Order 2013-8-27

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

On the Thirtieth day of August, 2013

United Airlines, Inc. Docket OST 2013-0004

Served August 30, 2013

Violations of 14 CFR Parts 234, 250, 259, and

374, and 49 U.S.C. §§ 41708, 41712, and 41721

CONSENT ORDER

This consent order concerns the failure of United Airlines, Inc., (United) to timely 

process consumer refund requests, as required by the Consumer Credit Protection Act 

and Regulation Z of the Board of Governors of the Federal Reserve System, 15 U.S.C. 

§§ 1601-1693r and 12 CFR Part 226 (Regulation Z), and the related implementing

requirement in 14 CFR Part 374. This consent order also addresses United’s failure to 

file accurate mishandled-baggage reports as required by 14 CFR 234.6 and oversales data 

as required by 14 CFR 250.10, as well as United’s failure to file in a timely manner 

reports of incidents involving animals during air transport as required by 14 CFR 234.13. 

Failure to comply with the reporting requirements in sections 234.6 and 250.10 also 

constitute violations of 49 U.S.C. § 41708. Violations of 14 CFR 234.13 also constitute 

violations of 49 U.S.C. § 41721. Additionally, violations of Part 234, Part 250, Part 259, 

and Part 374, as well as 49 U.S.C. §§ 41708 and 41721, are unfair and deceptive 

practices in violation of 49 U.S.C. § 41712. This order directs United to cease and desist 

from future similar violations and assesses a compromise civil penalty of $350,000 in 

connection with the refunding violations.

Refund Requests Involving Airline Tickets

Regulation Z of the Board of Governors of the Federal Reserve System, 15 U.S.C. 

§§ 1601-1693r and 12 CFR Part 226 (Regulation Z) and the related Department of 

Transportation (Department) implementing rule, 14 CFR Part 374, establishes that, with 

respect to refund requests involving airline tickets purchased with a credit card, a 

creditor—here United—must transmit a credit statement for a passenger refund to the 

credit card issuer within seven business days of receipt of full documentation for the 

refund requested. In addition, through its enforcement case precedent, the Department 

requires that, with respect to tickets purchased with cash or similar forms of payment, an 

airline must provide a refund within 20 business days of receipt of full documentation of 
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such a request.1 Furthermore, pursuant to 14 CFR 259.5, a covered carrier must adopt 

and adhere to a customer service plan that includes a commitment to provide prompt 

refunds when ticket refunds are due. Failure to process a refund within the stipulated 

time periods violates section 259.5 and Part 374 and constitutes an unfair and deceptive 

practice and unfair method of competition in violation of 49 U.S.C. § 41712.

During an on-site regulatory compliance inspection at United’s Chicago headquarters in 

August 2012, the Office of Aviation Enforcement and Proceedings (Enforcement Office) 

found substantial evidence indicating noncompliance with 14 CFR 259.5 and 14 CFR 

Part 374 by the carrier. Specifically, between March and May 2012, United failed to 

process over 9,000 refund requests in a timely manner. By failing to timely process 

refunds for air transportation, as required by Regulation Z and the Department’s 

enforcement case precedent, United violated 14 CFR Part 374 and engaged in an unfair 

and deceptive practice in violation of 49 U.S.C. § 41712.

Furthermore, pursuant to 14 CFR 259.5, United adopted a customer commitment and 

made it available on its website, www.united.com. In its customer commitment, United 

pledged that for purchases made with a credit card, it would submit the refund requests to 

the credit card issuer within seven business days of receiving a complete request for 

refund, and for purchases made with cash, check, or other forms of payment, it would

issue the refund within 20 business days of receipt of the completed refund request. 

United’s failure to adhere to this commitment violates 14 CFR 259.5(b)(5) and Part 374

and 49 U.S.C. § 41712.

Reporting Requirements

14 CFR 234.6 requires reporting carriers2 to report monthly with the Department on a 

domestic system basis the total number of passengers enplaned systemwide, and the total 

number of mishandled-baggage reports filed with the carrier. 14 CFR 234.13 requires 

any air carriers that provide scheduled passenger air transportation to submit a report to 

the Aviation Consumer Protection Division on any incidents involving the loss, injury, or 

death of an animal during air transportation within 15 days of the end of the month during 

which the incident occurred. 14 CFR 250.10 requires reporting carriers to file quarterly 

reports with the Department’s Bureau of Transportation Statistics (BTS) listing, inter 

alia, the number of passengers denied boarding involuntarily and the number of 

passengers who volunteered to give up their seats. These numbers are then published and 

made available to the public in the Department’s monthly Air Travel Consumer Report 

(ATCR), which ranks carriers according to their rate of mishandled-baggage reports per 

 1

 See Northwest Airlines, Inc., Order 87-11-33 (November 16, 1987).

2

 Reporting carrier means an air carrier certificated under 49 U.S.C. § 41102 that accounted for at least one 

percent of domestic scheduled-passenger revenues in the 12 months ending March 31 of each year. 

14 CFR 234.2. 
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1,000 passengers3 and their rate of involuntarily denied boardings.4 ATCR data are used 

by members of the traveling public when choosing among transportation options and by 

carriers as a basis for advertising materials regarding the quality of their service 

compared to other carriers. Therefore, it is imperative that the ATCR data be accurate. 

Violations of sections 234.6 and 250.10 also constitute violations of 49 U.S.C. § 41708, 

which authorizes the Department to require airlines to file reports in the form prescribed 

by the Department, and violations of section 234.13 also constitute violations of 

49 U.S.C. § 41721. Violations of sections 234.6, 234.13, and 250.10 constitute an unfair 

and deceptive practice and unfair method of competition in violation of 49 U.S.C. 

§ 41712.

United disclosed to the Department that in 2011, it filed inaccurate mishandled baggage 

and oversales reports. Specifically, with respect to the mishandled baggage reports, 

United explained that between January and October 2011, it underreported the number of 

mishandled baggage claims it received from passengers. Regarding the oversales reports, 

United revealed that in each quarter of 2011, it underreported the number of passengers 

who were voluntarily and involuntarily denied boarding on oversold flights and the total 

number of enplanements. As a result, United’s rankings in both areas in the ATCR were 

inflated. By filing with the Department inaccurate mishandled-baggage and oversales 

reports, United violated 14 CFR 234.6, 14 CFR 250.10, and 49 U.S.C. §§ 41708 and 

41712. 

Additionally, in 2012 and 2013, United failed to submit a number of the reports of 

incidents involving animals during air transport in a timely manner. By failing to timely 

file reports on incidents involving the loss, injury, or death of an animal during air 

transportation, United violated 14 CFR 234.13 and 49 U.S.C. §§ 41712 and 41721.

We note that United, on its own initiative, divulged its reporting errors to the Department, 

and took proactive measures to correct the reports and, in the case of the animals incident 

reports, to ensure timely reporting in the future. Accordingly, although the carrier is 

directed by this order to cease and desist from future similar violations, no civil penalty is 

assessed for the reporting violations discussed above.

Mitigation

In mitigation, United states that it takes seriously its compliance obligations under 

Regulation Z and has dedicated the necessary resources for compliance. United explains 

that the former United Air Lines, Inc., (“UAL”) and the former Continental Airlines, Inc.,

(“CAL”) transitioned to a single passenger service system, on March 3, 2012. United 

 3

 A carrier’s rate of mishandled baggage is based on the total number of reports each carrier received from 

passengers concerning lost, damaged, delayed, or pilfered baggage and its domestic passenger 

enplanements over that period. Air Travel Consumer Report, available at http://www.dot.gov/airconsumer. 

4

 A carrier’s rate of involuntary denied boarding is computed using its total quarterly number of 

involuntary denied boardings and its passenger enplanements over that period. Air Travel Consumer 

Report, available at http://www.dot.gov/airconsumer. 
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further explains that this process required that all flights of UAL and CAL be marketed 

under a single airline designator code, that all reservations be housed in a single 

reservation system necessitating the migration of all UAL ticket transactions to that 

system, and that a single revenue accounting system be created. United notes that this 

migration was the largest undertaking of its kind in the history of the airline industry. 

United states that in connection with this process, it experienced an unanticipated backlog and a substantial increase in the number of refund requests, managed by employees 

working with new systems and resulting in some unforeseeable anomalies that caused a 

temporary inability to process refunds in a timely manner.

The carrier states that to address the refund back-log and the increased number of refund 

requests, United invested significantly in overtime, temporary, and contract labor, 

providing extensive training on the joint accounting systems. United states further that it 

also implemented, on a temporary basis, a more expedited process of validating and 

approving certain refund claims to help to speed their processing.

Decision

The Enforcement Office has carefully considered the information provided by United, but 

continues to believe that enforcement action is warranted. The Enforcement Office and 

United have reached a settlement of this matter in order to avoid litigation. Without 

admitting or denying the violations described above, United consents to the issuance of 

this order to cease and desist from future similar violations of 14 CFR 234.6, 14 CFR 

234.13, 14 CFR 250.10, 14 CFR 259.5(b)(5), 14 CFR Part 374, and 49 U.S.C. §§ 41708,

41712, and 41721, and to the assessment of $350,000 in compromise of potential civil 

penalties otherwise due and payable pursuant to 49 U.S.C. § 46301.

This compromise assessment is appropriate considering the nature and extent of the 

violations described herein and the size and sophistication of the carrier, and serves the 

public interest. It represents a strong deterrent to future similar unlawful practices by 

United and other carriers.

This order is issued under the authority contained in 49 CFR Part 1.

ACCORDINGLY,

1. Based on the above discussion, we approve this settlement and the provisions of 

this order as being in the public interest;

2. We find that United Airlines, Inc., violated 14 CFR Part 374 by failing to timely 

process refunds for air transportation purchased with credit cards, as required by 

the Consumer Credit Protection Act and Regulation Z of the Board of Governors 

of the Federal Reserve System, 15 U.S.C. §§ 1601-1693r and 12 CFR Part 226;
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3. We find that by engaging in the conduct and violations described in ordering 

paragraph 2, above, and by failing to process refunds for air transportation paid

for with cash or similar forms of payment within 20 days of receipt of complete 

documentation for such refunds, United Airlines, Inc., engaged in an unfair and 

deceptive practice in violation of 49 U.S.C. § 41712; 

4. We find that by engaging in the conduct described in paragraphs 2 and 3, above, 

United Airlines, Inc., failed to adhere to its Customer Commitment in violation of 

14 CFR 259.5(b)(5) and 49 U.S.C. § 41712;

5. We find that United Airlines, Inc., violated 14 CFR 234.6 by failing to submit 

accurate mishandled-baggage reports; 

6. We find that United Airlines, Inc., violated 14 CFR 234.13 by failing to file 

reports of incidents involving animals during air transport in a timely manner;

7. We find that United Airlines, Inc., violated 14 CFR 250.10 by failing to submit 

accurate reports of the number of passengers who were voluntarily and 

involuntarily denied boarding; 

8. We find that, by engaging in the conduct described in ordering paragraphs 5

through 7, above, United Airlines, Inc., violated 49 U.S.C. §§ 41708, 41712, and 

41721; 

9. We order United Airlines, Inc., its successors, its affiliates, its assigns, and all 

other entities owned by, controlled by, or under common ownership and control 

with United Airlines, Inc., its successors, its affiliates, and its assigns to cease and 

desist from further violations of 14 CFR 234.6, 14 CFR 234.13, 14 CFR 250.10,

14 CFR 259.5(b)(5), 14 CFR Part 374, and 49 U.S.C. §§ 41708, 41712, and 

41721; 

10. We assess United Airlines, Inc., a compromise civil penalty of $350,000 in lieu of 

civil penalties that might otherwise be assessed for the refund-related violations 

covered in ordering paragraphs 2 through 4, above. Of this total penalty amount, 

$175,000 shall be due and payable within thirty (30) days of the date of this 

issuance of this order. The remaining portion of the civil penalty amount, 

$175,000, shall become due and payable immediately if, within one year of the 

date of issuance of this order, United Airlines, Inc., violates this order’s cease and 

desist provisions or fails to comply with the order’s payment provisions, in which 

case United Airlines, Inc., may be subject to additional enforcement action for 

violation of this order; and

11. We order United Airlines, Inc., to pay the penalty assessed in ordering paragraph 

10, above, through Pay.gov to the account of the U.S. Treasury. Payments shall 

be made in accordance with the instructions contained in the Attachment to this 

order. Failure to pay the penalty as ordered shall subject United Airlines, Inc., to 

the assessment of interest, penalty, and collection charges under the Debt 
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Collection Act and to further enforcement action for failing to comply with this 

order. 

This order will become a final order of the Department 10 days after its service date 

unless a timely petition for review is filed or the Department takes review on its own 

motion.

BY:

SAMUEL PODBERESKY

Assistant General Counsel for

 Aviation Enforcement and Proceedings

An electronic version of this document is available at

www.regulations.gov