaint. Passengers may feel that their complaints are 

legitimate when carriers respond to them specifically instead of just noting that a communication 

has been received. The Department expressly solicited comments regarding estimating the dollar 

value to customers of receiving a response to their complaint that acknowledges the issues 

involved, instead of a more generic acknowledgement of the communication, but usable 

information was not forthcoming. 

A cost-per-passenger analysis was conducted in which the net costs of the requirement (total 

costs, net of the monetized benefits from the more accessible information for filing complaints) 

was divided by the number of passengers on covered flights by international carriers. The results 

are presented in Section 5.3 below.

4.5.4. Cost of Area 5 Requirements

Foreign carriers that are not subsidiaries of other foreign carriers will have to comply with the 

minimum standards for responding to customer complaints included in the Rule provisions in 

this requirement area. The preliminary RIA included separate compliance cost estimates for large 

and small foreign carriers. The Department solicited comments as to whether this type of sizebased distinction appropriately captures the likely extent of variation in compliance costs among 

foreign carriers. Having received no comments on this issue, the final RIA assumes that the 

seven foreign carriers which boarded or deplaned at least 2 million international passengers in 

the United States in 2009 will need to develop and implement more extensive systems and 
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procedures to handle customer complaints will smaller foreign carriers. Per-carrier compliance 

costs are estimated as follows:

Table 25 – Unit Costs for Requirement Area 5

2012

Establish/upgrade complaint handling system and 

procedures (large foreign carriers*) $41,371

Establish/upgrade complaint handling system and 

procedures (other foreign carriers) $4,261

Per-complaint cost to respond $1.85

*More than 2 million passengers annually departing from/arriving in the United 

States.

Source: EAPP1 RIA estimates for U.S. carriers.

Based on these estimates and assumptions, costs incurred by affected carriers to comply with 

Rule provisions in Requirement Area 5 are expected to be $0.8 million in 2012 and $2.4 million 

for the entire 10-year period from 2012 through 2021.
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Table 26 – Estimated Compliance Costs for Requirement Area 5

2012 2012-2021

Cost of implementing response systems

Number of large foreign carriers* 7

Number of other foreign carriers 81

Cost of implementation, large foreign carriers $41,371

Cost of implementation, other foreign carriers $4,261

Cost of responding to complaints $634,738 $634,738

Number of complaints 77,520 939,393

Per-complaint response cost $1.85

Cost of responding to individual complaints $143,412 $1,737,877

Total cost of responding to complaints $778,150 $2,372,615

Total Compliance Costs (millions) $0.78 $2.37

Discounted Total Compliance Costs (millions) $1.91

*More than 2 million passengers annually departing from/arriving in the United States.

Note: Number of passengers complaining is estimated to increase in subsequent years by the 

international passenger growth rate projected in the 2009 FAA Aerospace Forecast.

4.6. Changes in Denied Boarding Compensation (DBC) Policy

4.6.1. Current Requirements, Industry Practices, and Need for Additional 

Regulation

DOT requires that airlines pay specified amounts of denied boarding compensation (DBC) to 

passengers on an overbooked flight in cases where the carrier is not able to recruit a sufficient 

number of passengers to voluntarily surrender their boarding passes in exchange for cash or 

vouchers. While nearly 90 percent of boarding refusals attributable to carrier oversales in 2009 

were resolved by recruiting volunteers, BTS data indicate that nearly 70,000 passengers were 

involuntarily bumped from oversold flights operated by reporting carriers.35

Table 27 – Passengers Denied Boarding on Reporting Carriers, 2009

Number % of Total

Involuntarily Bumped Passengers 69,416 0.012%

Number Receiving DBC 58,005 0.010%

Voluntarily Bumped Passengers 623,673 0.106%

Total Passengers Boarded 583,639,896

Source: BTS, Report of Passengers Denied Confirmed Space, 2009

 35 Under the present requirements, DBC must be paid only to passengers involuntarily bumped from flights on 

aircraft with 30 or more seats. Additionally, DBC does not have to be paid to passengers bumped from flights on 30-

60 seat aircraft to reduce the amount or distribution of weight carried for safety reasons.
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Currently, involuntarily bumped travelers are required to be given DBC equal to 100 percent of 

the fare (200 percent if alternative transportation is not provided within specified time limits) to 

the next stopover on the flight itinerary, up to the cap specified in the regulation. In 2008, the 

maximum level of DBC for involuntarily bumped passengers on oversold flights was raised from 

$200 to $400, when alternative transportation is provided by the carrier within 2 hours for 

domestic flights and within 4 hours for international flights, and from $400 to $800 otherwise.36

Based on preliminary analysis of a sample of data from the BTS passenger origins and 

destinations (O&D) survey, about 7 percent of each-way fares on round-trip tickets and just 

under one-quarter of one-way fares exceed $400.37

The current DBC policy is not clear on the amount of compensation that must be paid to a holder 

of a zero-fare (e.g., tour consolidator or frequent flyer) ticket who is involuntarily bumped from 

an oversold flight. In the O&D survey data analyzed, about 4.5 percent of round-trip fares have 

an each-way value of less than $50, the minimum amount that BTS includes in its statistical 

estimation of the average fares paid by passengers for air travel.38

Carriers are required to provide a full explanation of the DBC policy in written form, but airline 

representatives may not always provide complete information about the DBC regulation 

provisions when orally advising passengers who are involuntarily bumped. BTS Form 251 

reports do not include the amounts of DBC paid in the form of vouchers rather than cash or 

check payments, nor is information available on the extent to which the value of these vouchers 

typically exceeds the prescribed amount of DBC payable by cash or check. Thus, it is not 

possible to determine the number or share of passengers who would have been involuntarily 

bumped but who chose to accept travel vouchers or coupons instead.

The Department solicited 

comments on current carrier practices with respect to compensation of these travelers, who may 

or may not be treated equitably.

The current DBC requirements may not be sufficient to ensure that all passengers bumped from 

the same flight are treated equitably. Those flying on tickets that exceed the maximum DBC 

threshold will receive less compensation in relation to the amount of the fare paid; those flying 

on zero-fare tickets may not be compensated on a basis consistent with those who purchased 

tickets; and the extent and completeness of the verbal explanations of the compensation options 

available to potential volunteers for bumping on oversold flights may vary among gate agents.

 36 DOT, “Final Rule on Oversales and Denied Boarding Compensation,” DOT-OST-2001-9325-1328, April 18, 

2008. The original maximum levels for DBC were established in 1978. The 1978 limits of $100 and $200 for DBC 

are equivalent to $650 and $1,300, respectively, in July 2009, after taking into account increases in the Consumer 

Price Index over the past 21 years.

37 The sample analyzed included more than one million records for flights originating in Illinois during the second 

quarter of 2008; the average fare for a round-trip ticket in this sample was $349. The O&D market file data do not 

identify the type of fares associated with individual tickets, but analysis of the accompanying coupon file indicates 

that first-class tickets accounted for about 10 percent of flights in the sample. 38 Including one-way fares in the analysis does not materially alter the estimate of the proportion of passengers 

traveling on zero-fare tickets: just over 5 percent of one-way fares in this sample were below $50.
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4.6.2. Area 6 Requirements to Address Identified Needs

The Rule makes several changes in the existing requirements relating to denied boarding 

compensation (DBC):

• The Rule doubles the amount of DBC that must be paid to involuntarily bumped 

passengers: (1) from 100 percent to 200 percent of the one-way fare when alternative 

transportation is provided by the carrier within 2 hours for domestic flights and within 4 

hours for international flights and (2) from 200 percent to 400 percent of the one-way 

fare otherwise. 

• The Rule also increases the maximum amount of DBC that must be paid to involuntarily 

bumped passengers: (1) from $400 to $650 when alternative transportation is provided by 

the carrier within 2 hours for domestic flights and within 4 hours for international flights 

and (2) from $800 to $1,300 otherwise.

• The Rule stipulates that the Department implement a biannual inflation adjustment to the 

maximum DBC levels based on changes in the CPI-U, with the amount of the adjustment 

rounded to the nearest $25. Incorporating this adjustment obviates the need for periodic 

notice and comment rulemakings while maintaining the real value of the maximum 

compensation amounts set forth in the existing DBC rule.

• The Rule also clarifies previous DBC rule language by explicitly stating that the 

definition of “confirmed reserved space” on a flight that includes seats held by zero-fare 

tickets (e.g., tickets obtained from consolidators, as part of a tour package, or by using 

frequent flyer miles), thus entitling the holders to DBC if bumped. These passengers will 

be entitled to compensation at the lowest rate paid by cash, check, or credit card for a 

comparable class of ticket on the same flight, up to the maximum amount currently 

specified.39

• Carriers will be required to “advise each passenger solicited to volunteer for denied 

boarding, no later than the time the carrier solicits that passenger to volunteer, (1) 

whether he or she is in danger of being involuntarily denied boarding (in doing so, the 

carrier must fully disclose the boarding priority rules that the carrier will apply for that 

specific flight), and (2) the compensation the carrier is obligated to pay if the passenger is 

involuntarily denied boarding.”

• Another new requirement ensures that involuntarily bumped passengers are informed 

orally of their ability to receive payment of DBC to which they are entitled either by cash 

or check, rather than in the form of free or discounted air transportation.

It is difficult to evaluate the impact on the numbers of passengers who will be voluntarily or 

involuntarily bumped from adoption of these requirements. The increases in the DBC amounts 

may induce carriers to reduce the number of oversales, which will provide benefits to passengers 

who are involuntarily bumped, but will reduce the welfare of other passengers who will no 

longer be able to get seats on fully-booked flights that depart with empty seats.

 39 The Final Rule stipulates that a zero-fare ticket does not include free or reduced rate air transportation provided to 

airline employees and guests.
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The impact of the additional notice requirements on volunteers is also difficult to assess, because 

it depends in large part on how many potential excess volunteers there are for any particular 

oversold flight. If there are few or no excess volunteers, the expanded explanations may cause 

more of these passengers to force involuntary bumping to receive more compensation or 

compensation in a more desirable form (e.g., cash instead of travel vouchers). On the other hand, 

if there are a sufficiently large number of volunteers in relation to the number of oversold seats, 

these requirements may simply result in different specific individuals accepting the 

compensation being offered by the carrier.

It is also possible that some of these requirements may extend the time required to resolve

oversales situations and lengthen boarding times.

4.6.3. Benefits of Area 6 Requirements

Several of the changes in the Rule from current DBC policy will increase the amounts paid by 

carriers to passengers who are bumped involuntarily from oversold flights. However, any benefit 

to passengers in the form of higher DBC compensation payments (and higher voluntary 

compensation by the airline to avoid DBC payments) will be offset by an equivalent cost to 

carriers that is likely to be reflected ultimately in higher airfares. In the end, therefore, these 

additional payments represent a form of insurance shared by all passengers. The small costs 

borne by many would offset a significant share of the loss imposed on a few. Assuming that 

passengers are risk-averse, the rule will afford a small potential increase in aggregate welfare and 

redistribute the burden of involuntary denial of service more fairly among passengers.

It is also possible that carriers may reduce overbooking rates on some flights in response to the 

potential increase in DBC compensation costs. While fewer passengers would be involuntarily 

bumped, it is possible that maintenance of lower average load factors would permit fewer 

passengers to travel on their preferred flights. At the same time, if increased airfares (resulting 

from higher DBC payments and voluntary compensation) coincide with a perception of a 

reduced likelihood of involuntary bumping, airlines might find it possible to add flights without 

sacrificing profits. The costs and benefits of the potential impact of the rule on ticket prices and 

overbooking rates cannot be estimated and are not included in this evaluation.

Adoption of the new DBC requirements is expected to provide additional categories of potential 

benefits that could not be quantified in this regulatory evaluation, including the following:

• Decrease in Confusion Regarding Denied Boarding Compensation Provisions. The 

requirement that carriers must provide information regarding customer DBC rights in the 

same manner as other compensation is offered (such as a carrier coupon) should decrease 

confusion among passengers. When passengers are presented information in different 

formats (such as orally and written), there are ample opportunities for confusion.

• Decreased Resentment among Some Passengers Regarding Different Compensation 

Received. Under current guidelines, some passengers on the same flight and entitled to 

the same amount of compensation may unwittingly choose different methods of 

compensation and resent what other passengers received (such as cash).
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4.6.4. Cost of Area 6 Requirements

As noted in Section 4.6.3, the DBC provisions of this Rule will cause changes in the level of 

payments from carriers to passengers and some redistribution of the compensation received for 

both voluntary and involuntary bumping among passengers themselves. In addition to these 

monetary transfers, there are also real economic costs associated with implementing changes in 

the DBC policy and updating the maximum amounts payable on a biannual basis. These costs 

will be higher in the first year than in subsequent years because the Rule changes to the current 

DBC policy include new provisions relating to zero-fare tickets and verbal explanations 

provided to passengers who may be bumped involuntarily from oversold flights.

Changes in the DBC policy will require training and communications with gate agents for 

carriers in each airport they serve using aircraft with 30 or more seats. The BLS Occupational 

Employment Statistics estimate that in May 2009, approximately 92,000 people were employed 

as “Reservation and Transportation Ticket Agents and Travel Clerks,” a category that includes 

reservations staff (both onsite at airports and in call centers), ticket agents, gate or boarding 

attendants, but not flight-related or baggage handling employees.

In this analysis, we have assumed that one-quarter of these employees are gate agents who will

need to receive training and information on changes in the current DBC policy.40 We have 

assumed that substantially less time per-employee will be needed to train and communicate with 

gate attendants and other relevant carrier employees when the threshold amount of DBC is 

increased biennially in alternating future years.41

Unit costs for the steps that will be required to achieve compliance with the Rule provisions in 

Requirement Area 6 are estimated as follows:

 40 Most air carriers with fewer than 2,000 employees report passenger handling personnel under the more general 

category of “Passenger/General Services & Administration.” However, the total number of employees reported in 

this category by smaller carriers is about 7,400, the majority of whom are not likely to have responsibilities 

associated with boarding passenger flights. 41 For this analysis, the Department has assumed that any biannual changes in the maximum DBC limit will be made 

using the July CPI-U and become effective on January 1 of the following year. These costs may be increased if the 

adjustments must be made more rapidly, because it reduces the opportunities for carriers to communicate changes to 

gate agents and other passenger-handling personnel who must be informed. 
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Table 28 - Unit Costs for Requirement Area 6

Direct 

Labor 

Hours

Mean 

Wage 

Rate*

Full Cost 

per 

Hour** Unit Cost

Initial per-carrier programming and per-employee training costs

programming hours 20 $35.67 $102.00 $2,040 

gate attendants (incl. in ticket agents) 0.5 $16.68 $48.00 $24 

Bi-annual update per-carrier programming and per-employee training costs

programming hours 4 $35.67 $102.00 $408 

gate attendants (incl. in ticket agents) 0.05 $35.67 $102.00 $5 

*Wages rate for reservation and transportation ticket agents and travel clerks, NAICS 481000, BLS 

Occupational Employment Statistics, May 2009.

**Full cost includes benefits and other direct labor costs (43 percent of mean wage rate) and cost for time 

associated with supervisor/management review (100 percent of direct labor cost).

Based on these estimates and assumptions, costs incurred by affected carriers to comply with 

Rule provisions in Requirement Area 6 in the base case are expected to be approximately $0.6 

million in 2012 and $1.0 million for the entire 10-year period from 2012 through 2021.
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Table 29 - Estimated Compliance Costs for Requirement Area 6

2012

DBC 

Update 

Years* 2012-21

Programming costs to calculate DBC revisions

Number of marketing U.S. carriers 24 24 24

Cost per carrier $2,040 $408 

Cost of programming DBC calculations $48,960 $9,792 $88,128

Gate agent training costs

Number of gate agents** 22,980 22,980

Training costs per employee $24 $5 

Total cost of training gate agents and CSRs $551,520 $117,198 $1,020,312

Total Compliance Costs (millions) $0.55 $0.12 $1.02

Discounted Total Compliance Costs (millions) $0.97

* "DBC Update Years" are those years in which the maximum amount of DBC will be adjusted, 

starting 2014 and biennially thereafter.

** Assumes 1/4 of ticket agents must be trained.

4.7. Required Disclosure of Full Fares in Advertising and Prohibition 

on Opt-Out Provisions in Ticket Sales

4.7.1. Current Requirements, Industry Practices, and Need for Additional 

Regulation

Existing regulations require that advertising of air travel prices must include all fees, surcharges, 

and taxes. However, the Department has a longstanding enforcement policy that permits carriers 

and other sellers of air transportation to break out from the advertised price any airport or 

government fees and taxes that are charged on a fixed or per-segment basis.42

In February 2010, we conducted a review of the prices advertised on the websites of five 

mainline carriers, three low-cost carriers, and the four largest online travel agencies (OTAs).43

Of the eight carrier websites, only Delta’s displayed the full-fare prices along with the pre-tax 

prices at the flight selection stage. All eight carrier websites displayed the additional fees and 

taxes at the flight booking stage.

44

 42 The 7.5 percent Federal tax on fares must be included in the price displayed under the current enforcement policy.

In contrast, full-fare prices were displayed for each available 

option at the flight selection stage on all four OTA sites, along with prices that did not include 

the additional fees and taxes. However, the full-fare prices were shown more prominently on the 

Expedia and Orbitz flight selection pages than on those for Priceline and Travelocity.

43 For each of these sites, we requested two round-trip fares from Baltimore-Washington International Airport 

(BWI) to the George W. Bush Houston International Airport (IAH) departing on March 26, 2010, and returning on 

March 29, 2010. The review included capture of screen displays at the flight selection and booking stages.

44 The United Airlines flight selection page displayed only the fare for a specific combination of outbound and 

return flights at a single time, so determining the full-fare price for each combination of available flights required 

return trips to the flight selection and booking pages.
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At present, there are also no specific prohibitions on the ability of carrier, travel agency, and tour 

operator website purchase engines to include and charge for services in addition to the fare 

unless the purchaser takes affirmative action to opt-out of paying for these services. The most 

common charges added on this basis are for travel insurance and preferred seating assignments.45

Advertised prices that do not include the full amount of the fare being charged, including all 

mandatory fees and taxes, complicate consumer comparison of alternative travel itineraries to 

reach the same destination, which may involve different amounts of these mandatory fees and 

taxes. For example, booking a flight with a connection will incur additional airport departure and 

security fees that may partially or even totally offset the price advantage of a flight with one or 

more connections. Experienced travelers will incur longer search times to confirm that they have 

found the lowest or most appropriate fare when searching on multiple carrier or OTA sites. 

Inexperienced travelers may find themselves purchasing tickets at prices that are higher than 

those for other alternatives they reviewed once the charges for all mandatory fees and taxes are 

included. They may also unwittingly purchase optional services at prices that exceed what they 

would be willing to pay for these additions.46

In addition, substantial Department resources are required to review carrier, travel agent, and 

tour operator solicitations that have fees and taxes broken out of the advertised prices to 

determine if these advertisements comply with current enforcement policy. As noted in Section 

2.4, more than one-third of the consent orders entered into by the Department during the 3-year 

period from 2008 through 2010 involved non-compliance with established rules and policy 

relating to the advertising of air fares.

4.7.2. Area 7 Requirements to Address Identified Needs

The Department is amending its current enforcement policy on full-fare advertising 

requirements, which permits carriers and other sellers of air transportation to break out from the 

advertised price any mandatory airport or government fees that are charged on a fixed or persegment basis. The Rule specifically prohibits break-out of these charges and fees from 

advertised fares. This has the effect of reaffirming the stated policy and eliminating the variance 

from stated policy that limits consumers’ access to full fare information when they are in the 

process of making air travel purchase decisions.47

This requirement applies to any advertising or solicitation by “a direct air carrier, indirect air 

carrier, an agent of either, or a ticket agent, for passenger air transportation, a tour (i.e., a 

combination of air transportation and ground or cruise accommodations), or a tour component 

(e.g., a hotel stay) that must be purchased with air transportation that states a price for such air 

transportation, tour, or tour component.” The Rule provision will apply to all carriers, travel 

 45 Our research on full-fare advertising did not in most cases proceed to the step (after entry of credit card 

information) at which some booking engines may add charges for optional services on an opt-out basis. However, 

one large OTA site (Travelocity) added travel insurance at the flight booking stage on an opt-out basis. 46 While consumers may report that they would not have purchased services such as travel insurance or preferred 

seating assignment on an opt-in basis, it is likely that many would do so if the prices of these services were lower. 

For example, it is possible that nearly all passengers would purchase travel insurance if it were offered for $1 or less. 47 A previous reconsideration of this enforcement policy was conducted in Docket No. OST–2005–23194, which 

ended with the Notice of Proposed Rulemaking being withdrawn.
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agencies, and tour operators and will cover both print and online advertising, as well as online 

travel booking engines.

In addition, advertising and solicitations that display one-way fares for air transportation that are 

conditional on purchase of a round-trip ticket will be required to display in a conspicuous 

manner that they are “each-way fares.”

The Rule also prohibits covered entities from requiring customers to purchase additional 

optional services in connection with air transportation (such as travel insurance or preferred 

seating assignment) unless a consumer affirmatively chooses to have any such services included 

in the purchase price.

Because of the long lead times involved in some forms of print media advertising vehicles (e.g., 

annual visitors’ guides, promotional brochures for spring break travel packages), the Department 

is permitting covered entities to distribute or post advertising materials booked or produced 

before the rule date that comply with the current enforcement policy standards for a short period 

of time after the rule is published. The final RIA assumes that all print advertising which is 

created after the effective date of the Rule will need to comply with the requirement and that all 

online and print solicitations still in circulation will need to comply with the new requirement 

within 60 days of the effective date for the Rule.

4.7.3. Benefits of Area 7 Requirements

Consumers are likely to benefit in several ways from this provision. The first benefit is the time 

saved for those consumers beginning a ticket purchase that is later abandoned once the full fare 

is known. These beneficiaries see a fare advertised (in print, on television, etc.) that does not 

include all taxes and fees and decide to make the effort to purchase a ticket based on the 

advertised price, only to find that the full-fare price is “too high” and no longer worth 

purchasing. While advertising provides information to consumers that can facilitate the purchase 

of desired goods and services, incomplete pricing information in advertisements generates 

wasted effort by some consumers who begin to make purchase decisions that are later abandoned 

once full information is received. However, the value of this benefit could not be quantified 

because adequate data are not available on the number of these consumers and the average 

amount of time lost.

Passengers who purchase tickets from websites that did not previously present full fares up front

will benefit by (1) saving time that would previously have been spent searching for the full fare 

on single or multiple websites to be able to compare full-fare prices or (2) avoiding being 

attracted by lower, incomplete fares and then not fully taking into account the full fare when it is 

subsequently revealed, which in turn may lead to less than optimal purchasing decisions. The 

separation of a price into its components (often called “partitioned pricing”) that are presented at 

different times in the purchasing process has been found in many cases to affect demand. The 

benefits to the former group of consumers, those who save time reviewing multiple websites, are 

estimated below. The estimated benefits to those consumers who may make suboptimal 

purchasing decisions based on the fact that the full-fare is presented only at the end of the 

purchase is not included in the main analysis. A discussion and estimation of this benefit is 
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presented in Appendix 2.

Those passengers who visit multiple travel websites to ensure that they can adequately compare 

prices with all fees and taxes across the universe of websites (some of which may include all 

taxes and fees but at least some of which do not) are referred to in this evaluation as “Full-Fare 

Comparison Shoppers.”

Under the rule, these Full-Fare Comparison Shoppers will avoid the additional time needed to 

ensure that they are looking at comparable prices and are making decisions based upon the actual 

final cost of purchase. Note that this provision will not eliminate the value of comparison 

shopping across websites for prices. Rather, it will simply eliminate the need to search additional 

websites for the best fares including all taxes and fees or to spend additional time to be able to 

locate full-fare information on websites that do not provide full-fare prices up-front.

The typical Full-Fare Comparison Shopper is assumed to be shopping for an average of 1.4

people, which is the average travel party size on commercial airlines.48 The number of tickets 

purchased online is therefore divided by 1.4 to arrive at an estimate of the number of persons 

searching multiple web sites and making purchases. The analysis assumes that these purchasers 

will save an average of 3 minutes of search and estimation time if all fares displayed on travel 

websites included all required government taxes and fees up front.

49 This time saving was 

multiplied by a value of time derived from Department of Transportation data developed for 

estimating air travelers’ value of time and uses a weighted average of the estimated non-work 

value of time of leisure travelers and the average hourly earnings of business travelers ($24.14 

per hour; see Appendix 1 for greater detail).

While independent data are available on the percentage of air passengers who purchase tickets 

online and for the value of time for air travelers, independent estimates have not yet been found 

for the percent of online air tickets purchased by consumers who search and examine multiple 

websites to compare fares and who spend time specifically examining prices including all taxes 

and fees while shopping for the best price. A conservative estimate of 2 percent of online 

purchasers searching multiple websites was used for this analysis.

 48 Estimate from a 2007 Travel Industry Association study cited in the ATA comments.

49 Independent data on the potential search time saved were not located. We have therefore re-estimated the amount 

of time saved to 3 minutes based on a series of user time trials. The revised estimate measures only the portion of 

time spent searching on additional websites to find full-fare prices as opposed to the time that would be required to 

complete the entire purchasing process (entering names, credit cards, seat preference, etc.) on more than one site. 

However, it should be noted that this value could not be estimated for a representative sample of all online ticket 

purchasers. 
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Table 30 - Benefits Estimates for Requirement Area 7

2012 2012-2021

Tickets for Domestic Flights Sold by Reporting Carriers 260,838,061 2,962,820,014

Percent of Passengers on Domestic Flights using 

Reporting Carriers 87% 87%

Number of Total Passengers on Domestic Flights 300,055,656 3,408,286,734

Percentage of Domestic Passengers to Total Passengers 

on U.S. 88% 88%

Number of Total Tickets for U.S. Carriers

 

340,845,677 

 

3,871,614,405 

Percentage of Passengers using Internet for Airfare 

Purchase 52% 62%

Tickets Purchased on Websites

 

177,239,752 

 

2,396,529,316 

Average Travel Trip Party Size 1.4 1.4

Purchasers of Tickets on Websites 126,599,823 1,711,806,655

Full-Fare Comparison Shoppers

Assumed Percent of Online Purchasers Who Shop on 

Multiple Travel Websites without Full Fares Displayed 2% 2%

Purchasers Benefiting from Up-Front Posting of FullFare 2,531,996 34,236,133

Value of Time for Passenger (Personal Non-Traveling) $24.15 $24.15 

Average Time Saved by Purchasers Due to Up-Front 

Posting of Full-Fares (3 minutes = 0.05 hours)

 

0.05 

 

0.05 

Value of Average Time Saved Per Purchaser $1.21 $1.21 

Total Value of Time Saved from Reduction in Search 

Cost $3,057,386 $41,340,131 

Total Benefits (millions) $3.06 $41.34 

Total Component Benefits (millions) Discounted $28.97 

The full-fare advertising requirement may also improve customer good will toward carriers.

With all carriers consistently providing full-fare advertising to consumers, customers may 

perceive the carriers as treating them more “honestly.” Some customers may have more positive 

experiences purchasing tickets than otherwise, making them slightly more likely to travel by air 

in the future or to avoid the carriers or websites used previously.

By requiring that a customer take a specific action to opt-out of the purchase of an additional 

service or amenity, some customers mistakenly make a purchase they did not want or intend.

Some customers may misunderstand or simply miss the fact that an opt-out feature is an 

additional, optional purchase. By prohibiting opt-outs for additional services and amenities, this 
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provision will increase consumer welfare by decreasing unwanted purchases. While the nature of 

this effect is well understood, adequate information needed to estimate these benefits has not yet 

been found.

The Department expressly solicited comments regarding the estimation of several factors in the 

estimation of benefits for this provision, including the average search time saved for passengers

who already search for full fare information; the percentage of passengers who spend time 

searching websites to find full fare ticket information; the percentage of online ticket purchasers 

who purchase only from websites that provide full-fare pricing up-front; the percentage of 

passengers who are fully aware of added fees and taxes when purchasing tickets from travel sites 

that do not automatically display that data up front; the likely change in demand for those 

passengers who are not aware of the full amount of taxes and fees until later in the purchase 

process; and the percentage of travelers who inadvertently purchase additional services and 

amenities as a result of opt-out features who would otherwise not have made these purchases.

4.7.4. Cost of Area 7 Requirements

Carriers, travel agents, and tour operators that do not currently display fares which include all 

applicable taxes and fees in their advertising and solicitations will incur costs to comply with this 

requirement. The extent of these costs will depend in part on the length of time between the date 

on which the rule is published and the effective date of this requirement. We have assumed for 

this analysis that sellers of air transportation will need to ensure that any new print advertising 

developed after the effective date of the Rule will need to comply with the Rule requirement, but 

they will be able to distribute advertising already in production or distribution until 60 days after 

the effective date of the Rule. In this scenario, most (90 percent) print advertising materials will 

not require revisions, either because they do not display prices, display prices that include full 

fares for any air transportation being sold, or are not expected to remain in circulation for more 

than 60 days after the effective date of the Rule.50

For this analysis, large travel agencies and tour operators are defined as those with 20 or more 

employees. Our cost estimates assume that these companies will incur larger per-firm costs to 

revise online and print media advertising and solicitations that do not display full fares for air 

transportation. Small travel agents and tour operators with fewer than 20 employees are assumed 

to incur smaller per-firm costs to revise print advertising materials.

The unit costs for revising online and print advertising materials to comply with the Rule 

provisions in Requirement Area 7 are estimated as follows:

 50 For example, advertising for spring break travel packages that does not reflect full fares for air travel could be 

distributed after an assumed Rule publication date of January 1, 2012, as long as it did not offer tours that could be 

booked 180 days later.
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Table 31 - Unit Costs for Requirement Area 7

Direct 

Labor 

Hours

Mean 

Wage 

Rate*

Full Cost 

per 

Hour**

Cost per 

Firm

Reprogram website flight quotation pages

Large carriers/ 4 largest OTAs 80 $35.91 $103.00 $8,240

Small carriers/ large travel agencies/tour 

operators (20+ employees) 20 $35.91 $103.00 $2,060

Small travel agencies/tour operators (<20 

employees) with online booking capability 10 $35.91 $103.00 $1,030

Modify print advertising

Large carriers/travel agencies/tour operators 8 $22.99 $66.00 $528

Small carriers/travel agencies/tour operators 2 $22.99 $66.00 $132

*Rates for computer programmers and graphic designers, BLS Occupational Employment Statistics, May 2009.

**Full cost includes benefits and other direct labor costs (43 percent of mean wage rate) and cost for time 

associated with supervisor/management review (100 percent of direct labor cost).

It should be noted that these estimates do not include costs for carrier, travel agency, and tour 

operator websites to bring price displays on their online flight selection pages and online and 

print media advertising into compliance with current Department guidelines and enforcement 

policy (See the discussion in Section 4.7.1).

Based on these estimates and assumptions, costs incurred by affected carriers to comply with the 

Rule provisions in Requirement Area 7 are expected to be $6.8 million in 2012. No additional 

compliance costs will be incurred in subsequent years, as sellers of air transportation will have 

the option of displaying full-fare prices in all future advertising and solicitations without first 

preparing versions of these materials that do not include all relevant government taxes and fees.
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Table 32 - Estimated Compliance Costs for Requirement Area 7

2012 only

Reprogramming websites to show full fares

Number of large U.S. carriers offering tickets for purchase 18

Number of large foreign carriers offering tickets for purchase 87

Largest 4 online travel agencies (OTAs) 4

Unit cost to reprogram websites, large carriers/large OTAs $8,240

Number of small/very small U.S. carriers 33

Number of small/very small foreign carriers 2

Other travel agencies/tour operators (20+ employees) 893

Unit cost to reprogram websites, small/very small carriers $2,060

Small travel agencies/tour operators (<20 employees) with 

online booking capability 1,567

Unit cost to reprogram websites, small/very small carriers $1,030

Total cost of reprogramming websites $4,423,850

Modification of print advertising to reflect full fares

Number of large U.S. carriers offering tickets for purchase 18

Number of large foreign carriers offering tickets for purchase 87

Largest 4 online travel agencies (OTAs) 4

Other travel agencies/tour operators (20+ employees) 893

Unit cost to modify large firm print advertising $528

Number of affected small/very small U.S. carriers 33

Number of small/very small foreign carriers 2

Number of travel agencies/tour operators (<20 employees) 13,597

Unit cost to modify small firm print advertising $132

Total cost of revising print advertising $2,328,480

Total cost of revising websites and advertising $6,752,330

Total Compliance Costs (millions) $6.75

Discounted Total Compliance Costs (millions) $6.75

4.8. Expanded Disclosure of Baggage Fees and Other Optional Fees

4.8.1. Current Requirements, Industry Practices, and Need for Additional 

Regulation

In recent years, many of the major U.S. carriers have instituted separate charges for checked 

baggage and other services. While consumer awareness of the existence of checked baggage fees 

is increasing rapidly, the major carrier and other online booking engines currently do not have an 

option that allows purchasers to calculate these fees and incorporate them into the prices 
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displayed in flight search results. This complicates purchaser price comparisons and reduces the 

likelihood that advertised fares accurately represent the actual cost of air travel.

DOT issued guidance on May 19, 2008, published in the Federal Register at 73 F.R. 28854, 

which was designed to ensure that prospective air travelers receive timely and effective notice 

about charges for checked bags. The guidance references the steps needed to meet “implicit 

requirements” relating to the avoidance of unfair and deceptive practices with respect to 

disclosure of checked baggage fees. Specifically, DOT advised that:

...air carriers and foreign air carriers should place a notice regarding the above-described 

additional baggage charges on the first screen in which the carrier offers a fare quotation of a 

specific itinerary selected by a consumer... Airline reservations agents should disclose these 

baggage charges and limitations during telephone or counter sales prior to completing a sale.51

The method by which notice must be provided is also specified in the guidance. 

Based on a February 2010 review of reporting carrier websites, information on baggage fees and 

some other optional fees appears to be available to most passengers on major airlines. In 

addition, information about the many of the fees charged by major U.S. and foreign carriers are 

readily available on several OTA websites, including Expedia, Travelocity, and Kayak, in 

formats that facilitate cross-carrier comparisons by consumers.

However, it is possible that a significant number of travelers may visit only the site of the carrier 

on which they purchased a flight.52

4.8.2. Area 8 Requirements to Address Identified Needs

In many cases, these passengers would not be aware of the 

amounts of baggage fees and optional fees charged in the absence of notices on these sites, 

consequently incurring more charges for checked baggage and other optional services than if 

they had known about the additional costs for these items.

The Rule requires that each covered U.S. and foreign carrier disclose applicable baggage fees on 

e-ticket confirmations; post notice of any increases in baggage fees on its home page and 

maintain any such notice for at least 3 months after the increase; and provide a link from its 

home page to a page that contains a full disclosure of all baggage and other optional fees for 

services that passengers may be charged by the airline. These requirements also apply to online 

travel agencies and other sellers of air transportation.

The regulatory language currently defines covered carriers as those that have ticket-capable 

websites accessible to the general public. Following this definition, we have assumed that 

carriers which operate flights only on a contract basis for other carriers will not incur costs to 

comply with these requirements.

 51 Department of Transportation, “Guidance on the Disclosure of Policies and Charges Associated with Checked 

Baggage,” 73 F.R. 28854, May 19, 2008. 52 This is particularly likely to be true for passengers on low-cost airlines. About 75 percent of JetBlue and 

Southwest passengers book flights directly on the carrier websites, according to these carriers’ most recent annual 

reports.
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4.8.3. Benefits of Area 8 Requirements

Insufficient data were found to adequately estimate the benefits from these requirements. As with 

the analysis for other portions of this Rule for which robust estimates of benefits have not been 

found, a cost-per-passenger analysis was conducted. The results are presented in Section 5.3 

below.

However, provisions included in Requirement Area 8 may provide potential benefits that could 

not be quantified in this regulatory evaluation, including the following:

• Decrease in Time at Check-in. Some consumers are not fully aware of their carrier’s 

baggage fees until they arrive for check-in, even though all the information is available 

online at the time of purchase. In such cases, some passengers may be delayed at checkin as they attempt to repack so as to reduce their checked-in baggage. Such situations not 

only increase the amount of time spent checking-in, but also increase time spent waiting 

for those later in line. Ensuring that baggage fees are prominently displayed will 

minimize such problems.

• Improved Customer Good Will toward Carriers. With all carriers consistently providing 

full information regarding baggage fees to consumers in a conspicuous place, customers 

may perceive that carriers are treating them more “honestly.” Some customers may have 

more positive experiences than otherwise, making them slightly more likely to travel by 

air in the future.

It should also be noted that if some passengers are not fully aware of baggage fee changes 

currently and become so due to the requirements in the Rule, some of these passengers may 

decide to pack differently. These passengers would be more likely to take more into the cabin 

with them, which may lead to further crowding in the cabin.

4.8.4. Cost of Area 8 Requirements

Because most carriers already post notices on their websites with current fees for baggage and 

other optional products and services, the compliance costs for the provisions of this requirement 

that apply to carrier websites are limited to the incremental costs of updating and posting notices 

when these fees change. While carriers may incur more significant costs to program e-ticket 

generators to display any baggage fees that may apply, the Department does not have extensive 

information about the likely magnitude of these costs.

Travel agents and tour operators that provide online booking will also need to locate applicable

links to baggage and other fee disclosures on carrier websites. It is reasonable to assume that 

these links will be compiled into some type of reference sheet or guide that is available to firms 

in these sectors. Individual firms will incur costs to add these links to their current online 

booking engines and to update these links periodically.
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The following estimates of per-firm costs that will be incurred to achieve compliance with the 

Rule provisions in Requirement Area 8 were utilized in this analysis:

53

Table 33 - Unit Costs for Requirement Area 8

Direct 

Labor 

Hours

Mean 

Wage 

Rate*

Full Cost 

per 

Hour**

Cost per 

Firm

Website/E-ticket programming

Modify e-tickets (large marketing carriers/ 4 

largest OTAs) 40 $35.91 $103.00 $4,120

Small carriers/large travel agencies/tour 

operators (20+ employees) 20 $35.91 $103.00 $2,060

Small travel agencies/tour operators (<20 

employees) with online booking capability 10 $35.91 $103.00 $1,030

Post/update links to optional fees (twice per year)

Large marketing carriers/ 4 largest OTAs 8 $35.91 $103.00 $824

Small carriers/large travel agencies/tour 

operators (20+ employees) 4 $35.91 $103.00 $412

Small travel agencies/tour operators (<20 

employees) with online booking capability 2 $35.91 $103.00 $206

*Rates for computer programmers, BLS Occupational Employment Statistics, May 2009.

**Full cost includes benefits and other direct labor costs (43 percent of mean wage rate) and cost for time 

associated with supervisor/management review (100 percent of direct labor cost).

Based on these estimates and assumptions, costs incurred by affected carriers, travel agents, and 

tour operators to comply with Rule provisions in Requirement Area 8 are expected to be $4.8

million in 2012 and $9.1 million for the entire 10-year period from 2012 through 2021.

 53 The assumed frequencies of posting notices about baggage fees and optional fees on carrier websites (and the 

accompanying unit cost estimates) were doubled from those used in the preliminary RIA in response to comments 

received on the NPRM.
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Table 34 - Estimated Compliance Costs for Requirement Area 8

2012 2012-21

Programming/updating e-tickets to display baggage fees/links

Large marketing U.S. carriers 18

Large marketing foreign carriers 87

4 largest OTAs 4

Unit cost, large marketing carriers/largest OTAs $4,120 $7,828

Small/very small marketing U.S. carriers 33

Small/very small marketing foreign carriers 2

Large travel agencies/tour operators (20+ employees) 893

Unit cost, small/very small marketing carriers/large travel 

agencies/tour operators (20+ employees) $2,060 $3,914

Small travel agencies/tour operators (<20 employees) with 

online booking capability 1,567

Unit cost, small travel agencies/tour operators (<20 

employees) with online booking capability $1,030 $1,566

Total cost of reprogramming e-tickets $3,974,770 $7,552,063

Programming/updating websites to display optional fees/links

Large marketing U.S. carriers 18

Large marketing foreign carriers 87

4 largest OTAs 4

Unit cost, large marketing carriers/largest OTAs $824 $1,566

Small/very small marketing U.S. carriers 33

Small/very small marketing foreign carriers 2

Large travel agencies/tour operators (20+ employees) 893

Unit cost, small/very small marketing carriers/large travel 

agencies/tour operators (20+ employees) $412 $783

Small travel agencies/tour operators (<20 employees) with 

online booking capability 1,567

Unit cost, small travel agencies/tour operators (<20 

employees) with online booking capability $206 $391

Total cost of optional fee disclosure updates $795,778 $1,511,978

Total cost to post bag/optional fee information $4,770,548 $9,064,041

Total Compliance Costs (millions) $4.77 $9.06

Discounted Total Compliance Costs (millions) $7.88

Note: Cost of annual updates/validations for baggage and optional fee links assumed to be 10 

percent of base year implementation cost
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4.9. Prohibition on Post-Purchase Fare Increases

4.9.1. Current Requirements, Industry Practices, and Need for Additional 

Regulation

The Department is aware of several instances in the past few years in which tour operators have 

imposed post-purchase increases in the prices for air travel or combined travel packages on their 

customers. Consumers could also possibly find themselves incurring higher costs for air travel 

than were contracted for at the time of purchase because of increases in baggage fees, 

notwithstanding the May 19, 2008, DOT guidance on baggage fees, which states that:

Internet displays and airline agents should also make clear when the added charges or revised 

policies are to take effect. In no case should more restrictive baggage policies or additional 

charges be applied retroactively to a consumer who purchased his or her ticket at a time when the 

charges did not apply, or when a lower charge applied.

A February 2010 review of reporting carrier websites indicated that all reported increases in 

baggage fees were accompanied by effective dates for the change specified in terms of when 

tickets were purchased. 

It is possible that the current DOT guidance would not have continued to be effective for 

enforcing the current prohibition on post-purchase price increases. Codifying this policy also 

reduces the amount of resources and effort required for the Department to determine if entities 

are complying with its provisions.

4.9.2. Area 9 Requirements to Address Identified Needs

The Rule prohibits any “seller of scheduled air transportation, or of a tour or tour component that 

includes the price of scheduled air transportation” from making any post-purchase increases in 

the price of that air transportation, except in the case of an increase in a government-imposed tax 

or fee. The Rule also includes a provision that requires sellers to notify consumers of the 

potential for any price increases that could take place prior to the time that the services 

purchased have been paid in full.

The Department does not believe that air carriers, travel agencies, and tour operators currently 

attempt to impose post-purchase fare increases on prior purchasers of air transportation, but it 

lacks adequate information to confirm this assessment.

4.9.3. Benefits of Area 9 Requirements

Benefits from this provision accrue from the increased certainty of price (level of comfort) when 

purchasing packages include air travel. The benefit of this provision in addition to the value of 

the price increase is some level of comfort or certainty to the passenger. The estimated number 

of potentially impacted travelers was derived using data from two larger tour operator travel 

associations. For this analysis, a provisional estimate of incremental benefit was made by adding 

a premium to the value of search time and purchase time of travelers on package tours, as 

follows:
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Table 35 - Benefits Estimates for Requirement Area 9

2012 2012-2021

Number of Air Tour Package Travelers Who May 

Benefit from Prohibition of Post-Purchase Increase 21,135,680 240,076,987

Benefits of Certainty

Value of Time for Passenger (Personal Non-Traveling) $24.15 $24.15 

Premium on Certainty of Purchase 0.01 0.01 

Incremental Savings per Passenger per Hour 0.24 0.24 

Average Amount of Time Spent Purchasing Airfare 0.17 0.17 

Average Savings per Passenger $0.04 $0.04 

Monetized Benefits of Certainty $850,711 $9,663,099 

Total Benefits (millions) $0.85 9.66 

Total Component Benefits (millions) Discounted 7.15 

Some consumers will also benefit from increased security that tour package prices will not be 

increased; a benefit experienced during the entire period from time of travel purchase until the 

trip is completed. It is similar to an insurance value, the value to the consumer of knowing that 

even if fees increase, the consumer will not be liable for them. This benefit may also be 

considered in place of the benefit measured above.

In addition to the benefits for which quantitative estimates could be developed, a prohibition on 

post-purchase increases may well lead to an improvement in consumer good will toward noncarrier travel organizations such as ticket agents and tour operators.

The Department expressly solicited comments regarding the estimation of the appropriate 

premium on the value of air ticket purchasers’ time from the certainty that there will be no postpurchase price increase, as well as the estimation of the average amount of time to purchase 

ticket. In addition, the Department requested comments on other methodologies to value the 

benefit to consumers of knowing that their tour package price is a final price.

4.9.4. Cost of Area 9 Requirements

Most, if not all, domestic and foreign carriers are believed to be currently complying with this 

requirement. Some tour operators may not be following current Department guidelines that 

prohibit post-purchase price increases without prior disclosure to, and agreement by, customers 

at the time of purchase. In any event, it is unlikely that there are significant compliance costs 

associated with refraining from imposing post-purchase price increases on future purchasers of 

air transportation and travel packages.

However, tour operators will incur web programming and printed notice development costs to 

comply with the Final Rule requirement for pre-purchase disclosure of the possibility of price 

increases before the tour has been paid in full. The unit costs used to developing and displaying 

these disclosures are estimated as follows:
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Table 36 - Unit Costs for Requirement Area 9

Direct 

Labor 

Hours

Mean 

Wage 

Rate*

Full Cost 

per 

Hour**

Cost per 

Firm

Reprogram website flight confirmation pages

Large tour operators 20 $35.91 $103.00 $2,060

Small tour operators 10 $35.91 $103.00 $1,030

Develop printed disclosure form

Large tour operators 4 $22.99 $66.00 $264

Small tour operators 2 $22.99 $66.00 $132

*Rates for computer programmers and graphic designers, BLS Occupational Employment Statistics, May 

2009.

**Full cost includes benefits and other direct labor costs (43 percent of mean wage rate) and cost for time 

associated with supervisor/management review (100 percent of direct labor cost).

Based on these estimates and assumptions, costs incurred by affected tour operators to comply 

with Rule provisions in Requirement Area 9 are expected to be $1.1 million in 2012. No 

additional costs are expected to be incurred during the remainder of the entire 10-year period 

from 2012 through 2021.

Table 37 - Estimated Compliance Costs for Requirement Area 9

2012 only

Reprogramming websites to display disclosure form

Large tour operators (20+ employees) 267

Unit cost to reprogram websites, large tour operators $2,060

Small tour operators (< 20 employees) with online booking 190

Unit cost to reprogram websites, small tour operator $1,030

Total cost of reprogramming $745,720

Development of printed disclosure statements

Large tour operators (20+ employees) 267

Unit cost to develop disclosure statements (large firms) $264

Small tour operators (< 20 employees) 2,420

Unit cost to develop disclosure statements (small firms) $132

Total cost of revising print advertising $389,928

Total cost of revising websites and advertising $1,135,648

Total Compliance Costs (millions) $1.14

Discounted Total Compliance Costs (millions) $1.14
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4.10. Prompt Passenger Notification of Flight Status Changes

4.10.1. Current Requirements, Industry Practices, and Need for Additional 

Regulation

Passengers learn about changes in flight status (most importantly, delays or cancellations) 

through gate announcements, electronic displays at airports, checking carrier websites, and,

increasingly, automated notifications sent to cell phones or e-mail accounts. At present there are 

no regulatory requirements relating to the methods of provision, accuracy, or timeliness with 

which carriers inform passengers about flight status changes.

In particular, carriers are not currently required to offer passengers the option to subscribe to email or text messaging services that provide automatic notification of flight status changes. 

However, it is possible to sign up to receive these notifications on the websites of all but two

reporting carriers that currently sell tickets directly to the public. Flight status updates are also 

available from a number of third-party providers, including FlightStats.com, 4Info, and Google.

A review of some airline passenger forums and other online sources indicates that, in some 

instances, certain third-party notification services provide more timely updates on flight delays 

and cancellations than some of the carrier messaging systems.

Because of the increasingly widespread provision of real-time updates, passengers may 

reasonably expect that all of the channels from which they learn about flight status changes 

provide prompt updates as new information becomes available. In the absence of regulatory 

requirements, the speed of updates being posted could vary substantially among carriers or 

notification channels, and many consumers may not have sufficient information to assess which 

methods of notification provide relatively more prompt updates.

4.10.2. Area 10 Requirements to Address Identified Needs

The Rule requires that reporting carriers provide information on flight status changes to 

passengers through whatever means they use (electronic messaging services, website flight status 

tools, departure/arrival boards at airports, and gate attendant announcements) within 30 minutes 

of when that information either becomes available or should have become available to the 

carrier.

No information is currently available on the extent to which flight status updates are now 

disseminated to passengers by various communications channels within 30 minutes of new 

information becoming available.54

4.10.3. Benefits of Area 10 Requirements

Conceptually, being assured that carriers will promptly disseminate information about flight 

status changes may reduce the time and amount of effort that passengers expend to check on 

possible flight delays and cancellations; allow passengers (and those meeting arriving 

 54 The Department solicited comments on this issue in the NPRM but did not receive any information that could be 

used to quantify the impact of the Rule requirements in this area.
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passengers) to leave a smaller margin of safety in choosing what time to leave for the airport;

and help travelers feel more secure while traveling to the airport, knowing that they will be 

promptly updated if the status of their flight changes.

The Department currently does not have information on the extent to which reporting carriers 

currently comply with this requirement. Consequently, it is not possible to develop quantitative 

estimates of the benefits that passengers will receive from any changes in the promptness with 

which carriers notify travelers about flight status changes.

4.10.4. Cost of Area 10 Requirements

The Department does not have information on the extent to which reporting U.S. carriers 

currently comply with these requirements. Consequently, it is not possible to develop 

quantitative estimates of the compliance costs, if any, that will be incurred by the carriers to 

which these requirements will apply.

4.11. Limitations on Venue Provisions in Contracts of Carriage

4.11.1. Current Requirements, Industry Practices, and Need for Additional 

Regulation

There are currently no specific regulatory restrictions on the inclusion of venue provisions in 

carrier contracts of carriage. However, OST considers the inclusion of restrictive venue 

provisions in contracts of carriage to be an unfair and deceptive trade practice. The Aviation 

Enforcement Office has threatened enforcement action against carriers that have previously 

included restrictions precluding passengers from filing suit in jurisdictions other than those in 

which the carriers were headquartered. 

A February 2010 review of the contracts of carriage for the largest U.S. carriers indicated that 

only Spirit Airlines included a limitation on the venue for filing claims in its contract of carriage.

The absence of a prohibition on venue restrictions means that passengers traveling on the same 

flight with the same complaint or claim may face very different costs to pursue the matter, 

depending on their proximity to the carrier’s headquarters. In the case of Spirit Airlines, a 

passenger residing in Miami who had a claim arising from a round-trip flight to Los Angeles 

would need only make a short drive for a court appearance, while a passenger residing in 

southern California with the same type of claim on the same round-trip flight may need to incur 

substantially higher travel costs associated with pursuing a claim that must be filed in 

southeastern Florida.

4.11.2. Area 11 Requirements to Address Identified Needs

The Rule codifies current Department enforcement policy on permissible restrictions imposed by 

venue provisions in carrier contracts of carriage. Provisions that eliminate the right of consumers 
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to bring claims against the carrier in any competent court with jurisdiction are banned and will be 

treated by the Department as an unfair and deceptive trade practice.

4.11.3. Benefits of Area 11 Requirements

Some claimants will benefit from this provision by avoiding costs that they would otherwise 

have had to incur to travel to other States or to hire out-of-state lawyers. In addition, some 

lawsuits with merit may not be filed because the financial and time costs of filing in another 

State and potentially having to travel there for adjudication exceed the expected value of 

pursuing the claim. 

To the extent that legitimate lawsuits act as a deterrent to unlawful corporate behavior, it is 

possible that prohibiting venue restrictions will increase the effectiveness of this deterrent.

4.11.4. Cost of Area 11 Requirements

Air travelers can be expected to be somewhat more likely to pursue claims against carriers in the 

absence of venue restrictions in carrier contracts of carriage because they will be able to avoid 

the time and financial costs of out-of-state travel to adjudicate these claims. However, the 

Department does not possess adequate information to estimate the additional costs that will be 

incurred by carriers to defend any lawsuits that may be filed. Potential litigation cost savings to 

consumers and cost increases borne by carriers are included as unquantifiable costs of the Rule 

in the summary presented in Section 5.2 below.

5. Results and Discussion of the Benefit and Cost Analysis

The goal of a regulatory impact analysis is to estimate the incremental benefits and costs of 

adopting the Rule. The difference between benefits and costs quantified over the planning 

horizon lifecycle and discounted to the present represents the primary indicator of regulatory 

value.55

5.1. Overall Net Benefits of the Rule

A present value (PV) of net benefits greater than zero indicates that measured benefits 

exceed measured costs and that the regulation is likely to increase the general level of economic 

welfare accordingly. A PV of net benefits that is less than zero means that measured costs exceed 

measured benefits. This section summarizes the benefits, costs, and net benefits estimated for the 

requirements included in the Rule.

All quantified benefits and costs estimated for individual requirements were translated into 

current values for each year in the 10-year period beginning with calendar year 2012.

56

 55 This follows the guidance of OMB Circular A-4, which stipulates that this difference—the net present value 

(NPV)—should be regarded as the principal measure of value produced by a benefit-cost analysis. Further, 

Executive Order 12866 states that agencies should attempt to maximize the net benefits of their rulemakings, subject 

to statutory requirements.

In 

56 The affected parties are assumed to be fully compliant with the Rule by January 1, 2012. The expected effective 

data for all Rule requirements, with the exception of the full-fare advertising provision of Requirement Area 7, will 

be 60 days earlier. We have aligned the effective dates in the RIA to simplify the presentation and explanation of the 

benefit and cost estimates.
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accordance with OMB guidelines, a real discount rate of 7 percent is used in the primary analysis 

and is supplemented with overall estimates using a 3 percent discount rate.

The expected PV of passenger benefits from the requirements included in the Rule is estimated 

at $45.0 million using a 7 percent discount rate over the 10-year period of analysis. The expected 

present value of costs incurred by carriers and other sellers of air transportation to comply with 

these requirements is estimated at $30.7 million, discounted at 7 percent over the same 10-year 

period. The PV of net benefits for this 10-year period at a 7 percent discount rate is thus $14.3

million. Using a 3 percent discount rate, the PV of net benefits for 2012 through 2021 is 

estimated at $20.3 million.

Table 38 - Present Value of Net Benefits for the Rule, 2012-2021

PV (millions)

Monetized Benefits 10 Years, 7% discounting $45.0

10 Years, 3% discounting $53.5

Monetized Costs 10 Years, 7% discounting $30.7

10 Years, 3% discounting $33.2

Monetized Benefits 10 Years, 7% discounting $14.3

10 Years, 3% discounting $20.3

Table 39 provides estimates of the annualized dollar amounts of these monetized benefits and 

costs expressed in 2012 dollars at 7 percent and 3 percent discount rates. Annualized benefits of 

the Rule are estimated at $5.99 million at a 7 percent discount rate and $6.09 million at a 3 

percent discount rate over a 10-year period of analysis. Annualized costs of the Rule are 

estimated at $4.09 million at a 7 percent discount rate and $3.78 million at a 3 percent discount 

rate over a 10-year period of analysis.

Table 39 – Accounting Statement: Annualized Value of Rule Benefits and Costs, 2012-2021

2012 $millions

Monetized Benefits 10 Years, 7% discounting $5.99

10 Years, 3% discounting $6.09

Monetized Costs 10 Years, 7% discounting $4.09

10 Years, 3% discounting $3.78

Monetized Benefits 10 Years, 7% discounting $1.90

10 Years, 3% discounting $2.31
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5.2. Net Benefits of Specific Sets of Requirements

A requirement area-by-requirement area summary of benefit and cost estimates, as well as 

benefits and costs that were identified but could not be quantified, is provided in the table below.

Table 40 - Comparison of Requirement Area Benefits and Costs, 2012-2021

(Discounted at 7 percent annually to 2012 $ millions)

Area 1: Expansion of tarmac contingency plan requirements and 

extension of EAPP1 requirements to cover foreign carriers Total

Monetized Benefits $1.2

Monetized Costs $3.0

Monetized Net Benefits -$1.8

Additional unquantifiable benefits and costs that are directly or indirectly related to this 

rulemaking, which result in benefits that the Department has determined justify the costs:

Improved Management of Flight Delays

Decreased Anxiety with Regard to Flying

Reduced Stress among Delayed Passengers and Crew

Improved Overall Carrier Operations

Improved Customer Good Will toward Carriers

Additional Gate Return Costs Incurred by Carriers

Time Required for Airport/Terminal Authorities, CBP/TSA to Coordinate Plans

Area 2: Expanded tarmac delay reporting and application to foreign 

carriers Total

Monetized Benefits* $0.0

Monetized Costs $0.8

Monetized Net Benefits -$0.8

Additional unquantifiable benefits that are directly or indirectly related to this rulemaking, 

which result in benefits that the Department has determined justify the costs:

Increased Efficiency of US DOT Oversight and Enforcement Office Operations

Improved Management of Flight Delays

Area 3: Establishment of minimum standards for customer service plans 

(CSPs) and extension of EAPP1 Final Rule Areas to cover foreign carriers Total

Monetized Benefits $7.7

Monetized Costs $7.4

Monetized Net Benefits $0.3

Additional unquantifiable benefits that are directly or indirectly related to this rulemaking, 

which result in benefits that the Department has determined justify the costs:

Decreased Confusion and Uncertainty Regarding Department CSP Requirements

Improved Customer Service from Foreign Carrier Self-Auditing of Adherence to CSPs

Improved Customer Good Will toward Carriers

*Monetized estimates could not be developed from the information available on the record.
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Table 40 - Comparison of Requirement Area Benefits and Costs, 2012-2021

(Discounted at 7 percent annually to 2012 $ millions)

Area 4: Foreign carrier posting of tarmac delay contingency plans, CSPs, 

and contracts of carriage on websites Total

Monetized Benefits* $0.0

Monetized Costs $1.0

Monetized Net Benefits -$1.0

Additional unquantifiable benefits that are directly or indirectly related to this rulemaking, 

which result in benefits that the Department has determined justify the costs:

Decreased Occurrence of and Improved Resolution of Customer Complaints

Area 5: Extension of EAPP1 Final Rule Areas for carriers to respond to 

consumer complaints to cover foreign carriers Total

Monetized Benefits $0.0

Monetized Costs $1.9

Monetized Net Benefits -$1.9

Additional unquantifiable benefits that are directly or indirectly related to this rulemaking, 

which result in benefits that the Department has determined justify the costs:

Decreased Anger toward Carriers During Resolution of Complaints

Area 6: Changes in denied boarding compensation (DBC) requirements Total

Monetized Benefits* $0.0

Monetized Costs $1.0

Monetized Net Benefits -$1.0

Additional unquantifiable benefits and costs that are directly or indirectly related to this 

rulemaking, which result in benefits that the Department has determined justify the costs:

Decreased Confusion Regarding DBC Provisions

Decreased Resentment among Some Passengers Regarding Different Compensation Received

Programming and Training Costs for Foreign Carriers

Area 7: Full-fare advertising and prohibition on opt-out provisions Total

Monetized Benefits $29.0

Monetized Costs $6.8

Monetized Net Benefits $22.2

Additional unquantifiable benefits that are directly or indirectly related to this rulemaking, 

which result in benefits that the Department has determined justify the costs:

Travelers Less Likely to Mistakenly Purchase Unwanted Services and Amenities

Improved Customer Good Will toward Carriers

*Monetized estimates could not be developed from the information available on the record.
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Table 40 - Comparison of Requirement Area Benefits and Costs, 2012-2021

(Discounted at 7 percent annually to 2012 $ millions)

Area 8: Expanded disclosure of baggage and other optional fees Total

Monetized Benefits* $0.0

Monetized Costs $7.9

Monetized Net Benefits -$7.9

Additional unquantifiable benefits that are directly or indirectly related to this rulemaking, 

which result in benefits that the Department has determined justify the costs:

Decreased Time at Check-in

Improved Customer Good Will toward Carriers

Area 9: Limitations on post-purchase price increases Total

Monetized Benefits $7.2

Monetized Costs $1.1

Monetized Net Benefits $6.1

Additional unquantifiable benefits that are directly or indirectly related to this rulemaking, 

which result in benefits that the Department has determined justify the costs:

Improved Customer Good Will toward Carriers

Area 10: Prompt passenger notification of flight status changes Total

Monetized Benefits* $0.0

Monetized Costs* $0.0

Monetized Net Benefits $0.0

Additional unquantifiable benefits that are directly or indirectly related to this rulemaking, 

which result in benefits that the Department has determined justify the costs:

Greater Comfort and Certainty from Knowing that Information Will Be Available In Timely 

Manner

Area 11: Limitations on venue provisions in contracts of carriage Total

Monetized Benefits* $0.0

Monetized Costs* $0.0

Monetized Net Benefits $0.0

Additional unquantifiable benefits and costs that are directly or indirectly related to this 

rulemaking, which result in benefits that the Department has determined justify the costs:

Improved Customer Good Will toward Carriers

Reduced Costs for Consumers to File/Adjudicate Claims

Increased Costs for Carriers to Settle/Adjudicate Claims

Requirement Areas 1 -11 Total Total

Monetized Benefits $45.0

Monetized Costs $30.7

Monetized Net Benefits $14.3

*Monetized estimates could not be developed from the information available on the record.
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Substantial portions of the estimated benefits, costs, and net benefits from the Rule are 

attributable to the full-fare advertising provision of Requirement Area 7. The expected benefits 

estimated for this single provision total $29.0 million over the entire 10-year period from 2012

through 2021 using a discount rate of 7 percent. Benefits estimated for the full-fare advertising 

provision represent 64 percent of the total benefits estimated for the Rule provisions in all 11 

requirement areas during the period from 2012 through 2021.

The expected costs of complying with the full-fare advertising provision of Requirement 7 are 

estimated at $6.8 million. All of these costs will be incurred in 2012. Costs estimated for the fullfare advertising provision represent 22 percent of the total costs estimated for the Rule 

provisions in all 11 requirement areas during the period from 2011 through 2020.

None of the present values for quantified benefits or costs associated with any of the other 10 

requirements from 2012 through 2021 (discounted at 7 percent) are estimated to exceed $10 

million.

5.3. Cost-per-Passenger Analysis

Because there are potentially significant but unquantifiable benefits that may be realized by 

passengers as a result of these requirements, a cost-per-passenger analysis was conducted for 

each Requirement Area in which the benefits either could not be monetized or the monetized 

benefits were smaller than the estimated costs. The results of these calculations are as follows: 

Requirement Area 1: A cost-per-passenger analysis was conducted in which we divided the net 

cost of this component (total costs less estimated benefits of greater comfort due to access to 

food, water, and clean lavatories) by the number of passengers. The resulting figure represents 

the minimum level of the insurance value of these requirements that would be necessary for the 

benefits (including the components for which estimates could be developed) to exceed the 

estimated costs. Costs of the provisions included in Requirement Area 1 are estimated at $3.2

million over the entire 10-year period from 2012 through 2021. Dividing this total cost (less the 

measured benefits noted above) by the corresponding affected passenger volume of 887 million 

over those 10 years results in a threshold value of $0.003, or one-third of one cent. The benefits 

of the Rule requirements in this area will exceed the costs if air travelers would be willing to pay, 

on average, at least this amount per trip to be protected by these requirements.

Requirement Area 3: To estimate the minimum amount of consumers’ willingness to pay for 

this assurance that would bring the estimated benefits to an amount equal to costs, the total costs 

for this component of the Rule are divided by the total number of passengers. The resulting 

figure from this estimate is approximately $0.001, or one-tenth of one cent per passenger.

Requirement Area 4: To estimate the minimum amount of the value to consumers for this 

increased accessibility to customer service plan information (for measured benefits to equal 

cost), the total costs for this component of the Rule are divided by the total number of 

passengers. The resulting figure from this estimate is about $0.002, or one-fifth of one cent per 

passenger.
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Requirement Area 5: The net costs of the requirement (total costs, net of the monetized benefits 

from the more accessible information for filing complaints) were divided by the number of 

passengers on covered flights by international carriers. The resulting figure of less than one-third 

of one cent per passenger represents the minimum average value to consumers of this portion of 

the requirement that would cause total benefits to exceed estimated costs.

Requirement Area 8: To estimate the minimum amount of the value to consumers from greater 

disclosure of baggage and other optional fees, the total costs for this component of the Rule are 

divided by the total number of passengers on domestic and foreign carriers. The resulting figure 

from this estimate is about 3/100 of one cent per passenger.

5.4. Conclusion

This regulatory analysis indicates that adoption of the new requirements will result in projected 

benefits to the public that outweigh the estimated costs of the Rule.
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Appendix 1: Notes on Estimation of Benefits and Data Sources Used

Requirement Area 1: Tarmac Delay Plans for Foreign Carriers

The formula below illustrates the inputs and calculations used to estimate benefits for this 

provision. The abbreviation PAX is used for the word passenger(s).

(1) Passengers Who May Benefit= PAX using Foreign Carriers (Dom & Int’l), Segment

Overall Assumptions

− #PAX on Foreign Carriers already in Compliance

(2) Flights That May Benefit= No. of Foreign Carrier Flights (Dom & Int’l)

− #No. of Flights on Foreign Carriers already in Compliance

(3) Avg. No. of PAX Who May Benefit

Per Flight That May Benefit= Passengers Who May Benefit (1)

÷ Flights That May Benefit (2)

In-Scope Passengers (Arrivals) = Number of Flights w/ Long Tarmac Delays Two+ Hours

Benefit from Provision of Adequate Food, Drink, and Lavatory

on Foreign Carriers Not already Compliant

X % of 2+ Hr Delays that are Arrivals

X Avg. No. of PAX Who May Benefit per Potential

Flight (3)

In-Scope Passengers (Departures) = Number of Flights w/ Long Tarmac Delays Two+ Hours

on Non-Compliant Carriers

X % of 2+ Hr Delays that are Departures

X Avg. No. of PAX Who May Benefit per Potential

Flight (3)

Incremental Savings per Hour from

Food, Drink, Lavatory= Value of Time

X Premium of Comfort

Total Savings from Arrivals= In-Scope Passengers (Arrivals)

X Incremental Savings per Hour from Food, Drink, 

Lavatory

X Avg. Wait Time after 2 Hour Tarmac Delay (Arrivals)

Total Savings from Departures= In-Scope Passengers (Departures)

X Incremental Saving per Hour from Food, Drink, 

Lavatory

X Avg. Wait Time after 2 Hour Tarmac Delay (Depart)

Calculation of Benefits= Total Savings from Arrivals

+ Total Savings from Departures
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Requirement Area 7: Full-Fare Prices in Advertising

The formula below illustrates the inputs and calculations used to estimate benefits for this 

provision:

No. of Round Trip Purchases= No. of PAX Who Use U.S. Carriers (Dom & Int’l), 

Market

Overall Assumptions

X % of PAX Who Purchase Airfare via Internet

= No. of PAX who Purchase Airfare via the 

Internet

In-Scope Passengers= (1) Passengers Who May Benefit

Benefits to Passengers who already search for full fare information

X % of On-Line Customers Who Research 

Multiple Websites (one of which does not use 

full-fare advertising up-front)

÷ Average Number of People in Travel Party

Calculation of Benefits= In-Scope Passengers

X Avg. Extra Time Spent on Internet Searching 

for Taxes/Fees 

X Value of Time

In-Scope Passengers= Passengers Who May Benefit

Benefits to Passengers Who Do Not Currently Compare Full Fares (Elimination of Dead-Weight 

Loss)

X (1- On-Line Customers Who Research on 

Multiple Websites (one of which uses 

hidden fees)

X (1-% of PAX Who Use Website Already 

Showing Full Fare)

Decrease in Price= Weighted Average Price of Airfare

X % of Airfare that Make-Up Hidden Fees

Increase in Market Demand= In-Scope Passengers

X Decrease in Price

X Elasticity of Air Travel Demand

Calculation of Benefits= (In-Scope Passengers

X Decrease in Price)

+ (Increase in Market Demand

X 1⁄2

X Decrease in Price)
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Requirement Area 9: Prohibition on Post-Purchase Increase

The formula below illustrates the inputs and calculations used to estimate benefits for this 

provision:

In-Scope Passengers= Estimated number of travelers on tour packages

Overall Assumptions

Calculation of Benefits= In-Scope Passengers

Benefits of Uncertainty

X Value of Time

X Premium for Increased Comfort from Knowing 

Will Be Notified
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Source Notes

Forecast Average Growth of Airline Passenger Traffic per Year

Multiple Requirement Areas

Variable Description: This is the estimated annual growth in airline passenger traffic 

transported on domestic and international trips from and to airports in the U.S. forecast for the 

future. These rates are applied in the year 2011 and beyond.

Source: U.S. Department of Transportation, Federal Aviation Administration, Aerospace 

Forecast Fiscal Years 2010–2030.

Forecast Growth of Airline Passenger Traffic (per Year) on U.S. Airlines 

Year All Flights Domestic Flights International Flights

2010 0.5% 0.4% 0.9%

2011 and future 2.8% 2.6% 4.2%

Passenger Value of Time

Variable Description: This is the monetized value of time for air passengers. This estimate is 

used to calculate time savings and increased level of comfort.

Estimates of the value of time for air travelers while traveling are those prepared by the 

Department of Transportation for economic analyses. The value of time for air travelers while 

not traveling was estimated using earnings estimates used by the Department of Transportation 

for calculation of the above estimates as follows: a weighted average (by proportion of all 

travelers) of (1) 100 percent times the average hourly earnings of those traveling by air on 

business and (2) 50 percent times the average hourly earnings of those traveling by air for 

personal trips.

Source: U.S. Department of Transportation, “Revised Departmental Guidance Valuation of 

Travel Time in Economic Analysis”, 2003.

Value of Time

Lower 10% Limit Median Upper 10% Limit

Value of Time for Passenger 

(Personal Non-Traveling) $21.74 $24.15 $26.57 

Value of Time for Passenger 

(Average for All Travelers) $23.80 $28.60 $35.60 
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Value of Time Premiums for Differing Qualitative Levels of Service 

Variable Description: Requiring foreign carriers to set and adhere to limits on lengthy tarmac 

delays will shift part of the total trip time currently spent in less comfortable conditions (such as 

the fifth hour on a plane waiting on the tarmac) to time spent in more comfortable conditions (the 

fifth hour spent in the terminal). The value of the difference in comfort is by applying a value-ofservice premium to the base value of travel time saved (see above). Estimates for this comfort 

premium were developed from economic literature on transportation. Premiums have been 

derived from survey-based data that reflect travel time values which incorporate the quality 

waiting, walking, and transfer conditions. Level of service ratings were rider-determined and are 

used to determine the value of different levels. The values used are shown in the table below.

Source: Level of service estimates of value of travel time from Todd Litman, “Valuing Transit 

Service Quality Improvements,” the Victoria Transport Policy Institute, 2007.

Value of Time Premiums for Differing Qualitative Levels of Service

Category LOS A - C LOS D LOS E LOS F

Ratio of A-C 

to D (Proxy 

for 2-5 Hours 

Delay)

Ratio of A-C 

to E (Proxy 

for >5 Hours 

Delay)

Adult transit passenger -

seated 35% 47% 58% 70% 1.34 

 

1.68 

Adult transit passenger -

standing 50% 67% 83% 100% 1.34 

 

1.68 

Note: LOS refers to level-of-service and incorporates qualitative factors such as comfort, convenience, and reliability for various 

modes’ waiting, walking, and transfer conditions. LOS A refers to the best conditions and F to the worst. The difference in the 

value of time between the average for LOS rating A-C and LOS rating D is used to estimate a premium for the greater comfort 

from access to food, water and clean lavatory facilities. The difference in the value of time between the average for LOS rating 

A-C and LOS rating E for transit passengers is used to estimate a premium for the greater comfort of waiting in the terminal 

instead on in the plane on the tarmac.57

Number of Flights and Passengers with Extended Tarmac Delays

Requirement Area 1

Variable Description: The number of flights and passengers for foreign carriers by amount of 

tarmac delay time is estimated using the distribution of flights by tarmac delay for domestic 

“reporting carriers” (those with 1 percent or more of scheduled passenger service) since foreign 

carriers do file the necessary detailed statistics with the Federal Government. To estimate delays, 

the ratios of each delay, by length, for reporting domestic carriers were used on the foreign 

carrier flight population to estimate number of delays at each time interval. 

Source: Econometrica tabulations of BTS Form 234 data.

 57 These premiums are similar to premiums estimated for the value of sitting instead of standing during a transit trip, 

which have ranged from 20 percent to 50 percent. See Marcus von Wartburg and W.G. Waters II, “Chapter 2: 

Congestion Externalities and the Value of Travel Time Savings,” in Towards Estimating the Social and 

Environmental Costs of Transportation in Canada, Anming Khang, et al eds., Center for Transportation Studies, 

University of British Columbia, August 2004 and P.B. Goodwin, “Human Effort and the Value of Travel Time,”

Journal of Transport Economics and Policy, January 1976.
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Cost of Posting a Contingency Plan Dealing with Flight Delays on an Airline’s Website

Variable Description: This is the cost of posting a contingency plan dealing with flight delays 

on an airline website.

Source: Estimate provided by subject matter experts among HDR IT staff compared against 

figures provided by reporting carriers to modify computer systems to provide additional 

reporting data to BTS regarding cancellations, diversions, and gate returns, as reported in 

Regulatory Evaluation on Revision or Airline Service Quality Performance Reports, US 

Department of Transportation, Docket No OST 2007-28522 for reasonableness.

Cost of Posting a Contingency Plan Dealing with Flight Delays on an Airline’s Website

Source Lower 10% Limit Median Upper 10% Limit

Regulatory Evaluation on Revision 

of Airline Service Quality 

Performance Reports* $10,000 $22,500* $30,000

Subject Matter Expert $15,000 $22,500 $30,000

In Use $15,000 $22,500 $30,000

*Median estimated based upon high and low.

Cost of an Average Airline Meal

Variable Description: This is the average national cost of an airline meal per passenger in the 

U.S. in 2007.

Data Sources: Karen Aho, “The Death of the Airline Meal,” MSN Money, Feb. 22, 2008.

Cost of an Average Airline Meal per Passenger (2009 Dollars)

Cost of Deplaning Passengers (per Passenger) 

Variable Description: This is the cost of deplaning passengers on a per passenger basis. The 

cost is what an airport would charge airlines to deplane passengers. This is assumed to be $1.37 

per passenger (in 2008 dollars). This is the fee that Atlanta International Airport charged airlines 

to deplane passengers.

Source: Paul Meyer, Operations Department, Atlanta International Airport. 

Lower 10% Limit Median Upper 10% Limit

Cost of Average Airline Meal Per 

Passenger $2.65 $3.71 $4.77
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Requirement Areas 3 and 5

Number of Air Carrier Complaints

Variable Description: This is the annual number of complaints filed with an air carrier. 

Complaints can relate to flight problems, oversales, customer service, lost baggage, etc. Baseline 

figures are taken from data compiled by the U.S. Department of Transportation. However,

because carriers receive many more complaints than are filed with the U.S. Department of 

Transportation, a complaint “multiplier” is used to calculate the actual number of “ground-level” 

complaints received by carriers from passengers.

Source: U.S. Department of Transportation, Office of Aviation Enforcement and Proceedings, 

“Air Travel Consumer Report”, January 2008–December 2008; Final Report on Airline 

Customer Service Commitment,” Office of the Inspector General, U.S. Department of 

Transportation, report AV-2001-020, February 12, 2001, and “Air Travel Consumer Report, U.S. 

Department of Transportation.

2008 Filed Complaints

Lower 10% Limit Median Upper 10% Limit

Number of Complaints (Both U.S. 

and Foreign Carriers) 10,473 9,426 11,520

Number of Complaints (Foreign 

Carriers) 1,275 1,148 1,403

Complaint Multiplier (# of 

Complaints not filed actually 

received by Carriers)* 61 61 61

* Multiplier Source: “Final Report on Airline Customer Service Commitment,” Office of the Inspector General, U.S.

Department of Transportation, report AV-2001-020, February 12, 2001, and “Air Travel Consumer Report, U.S. 

Department of Transportation.

Factor to Adjust Number of Annual Complaints to Covered Carriers that Do Not Already 

Self-Audit Adherence to Customer Service Plans

Variable Description: This the average number of complaints received by covered carriers that 

are not already self-auditing adherence to customer service plans, which is measured using 

complaint data reported for domestic carriers as proxy for foreign carriers. The DOT Air Travel 

Consumer Reports lists complaints received by the Department, but not complaints directly to 

the carriers. The DOT Inspector General found in 2001 that it received 1,352 complaints for the 

10 major airlines, but that those carriers received 82,587 complaints, or 61 times the number of 

complaints recorded by DOT. To arrive at a total number of complaints for covered carriers, the 

number of complaints in DOT Air Travel Consumer Reports for covered carriers that are not 

already self-auditing adherence to customer service plans was multiplied by 61.

Source: “Final Report on Airline Customer Service Commitment,” Office of the Inspector 

General, US Department of Transportation, report AV-2001-020, February 12, 2001, and “Air 

Travel Consumer Report, U.S. Department of Transportation. 
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Change in Complaints Due to Self Auditing of Customer Service Plans 

Variable Description: This variable measures the decrease in customer complaints that would 

occur due to self-auditing of adherence to customer plans. For those four carriers that have 

already implemented self audits (Alaska in 2000, Continental in 2001, Northwest in 1999, 

Southwest in 1999), the average change in complaints in the 2 years following implementation 

was calculated to be –39 percent. During those same periods, the change in complaints to carriers 

that did not self audit was calculated to be –19 percent, a difference of 20 percentage points from 

self-auditing carriers. Under the conservative assumption that those carriers most likely to 

benefit from self audits of customer service plans were the first to implement them, remaining 

carriers that will now implement self audits as a result of the Final Rule are expected to realize 

an improvement in complaint rates equal to half of difference in comparative complaint rates 

noted above, i.e., a 10 percent decrease in complaints.

Source: Calculations based on data from DOT Air Travel Consumer Report, 1998 through 2007. 

Information on self auditing of customer service plans from DOT and e-mail communication.

Summary of Annual Costs for Self-Auditing Service for Reporting and Non-Reporting 

Carriers

Variable Description: This is the annual cost to reporting carriers of self-auditing additional 

service (customer complaint) calls stemming from the implementation of the new regulations. 

The mean annual salary of a customer service representative in 2007, according to the BLS, was 

$31,040. The Department of Homeland Security 2006 Cost-Benefit Analysis Guidebook58

In addition to the costs of the customer representative, it is assumed that the airlines also hire a 

contractor to test the quality of the customer service representatives. Northwest contracted with a 

third party to place “mystery calls” to five reservations centers to test DOT mandates and other 

compliance issues. The Northwest Airlines customer service plan described that this service is 

extrapolated to include 100 calls per center per quarter (500 calls per quarter) to test their 

customer service plan compliance and adjust training/coaching accordingly. Extrapolating 

further, 2,000 external audit calls need to be made each year. Each of these is assumed to cost 

$15 per hour and last an average of 30 minutes. The total annual cost of this external audit 

process is estimated at $15,000 per airline.

recommends using a mark-up of 32.8 percent to wages to take into account benefits received 

over and above wages.

Because reporting carriers have much larger operations, on average, than non-reporting carriers, 

it is assumed that the implementation costs for non-reporting carriers would be proportionally 

smaller. The average cost for non-reporting carriers to self-audit is at 11 percent of that for 

reporting carriers, reflecting the portion of passengers on non-reporting carrier flights, or $6,248.

Data Sources: Mean starting salary of customer service representative was from the Bureau of 

Labor Statistic’s May 2007 National Occupational Employment and Wage Estimates; Benefits 

 58 Page 15.
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multiplier from U.S. Department of Homeland Security, 2006 Cost-Benefit Analysis Guidebook; 

Data regarding Northwest external audit costs a subject matter expert. 

Annual Costs to Airlines of Self-Auditing Customer Complaint Calls

Elasticity of Demand for Complaining

Variable Description: This figure (1.0741) estimates the change in number of complaints due to 

a unit change in the cost of complaining.

Source: David Morris, “The Cost of Complaining and the Efficiency of Consumer Complaints 

Agencies,” Journal of Consumer Studies and Home Economics, 1980. 

Cost of Complaining

Variable Description: These are the elements that comprise the cost incurred by the passenger 

to file a complaint. In the absence of information breaking down complaints to carrier by method 

used to file, one third of complaints are assumed to be submitted online, one third via mail, and 

one third via phone. Cost components independent of time include: for writing a letter, $0.42 for 

a stamp and $.10 for paper and envelope; for making a phone call, $0.15 phone charge; for emailing a complaint, it was assumed that the incremental cost for those choosing the method 

would be $0. The value of a consumer’s time is assumed at the average hourly wage rate, and the 

amount of time required to prepare and file a complaint varies from 10 to 30 minutes.

Cost

Customer Service Cost $41,798 

Mystery Calling Contract $15,000 

Total $56,798 

Source: Bureau of Labor Statistics’ May 2007 National Occupational Employment and Wage Estimates; Benefits 

multiplier from U.S. Department of Homeland Security, 2006 Cost-Benefit Analysis Guidebook; Data regarding 

Northwest external audit costs from subject matter expert.
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Value of Time to Prepare and File a Complaint

Cost Component

Lower 10% 

Limit

(10 Minutes 

Spent)

Median

(20 Minutes 

Spent)

Upper 10% 

Limit

(30 Minutes 

Spent)

Materials Cost

% of 

complaints

Materials cost of letter writing:

Stamp $ 0.42 

paper and envelope $ 0.10 

33% $ 0.17 $ 0.17 $ 0.17 

Equipment cost of calling:

Phone charge $ 0.15 

33% $ 0.05 $ 0.05 $ 0.05 

Additional equipment/materials cost of 

going online:

$ - 33% $ - $ - $ - 

Time Spent 

 (variable from 10 to 30 minutes)

Value of Time for Air 

Passengers

$28.60 per hour $9.53 $ 4.77 $14.30

Total $ 9.76 $ 4.99 $ 14.52 

Source: Bureau of Labor Statistics; subject matter experts.

Cost to Airlines of Providing Information to Travelers on how to File a Complaint on a 

Website or at Check-In Counter for Reporting Carriers and Non-Reporting Carriers (Also 

used as proxy for Cost to Airlines of Implementing a Customer Service Plan for Reporting 

Carriers and Non-Reporting Carriers)

Variable Description: The cost of modifying a website for reporting carriers would be, based on 

subject matter expert opinion, between $10,000 and $60,000 (with $35,000 the most likely cost 

and a 90 percent probability of the actual number falling within the $10,000 to $60,000 range).

The cost for reporting carriers to modify counters to provide information to customers on how to 

file complaints is estimated at $6,347. At OfficeDepot.com, on May 1, 2008, an acrylic engraved 

wall sign cost $13.99. The national median salary for a building and grounds maintenance 

employee, according to the BLS, was $9.75 in 2006. Inflating this to 2008 terms (using national 

Employment Cost Index from the Bureau of Labor Statistics) it becomes $10.26. According to 

the FAA “Calendar Year 2006 Passenger Activity Commercial Service Airports in U.S.,” there 

were 566 airports in the United States that handled passenger flights. If it is assumed that each 

airport, on average, requires 20 signs and that it takes a maintenance employee 1 hour to put each 

sign up, sign costs would be $158,367 and labor costs $114,558 for a grand total of $272,925. In 

2007, there were 43 air carriers in the United States with gross revenues of $20 million or higher. 

Dividing the total costs of $272,925 by 43 carriers, results in a mean airline cost of $6,347.

It is assumed that, since reporting carriers have much larger operations, on average, than nonreporting carriers, the implementation costs for non-reporting carriers would be proportionally 
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smaller. Websites for some carriers could be updated with a simple link that would require less 

than a day of an experienced computer programmer’s time (at a median hourly wage in 2008 of 

$33.47 an hour). The average cost for non-reporting carriers is therefore assumed to be lower 

than for reporting carriers and is estimated at 11 percent of that for reporting carriers, reflecting 

the portion of passengers on non-reporting carrier flights, or $4,261.

This cost to provide information to customers is also used as a proxy to estimate the costs of 

implementing a customer service plan for reporting carriers and non-reporting carriers (at the 

same ratios as above).

Source: Estimate for website modification provided by reporting carriers to modify computer 

systems to provide data for additional reporting requirements per Final Rule on Airline Service 

Quality Performance Reports used as a proxy. This is also used as a proxy for cost to implement 

the customer service plan.59

Additional Costs to Provide a Response to all Complaints within 60 Days Which 

Specifically Address Individual Passenger Complaints 

Variable Description: This is the incremental cost, to airlines, of providing a response to a 

passenger complaint within a 60 day period from which the complaint was lodged. These 

responses need not be resolutions to the problems raised, but rather a targeted acknowledgement 

of the type/purpose of the complaint. It is assumed that carriers will be able to develop response 

templates which will streamline this process. This cost was assumed to be equal to the additional 

labor cost of handling a complaint, estimated at $1.34, when compared to a standard

acknowledgement that a communication was received (for example, the difference between 

sending a letter that the complaint regarding a baggage delay is being examined versus sending a 

standard response simply thanking the customer for their letter). This number was estimated by 

finding the hourly wage of “Office and Administrative Support Workers” in the United States 

(median of $13.08 per hour in 2006 dollars), inflating it to 2008 dollars ($13.60), and adding 

benefits of 35 percent of wages ($18.10). Assuming that a standard, targeted response to an 

average complaint can be sent in 6 additional minutes yields a cost of $1.85 per hour. 

Source: Office and Administrative Support Worker wage data from the Bureau of Labor 

Statistics, 2006 Occupational Employment Survey; Benefits for national airlines were calculated 

based on data from Aviation Specialists Group, Inc., Economic Values for FAA Investment and 

Regulatory Decisions, A Guide, Contract No. DFTA 01-02-C00200, p. 4-4. This report was 

prepared for the Federal Aviations Administration’s Office of Aviation Policy and Plans, U.S. 

Federal Aviation Administration.

 59 Reported in Draft Regulatory Evaluation on Revision of Airline Service Quality Performance Reports, U.S. 

Department of Transportation, Docket No. OST 2007-28522, November 2007.
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Average Travel Trip Party Size

Requirement Area 7

Variable Description: This figure is the estimated average number of people per group or trip 

on a commercial airline flight. This variable may also be interpreted as the average number of 

tickets purchased per trip or transaction. The average trip party size for flight travel is estimated 

at 1.4.

Source: Air Transport Association of America, comments submitted on regards to the Notice of 

Proposed Rulemaking on Enhancing Airline Passenger Protections II, citing the Travel Industry 

Association of America (2007).

Average Price of Airfare

Variable Description: Estimate of average prices for domestic and international flights. A 

weighted average of the two estimates is calculated to arrive at an all-purpose average price of 

airfare.

Source: American Express Business Travel, “Travel Fares and Rates Approaching PreRecession Levels: American Express Business Travel Monitor Reveals Pricing Trends Across 

North America,” December 2010. 

Average Price of Airfares

Median

Average Price of Airfare (Domestic) $228 

Average Price of Airfare (International) $1,781 

Percentage of Passengers Purchasing Airfare Online

Variable Description: Estimate of the proportion of passengers purchasing airfares on websites.

Source: Air Transport Association (ATA), comments submitted on regards to the Notice of 

Proposed Rulemaking on Enhancing Airline Passenger Protections II, citing ATA survey of 

2008.

Proportion of Online Consumers for Flight Travel

Median

Percentage of Passengers Who Purchase Airfare on Carrier Websites 52%
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Elasticity of Air Travel Demand

Variable Description: This elasticity estimates the percentage change in demand in relation to a 

change in price. The elasticity is applied to current demand in response to up-front advertising of 

hidden fees. Since this is a revelation in prices rather than an increase, a low elasticity is used to 

represent this change. An elasticity of –0.4 is used in the analysis.

Source: International Air Transport Association, “Air Travel Demand,” 2009.

Number of Passengers Purchasing Tour Packages

Requirement Area 9

Variable Description: This figure is the estimated number of people who travel in a tour 

package with an air component. The estimate was derived by combining estimates of travelers on 

tour packages by members of two trade associations, NTA (9 million for 2009) and United States 

Tour Operators Association, USTOA (11 million).

Source: For NTA, telephone conversation with NTA February 4, 2011; for USTOA, Web page 

accessed on February 4, 2011, http://www.ustoa.com/2009/WhoWeAre.cfm.
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Appendix 2: Estimates of Additional Benefits for Requirement Area 7

As noted in the discussion regarding benefits to upfront full-fare advertising (section 4.7.3), there 

are other potential beneficiaries in addition to those noted in the main analysis (the Full-Fare 

Comparison Shoppers). Some passengers may end up purchasing tickets they otherwise would 

not have if the first fare they had seen on the online purchase site was a full fare, instead of one 

that omitted some of the required taxes and fees. Several studies and experiments have

demonstrated that partitioned pricing (the separating of a price into its components) can lead to 

increases in consumer demand.60 Some have explicitly looked at the impact of the timing that the 

different pieces of pricing information are revealed in purchasing situation, which reflects the 

situation to be assessed here – i.e., assessing the impact of presenting consumers with a lower, 

incomplete price as they begin their transaction and presenting the full price only at the moment 

of payment. While the reasons behind this effect are not fully understood, it has been theorized 

that people may “anchor” onto the first price they see, make a decision to purchase based on that 

price, and then have difficulty letting go of that decision. Industry commenters to the rule 

strongly disagreed with this theoretical assumption.

One frequently cited study used a field experiment to compare purchases at grocery stores when 

prices were posted with and without sales tax and found that presenting price tags including 

taxes on the shelf (i.e., when first encountering the opportunity to select the product for 

purchase) led to an overall decrease in purchases by 8 percent.

61 Although not a study of how the 

timing of revealing pricing information impacts purchasing decisions online, the study explicitly 

compared (at different establishments and for different products) how presenting a price with 

taxes when the consumer first “reaches” for the product versus revealing taxes at check-out leads 

to more purchases. 

Other studies have examined eBay purchases online in an attempt to assess how consumers 

incorporate shipping and handling fees in that online medium. Shipping and handling fees on 

eBay are set by the seller and vary greatly even between identical products, and some research 

has found that consumers are less sensitive to shipping costs than to bidding prices.62

If revealing full-prices later in the purchasing process leads to more purchases than if the full 

price had not been seen immediately, most economists interpret this effect as purchasers making 

 60 Deborah Shenck’ “Exploiting the Salience Boas in Designing Taxes,” (New York University Law and Economics 

Working Papers, Paper 233, 2010) has an informative and extensive review of past work in this area. See also 

Morwitz, Vicki, Greenleaf, Eric, Shalev, Edith and Johnson, Eric J., The Price Does Not Include Additional Taxes, 

Fees, and Surcharges: A Review of Research on Partitioned Pricing (February 26, 2009). Available at SSRN: 

http://ssrn.com/abstract=1350004. Note, though that some studies have found that partitioned pricing can also lead 

to negative brand recognition and may hurt sales in the future, if the fees are perceived to be excessive and within 

the seller’s ability to control. This differs somewhat from the situation here, since the separate portions of the price 

are taxes imposed by state, local and federal governments (as opposed to shipping fees, etc.). 61 Raj Chety, Adam Looney and Kory Kroft, “Salience and Taxation: Theory and Evidence,” American Economic 

Review, 2009.

62 See T. Hossain and J. Morgan, “Plus Shipping and Handling: Revenue (Non) Equivalence in Field Experiments 

on Ebay,” Advances in Economic Analysis and Policy, 2006, as noted in David Gamage and Darien Shanske, “On 

Tax Salience: Market-Salience and Political-Salience.” taxprof.typepad.com/files/gamage-1.pdf
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“sub-optimal” choices—i.e., purchasing air travel at a price higher than they otherwise would 

have. In such situations, there is what economists would call a “dead-weight loss” which reflects 

the difference between what consumers would have purchased if they had seen the full-fare from 

the beginning and what they did purchase. This loss is calculated using average prices, estimates 

of consumer sensitivity to differences in airfares, and the newly revealed fees and taxes. 

The grocery store analysis noted above measured an 8 percent decline in demand when posting 

prices that included taxes of 7.5 percent. The analysis used here is more conservative and uses a 

national elasticity for air travel of -0.4 (estimated by the International Air Transport Association) 

together with an average ticket price of approximately $307 and the value of those fees which are 

newly required to be included when prices are first posted (estimated at 5 percent).63

 63 Derived from data in the BTS American Travel Survey; see source notes in the Appendix for greater detail.

This 

methodology leads to an estimated 2 percent decline in demand, which is one fourth of the 

decline noted in the groceries study, while the ratio of the revealed taxes is two thirds (7.5 

percent versus 5 percent). The resulting benefit is estimated to be approximately $27 million 

total over 10 years.
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Table - Illustration of Benefits Estimation of Avoided Deadweight Loss

2012 2012-2021

Tickets for Domestic Flights Purchased Online 177,239,752 2,439,667,765

Average Travel Trip Party Size 1.4 1.4 

Purchasers of Tickets on Websites 126,599,823 1,742,619,832

Percent of That Are Full-Fare Comparison Shoppers 2% 2%

Purchasers Who Are Not Full-Fare Comparison 

Shoppers 124,067,827 1,707,767,435 

Percentage of Purchasers Using Websites Already 

Presenting Full Fare 90% 90%

Purchasers Who May Benefit from Up-Front 

Posting of Full-Fares During Purchasing 12,406,783 170,776,744 

Taxes Now Included in Full-Fare as Percent of Total 

Price 5% 5%

Average Price of Airfare (Domestic) $228 $228 

Average Price of Business Airfare (International) $1,781 $1,781 

Adjusted (by half) Average Price of Business Airfare 

(International) $891 $891 

Percentage of Passengers in U.S. Carrier Flights that 

are Domestic Flights 88% 88%

Weight Average Airfare for Passengers of U.S. 

Domestic Carriers $307 $308 

Revelation in Price ("Increase in Price") $15 $15 

National Level Elasticity for Air Travel Demand (0.40) (0.40)

Percentage Decrease in Demand -2% -2%

Change in Purchases 347,390 4,781,749 

Discounted Monetized Benefits from Elimination 

of Dead Weight Loss $2,668,678 $27,061,521