## Preliminary Regulatory Analysis

Consumer Rulemaking NPRM: Enhancing Airline Passenger Protections II

Contract No.:

GS

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Order No.:

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Project No.:

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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

Sil ver Sp ring, Maryland



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## Table of Contents

Executive Summary

................................ ................................ ................................ ...................... 1

Introduction

................................ ................................ ................................ ................................ ... 4

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

........ 5

1.1. U.S. and Foreign Air Carriers

................................ ................................ .............................. 5 1.2. Airports

................................ ................................ ................................ ................................ 7 1.3. Flights and Passengers

................................ ................................ ................................ ......... 8 1.4. Regulatory Authorities

................................ ................................ ................................ ......... 9 1.5. Travel Agencies and Tour Operators

................................ ................................ ................. 10

2. Current Regulatory Requirements, Industry Practices, and Need for Additional Requirements

................................ ................................ ................................ ............................... 10

2.1. Additional Requirements for Tarmac Contingency Plans

................................ ................. 11 2.2. Tarmac Delay Reporting

................................ ................................ ................................ .... 12

2.3. Minimum Standards for Customer Service Plans (CSPs)

................................ .................. 13 2.4. Incorporation of Tarmac Contingency Plans and Customer Service Plans into Contracts of Carriage

................................ ................................ ................................ ............................. 13 2.5. Requiring Foreign Carriers to Respond to Customer Complaints

................................ ..... 14 2.6. Changes in Denied Boarding Compensation (DBC) Policy

................................ .............. 15 2.7. Required Disclosure of Full Fares in Advertising and Prohibition on Opt

- Out Provisions

in Ticket Sales

................................ ................................ ................................ ................... 16 2.8. Expanded Disclosure of Baggage Fees and Ot her Optional Fees

................................ ...... 17

2.9. Prohibition on Post

- Purchase Fare Increases

................................ ................................ ..... 18 2.10. Prompt Passenger Notification of Flight Status Ch anges

................................ ................ 18 2.11. Limitations on Venue Provisions in Contracts of Carriage

................................ ............. 19

3. Proposed Regulatory Requirements and Alternatives for Addressing Identified Needs 19

3.1. Additional Requirements for Tarmac Contingency Plans

................................ ................. 20 3.2. Expanded Reporting of Tarm ac Delays

................................ ................................ ............. 21 3.3. Minimum Standards for Customer Service Plans (CSPs)

................................ .................. 22 3.4. Incorporation of Tarmac Contingency Plans and Cust omer Service Plans into Contracts of Carriage

................................ ................................ ................................ ............................. 22 3.5. Requiring Foreign Carriers to Respond to Customer Complaints

................................ ..... 22 3.6. Chang es in Denied Boarding Compensation (DBC) Requirements

................................ .. 23 3.7. Required Disclosure of Full Fares in Advertising and Prohibition on Opt

- Out Provisions

in Ticket Sales

................................ ................................ ................................ ................... 24 3.8. Expanded Disclosure of Baggage Fees and Other Optional Fees

................................ ...... 25

3.9. Prohibition on Post

- Purchase Fare Increases

................................ ................................ ..... 25 3.10. Passenger Notification of Flight Status Changes

................................ ............................. 26 3.11. Limitations on Venue Provisions in Contracts of Carriage

................................ ............. 26Preliminary Regulatory Analysis 1029

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## Table of Contents
(continued)

4. Framework for Analysis of Benefits and Costs

................................ ................................ ... 26

4.1. Type of Air Travel Issues Being Addressed

................................ ................................ ...... 26 4.2. Availability of Alternatives to Carrier Services or Information

................................ ........ 28 4.3. General Assumptions Used in Estimating Benefits and Costs

................................ .......... 29

4.4. Alternatives Considered

................................ ................................ ................................ ..... 30

5. Estimated Benefits of Proposed Requirements

................................ ................................ ... 30

5.1 . Additional Requirements for Tarmac Delay Contingency Plans

................................ ....... 30 5.2. Expanded Reporting of Tarmac Delays

................................ ................................ ............. 35

5.3. Minimum Standar ds for Customer Service Plans

................................ .............................. 35 5.4. Incorporation of Tarmac Contingency Plans and Customer Service Plans into Contracts of Carriage

................................ ................................ ................................ ............................. 37 5.5. Requiring Foreign Carriers to Respond to Customer Complaints

................................ ..... 37 5.6. Changes in Denied Boarding Compensation (DBC) Policy

................................ .............. 38 5.7. Required Disclosure of Full Fares in Advertising and Prohibition on Opt

- Out Provisions

in Ticket Sales

................................ ................................ ................................ ................... 39 5.8. Expanded Disclosure of Baggage Fees and Other Optional Fees

................................ ...... 43

5.9. Prohibition on Post

- Purchase Fare Increases

................................ ................................ ..... 43 5.10. Prompt Passenger Notification of Flight Status Changes

................................ ................ 44 5.11. Limitations on Venue Provisions in Contracts of Carriage

................................ ............. 45

6. Estimated Costs of Proposed Requirements

................................ ................................ ........ 45

6.1. Additional Requirements for Tarmac Delay Contingency Plans

................................ ....... 45 6.2. Expanded Reporting of Tarmac Delays

................................ ................................ ............. 47

6.3. Minimum Standards for Customer Service Plans

................................ .............................. 49 6.4. Incorporation of Tarmac Contingency Plans and Customer Service Plans into Contracts of Carriage

................................ ................................ ................................ ............................. 50 6.5. Requiring Foreign Carriers to Respond to Customer Complaints

................................ ..... 50 6.6. Changes in Denied Boarding Compensation (DBC) Policy

................................ .............. 51 6.7. Required Disclosure of Full Fares in Advertising and Prohibition on Opt

- Out Provisions

in Ticket Sales

................................ ................................ ................................ ................... 53 6.8. Expanded Disclosure of Bag gage Fees and Other Optional Fees

................................ ...... 56

6.9. Prohibition on Post

- Purchase Fare Increases

................................ ................................ ..... 57 6.10. Prompt Passenger Notification of Flight Status Changes

................................ ................ 58 6.11. Limitations on Venue Provisions in Contracts of Carriage

................................ ............. 58Preliminary Regulatory Analysis 1029

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## Table of Contents
(continued)

7. Re sults and Discussion of the Benefit and Cost Analysis

................................ ................... 58

7.1. Overall Net Benefits of the Proposed Requirements

................................ ......................... 58

7.2. Net Bene fits of Specific Proposed Requirements

................................ .............................. 60

7.3. Annualized Benefits and Costs

................................ ................................ .......................... 63 7.4. Benefits and Costs for Alternative Requirem ent Scenarios

................................ ............... 63

7. 5 . Conclusion

................................ ................................ ................................ ......................... 64

Appendix: Estimation of Benefits

................................ ................................ ........................... A

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## List of Tables

Table ES1

- Present Value of Net Benefits for Proposed Requirements, 2011

- 2020

..................... 2

Table ES2

- Annualized Benefits and Costs, 2011 throu gh 2020, $ millions 2011

....................... 3

Table 1

- U.S. Carrier Scheduled Passenger Service, 2008

................................ ............................ 6

Table 2

- Number of U.S. Carriers by Size Class, 2008

................................ ................................ . 7

Table 3

- Passenger Enplanements by Size of Airport, 2008

................................ ......................... 8

Table 4

- Scheduled Passenger Service: Departures and Passengers

................................ ............. 9

Table 5

- Travel Agencies and Tour Operators, 2006

................................ ................................ .. 10

Table 6

- Number and Percent of Flights with Tarmac Times of 3 Hours or More

..................... 12

Table 7

- Passenger Service Complaints Received by the Department, 2008

.............................. 14

Table 8

- Passengers Denied Boardi ng on Reporting Carriers, 2008

................................ ........... 15

Table 9

- Projected Annual Numbers of Lengthy Tarmac Delays for Foreign Carriers

............... 21

Table 10

- Projected 3

- Hour Tarmac Delays, 2009

................................ ................................ ...... 22

Table 11

- Projected Number of Consumer Complaints (Foreign Carriers)

................................ . 23

Table 12

- Ill ustration of Benefits Estimation for First Year, Requirement 1

.............................. 33

Table 13

- Illustration of Benefits Estimation for First Year, Requirement 3

.............................. 36

Table 14

- Illustration of Benefits Estimation for First Year, Requirement 5

.............................. 37

Table 15

- Illustration of Benefits Estimation for First Year, Requirement 7

.............................. 41

Table 16

- Illustration of Benefits Estimation for First Year, Requirement 9

.............................. 44

Table 17

- Unit Costs for Requirement 1

................................ ................................ ...................... 46

Table 18

- Estimated Compliance Costs for Requirement 1

................................ ......................... 47

Table 19

- Unit Costs for Requirement 2

................................ ................................ ...................... 48

Table 20

- Estimated Compliance Costs for Requirement 2

................................ ......................... 49

Table 21

- Unit Costs for Requirement 3

................................ ................................ ...................... 50

Table 2 2

- Estimated Compliance Costs for Requirement 3

................................ ......................... 50

Table 23

- Unit Costs for Requirement 5

................................ ................................ ...................... 51

Table 24

- Estimated Compliance C osts for Requirement 5

................................ ......................... 51

Table 25

- Unit Costs for Requirement 6

................................ ................................ ...................... 52

Table 26

- Estimated Compliance Costs for Requirement 6

................................ ......................... 53

Table 27

- Unit Costs for Requirement 7

................................ ................................ ...................... 54

Table 28

- Estimated Compliance Costs for Requirement 7

................................ ......................... 55

Table 29

- Unit Costs for Requirement 8

................................ ................................ ...................... 56

Table 30

- Estimated Compliance Costs for Requirement 8

................................ ......................... 57

Table 31

- Present Value of Net Benefits for Proposed Requirements, 2011

- 2020

..................... 59

Table 32

- Present Value of Net Benefits for Proposed Requirements, 2011

- 2030

..................... 59

Table 33

- Comparison of Requirement

- Specific Benefits and Costs, 2011

- 2020

....................... 60

Table 34

- Annualized Benefits and Costs, 2011 through 2020, $ mill ions 2011

........................ 63

Table 35

- Benefits and Costs for Base Case and Four Alternative Scenarios

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## Executive Summary

The Department of Transportation (DOT) is propo sing a rule to provide airline passengers with additional protections in the areas of airline service provision and consumer information. Some of the provisions in this proposed rule build on regulatory requirements recently adopted as part

of the Final R ule on Enhanced Airline Passenger Protections ( EAPP1 ) , which 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 requireme nts that

are included in the Notice of Proposed Rulemaking (NPRM). Th is 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, a s required by Executive Order (EO)

12866. 1



### In this preliminary analysis, we provide estimates of the benefits and costs for specific proposals in the NPRM that would add regulatory requ irements in 11 areas, including extension of the

EAPP1 requirements fo r 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; and elimination of the break

- out of

government taxes and fees from advertised fares for air transportation. Benefits and costs are

also estimated for alternatives to some of the proposed requirements.

For each area addressed in the NPRM , we present the rationale for adopting additional requirements. We also provide information on current regulatory requirements, Department enforcement policy, and industry practices; specify the nature of the benefits and costs involved in the proposals; and indicate the sources of data used to quantify (where possibl e) these benefits

and costs

. Benefit and cost estimates are presented for individual requirements, and aggregate benefits and costs of the proposed requirements are summarized as the present value of net

benefits ove r 10

- and 20

- year time periods.

Most of the proposed requirements would 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 the proposed requirement s . T here are 88 foreign

carriers that would be required to comply with the requirements for tarmac contingency plans, customer service plans (CSPs) , and customer compl aint responses adopted for U.S. carriers in

the EAPP1 Final Rule. In addition to U.S. and foreign carriers, t he proposed requirement that full fares be displayed in travel advertising and solicitations would also cover as many as 15,000

firms in the trave l agent and tour operator sectors.

All quantified benefits and costs estimated for individual requirements were translated into current values for each year in the 10

- and 20

- year periods beginning with calendar year 2011. 2

1 An analysis of the impact of the proposed 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, 2011, with the exception of the full

- fare advertising provision of proposed Requirement 9, which is assumed to be take effect 30 days later.Preliminary Regulatory Analysis 1029

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### In accordance with OMB guidelin es, 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

.

Table ES1

- P resent V

alue of Net Benefits for Proposed Requirements, 2011

- 2020

PV (millions)

Total Quan tified Benefits 10 Year s, 7% discounting $87.59

10 Year s, 3% discounting $104.18

Total Quantified Costs 10 Years, 7% discounting $25.98

10 Years, 3% discounting $28.45

Net Benefits 10 Years, 7% discounting $61.61

10 Years, 3% discounting $7 5.73
*Note: Totals may not sum due to rounding.



### The expected present value (PV) of passenger benefits from the proposed requirements included

in the NPRM over a 10

- year period using a 7 percent discount rate is estimated at $ 87.59 million. The expected present value of costs incurred by carriers and other sellers of air transportation to comply with the proposed requirements is $ 25.98 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 $ 61.61 million.

A comparison of the estimated benefits and costs for each of the 11 proposed requirements is provided in Table 33 in Section 7.2, along with information on additional benefits for which quantitative estimates could not be develope d.

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

attributable to the full

- fare advertising provision of Requirement 7 . The expected benefits estimated for this single provision total $ 73.50 million ov er the 10

- year period from 2011

t hrough 2020 using a discount rate of 7 percent. Benefits estimated for the full

- fare advertising provision represent 8 4 percent of the total benefits estimated for all 11 proposed requirements during the period from 2011 th rough 2020.

T he expected costs of complying with the full

- fare advertising provision of Requirement 7 are estimated at $ 6.86 million over the 10

- year period from 2011 through 2020 using a discount rate of 7 percent. Costs estimated for the full

- fare adver tising provision in Requirement 7 represent
26 percent of the total costs estimated for all 11 proposed requirements during the period from

2011 through 2020.

None of the present values for estimated benefits or for estimated costs associated with any of the other 10 requirements from 2011 through 2020 (discounted at 7 percent) are exceed $10

million.

This preliminary regulatory evaluation also includes a presentation of the annual benefits and expenditures associated with this proposed rule. Table ES2 pr ovides our best estimate of thePreliminary Regulatory Analysis 1029

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### annual ized dollar amount of these benefits and costs expressed in 201 1 dollars at 7 percent and 3 percent discount rates. We estimate that the benefits will be $ 25.59 million annualized at a 7

percent discount rate, or $ 25.0 1 million annualized at a 3 percent discount rate. Cost s of this proposed rule are estimated to be approximately $ 5.97 million annualized at a 7 percent discount rate, or $ 5.26 million annualized at a 3 percent discount rate, over a 10

- year period of analy sis. 3

Table E S 2

- Annualized Benefits and Costs

, 2011 t hrough 2020, $ m illions 201 1

Estimates Units

Primary
Estimate Low

Estimate High

Estimate Year

Dollar Discount

Rate Period

Covered

Annualized Monetized
Benefits $25.59 $11.27 $53.41 201 1 7% 2011

- 2020

$25.01 $10.99 $52.24 201 1 3% 2011

- 2020
Annualized Monetized
Costs $5.97 $4.64 $7.52 201 1 7% 2011

- 2020

$5.26 $4.16 $6.54 201 1 3% 2011

- 2020



### This preliminary regulatory analysis indicates that adoption of the proposed requirements would

result in projected benefits to the public that outweigh the estimated costs of the proposed rule.

3 This statement is presented in essentially the same format as the a ccounting statement that OMB Circular A

– 4 requires for final rules.Preliminary Regulatory Analysis 1029

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## Introduction

The Department of Transportation (DOT) is propos ing a rule to provide airline passenger s with

additional protections in the areas of airline servic e provision and consumer information. Some of the provisions in this proposed rule build on regulatory requirements recently adopted as part

of the Final Rule on Enhanced Airline Passenger Protections ( EAPP1 ). 4



### Econometrica and its subcontractor HDR Dec ision Economics were tasked with develop ing a regulatory evaluation for each of the requirements that are included in the Notice of Proposed Rulemaking (NPRM). Th is regulatory evaluation estimates the economic impact, in terms of

benefits and costs, to pa ssengers, 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 proposed rule and to assess whether, on balance, the rule is in the public interest. T h is analysis provides a baseline description of passenger protections , identifies the need for the proposed rule , and defines the analytic scope and parameters. I t discusses the proposed rule ‘s anticipated effects and presents a summary of the expected benefits and costs

.

In this preliminary analysis , we provide estimates of the benefits and costs for specific proposals

in the NPRM that would add regulatory requirements in the following areas :

Req

. # Req uirement Description

1 Expansion of t armac delay contingency plan requirements and extension of

EAPP1 Final Rule requirements to cover foreign carriers

2 Expanded t armac delay reporting and application to foreign carriers

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

extension of EAPP1 Final Rule requirements to cover foreign carriers

4 Incorporation of tarmac delay contingency plans and CSPs into carrier contracts

of carriage

5 Extension of EAPP1 Final Rule requir ements 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 o n post

- purchase price increases

1 0 Prompt passenger notification of flight status changes

11 Limitations on venue provisions in contracts of carriage.

This document provides a preliminary economic evaluation of the proposed requirements in each

of these areas. It should be noted that the Department has also presented and discussed several alternatives and possible additional requirements in the NPRM which have not been incorporated

into the proposed regulatory text.

4 ―Final Rule on Enhancing Airline Passenger Protections,‖ DOT

- OST

- 007

- 0022, December 30, 2009.Preliminary Regulatory Analysis 1029

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### For eac h area addressed in the NPRM , we present the rationale for adopting additional requirements and in some cases, possible alternatives for achieving these objectives. W e provide

information on current regulatory requirements , Department enforcement policy, and industry practices; specify the nature of the benefits and costs involved in the proposals; 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 proposed requirements are summarized as the present value of net benefits over 10

- and 20

- year time periods. The accompanying Regulatory Flexibility Analysis assesses the extent to which the

costs associated wi th these requirements could impact 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 m any est imates and assumptions

in cases where specific data were not available or to make the estimation exercise manageable. The Department solicit s any comments to improve the analysis to the greatest extent possible. Comments may be submitted to the regulatory docket using any of the methods listed under

―Addresses‖ in the preamble to the Proposed Rule. All input received during the public comment period will be considered

.



## 1

. 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.

1

. 1. U.S. and Foreign Air Carriers

More th an 200 domestic and foreign air carriers provide some combination of scheduled and

non

- schedule d 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 certi ficate under 49 USC

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

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

―certificated carriers

. ‖ A relatively limited number of carr iers 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.

Several revenue

- and aircraft size

- based distinctions among categories of U.S. carriers are relevant for regulatory purposes . The most important of these are discussed in more detail below

. In contrast, all foreig n carriers operating flights to and from the United States are currentlyPreliminary Regulatory Analysis 1029

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### subject to the same regulatory requirements and nearly all would be subject to the additional requirements being proposed by the Department in this proceeding. 5



### Reporting Carriers

The applicability of some c urrent regulatory requirements var ies not only between domestic and foreign carriers, but also between different categories of domestic carriers, based on the sizes of the aircraft operated or the carrier‘s share of total industry r evenues from scheduled air passenger

service on domestic routes. ―Reporting carriers‖

— those that account for at least 1 percent of

domestic scheduled passenger service revenues

— must report information to the Bureau of Transportation Statistics monthly on l engthy tarmac delays, on

- time performance (OTP), payment of denied boarding compensation (DBC), and other aspects of carrier performance. Reporting carriers include seven mainline carriers (Alaska, American, Continental, Delta/Northwest, Hawaiian, United, and US Airways), four low

- cost model major airlines (AirTran, Frontier, JetBlue, and Southwest), and seven regional carriers (American Eagle, Atlantic Southeast, Comair, ExpressJet, Mesa, Pinnacle, and SkyWest)

. 6

Table 1

- U.S. Carrier Scheduled Passenger Service, 2008

Number of

Carriers Departures Passengers Passengers/

Departure

Reporting Carriers 18 7,559,996 667,562,183 88

Other U.S Carriers 99 2,640,027 88,265,323 33

Total 117 10,200,023 755,827,506 74

Reporting % of Total 15.4% 74.1% 88.3%

Note: Delta and Northwest are shown as a single reporting carrier, although they did not
consolidate reporting under the Delta name until 2010.

Source: BTS T

- 100 Segment database, 2008



### Aircraft Size

- Based Distinctions among U.S. Carriers Many regul atory 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 businesses for purposes of assessing impact under the relevant requirements of the Regulatory Flexibility Act. There are also a signifi c ant 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 . Most of these carriers provide charter

s ervice using at least one aircraft with more than 60 seats.

5 Since the preliminary RIA was prepared, it has been determined that 2 of these 88 foreign carriers operate passenger service to and from the United States exclusively with aircraft having fewer than 30 s eats. These two carriers would not have to comply with the proposed requirements that apply only to U.S. and/or foreign carriers that provide passenger service on at least one aircraft that has 30 or more seats.

6 In 2009, two carriers (ExpressJet and Pin nacle) had market shares that did not meet this threshold but will continue to report these data voluntarily; both carriers are therefore included in the definition of ―reporting carrier.‖ Delta and Northwest reported as separate carriers through 2009, but reporting has been consolidated under the Delta name beginning in 2010.Preliminary Regulatory Analysis 1029

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- Number of U.S. Carriers by Size Class, 2008

Group Seat

Criterion Total Out of

Business Active Contract

Carriers Other

Large > 60 41 2 39 17 22

Small 30

- 60 14 1 13 6 7

Very Small < 30 43 8 35 2 33

Charter

- only 19 2 17 0 17

Total 117 13 104 25 79

Note: 6 large contract carriers, 1 small contract carrier, and 12 other large carriers were reporting

carriers in 2008.

Source: BTS T

- 100 Segment database, 2008; BTS B

- 43 Aircraft d atabase, 2007



### T he U.S. domestic airline industry continues to undergo significant consolidation . Of the 117 U.S. carriers operating at the beginning of 2008 , 13 were no longer providing service 2 years later

. Some of the remaining carriers are wholly

- ow ned subsidiaries , but are treated as separate airlines for some reporting and regulatory compliance purposes.

Mainline and Regional Airlines Several U.S. carriers, including 6 of the 19 reporting carriers in 2009, 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 carr iers‘ schedules under

code

- share agreements. A few small regional carriers (e.g., Cape Air and Great Lakes) operate

both contract and independently

- marketed flights.

Regional carriers

—

both contract carriers and those that market flights independently

— pro vide 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 442 of 635 U.S. airport s. 7



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

airlines in the same size classes. In some instances, h owever, contract carriers must comply with their mainline partners‘ commitments and compliance r equirements

— including relevant provisions in the customer service plans and contracts of carriage that would be affected by the proposed requirements in this NPRM

. 8



### 1

. 2. Airports

The Federal Aviation Administration (FAA) categorizes airports based on the annual number s of passengers boarded (―enplanements‖)

. There were 503 U.S. airports with at least 2,500 p assenger enplanements in 2008. More than two

- thirds of domestic and international passengers departed

7 Regional Airline Association, 2009 Annual Report.

8 The term ―regional carrier‖ is also used to refer to U.S. airlines with less than $100 million in revenues annually, including th ose that independently market air transportation to the public. Most of these carriers are included in the ―very small‖ category. A large number of them operate solely within the State of Alaska.Preliminary Regulatory Analysis 1029

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Page 8 of 64 Pages Econometrica, Inc. Last Revised May 24, 2010 

### from 29 major metropolitan hubs, and another one

- fifth from one of 37 medium hubs. On the other end of the size spectrum, there were 121 airports with 2,500

– 10,000 passenger enplanements in 2008 . More than half of these (64) were located in Alaska.

Table 3

- Passenger Enplanements by Size of Airport, 2008

Category Minimum %/#

of Passengers # of

Airports Passengers

(millions) % of Total Passengers / Airport
(millions)

Large Hub >1% of total 29 504.0 68.5% 17.38

Medium Hub >0.25% of total 37 147.0 20.0% 3.97

Small Hub >0.05% of total 72 60.8 8.3% 0. 84

Non

- Hub >10,000/year 244 22.9 3.1% 0.09

Other

Commercial >2,500/year 121 0.6 0.1% 0.00

Total 503 735.3 1.46

Source: Federal Aviation Administration, Primary and Non

- Primary Commercial Service Airports, 2008



### International flights depart from ev ery large and medium hub

, most small hubs, a nd about one

third of non

- hub airports. However, o nly 7 of the 121 airpor ts with between 2,500 and 10,000 passenger departures in 2008 offered international service.

1

. 3. Flights and Passengers

Airline passenge rs travel to both domestic and international destinations using both scheduled

and non

- scheduled (charter) service provided by U.S. and foreign carriers. Carrier

- specific data on the annual numbers of domestic and international departures and passengers bo arded for each type of flight are available from the Bureau of Transportation Statistics ( BTS ) T

- 100 database.

Most passenger travel is on scheduled service flights, and seven out of every eight scheduled flights are to destinations within the United Stat es. Virtually all domestic flights are on U.S.

carriers . F oreign 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 sig nificant majority of international departures, although the share of passengers on international flights is split more evenly between U.S. and foreign carriers because the average number of passengers per departure is larger on flights operated by foreign carrier s

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- Scheduled Passenger Service: Departures and Passenger s

Domestic International Combined

Departures

U

. S

. Carriers 9,373,657 826,366 10,200,023

Foreign Carriers 2,562 511,283 513,845

Total 9,376,219 1,337,649 10,713,868

Pas sengers

U

. S

. Carriers 666,990,665 88,836,841 755,827,506

Foreign Carriers 526,450 69,539,809 70,066,259

Total 667,517,115 158,376,650 825,893,765
Passengers/Departure

U

. S

. Carriers 71 108 74

Foreign Carriers 205 136 136

Total 71 118 77

Source: BTS T

- 100 Segment database , 2008



### The total numbers of departures and passengers flown typically rise each year, but both fell in 2008 and again in 2009. The FAA Aerospace Forecast for 2009 anticipated an 8.0 percent drop from 2008 in passenger enplanements on U.S. carrier flights. This decline was expected to be more pronounced for domestic flights, with a projected decrease of 8.8 percent from 2008, compared with a forecast reduction of 2.4 percent for international flights. The FAA Aerospace Forecast project ed even larger percentage decreases in capacity, measured by available seat miles (ASMs), as some carriers ceased operations or reduced the size of their aircraft fleets in

active service

.

1. 4

. Regulator y Authoritie s

The Office of the Sec retary (OST) conducts economic licensing of U.S. carriers ; establishes regulatory requirements relating to advertising and provision of scheduled and non

- scheduled passenger service ; issues guidelines and letters to codify and clarify Department enforcemen t policy ; and enters into consent orders to enforce regulations and impose penalties for non

compliance. All of the proposed requirements evaluated in this regulatory analysis represent modifications or clarifications to existing OST rules and enforcement policy.

During 2008 and 2009 the OST entered into 48 enforcement orders with U.S. and foreign carriers, travel agencies, and tour operators. One

- third of these consent orders involved non

compliance with established rules and policy relating to the advert ising of air fares

.

Regulatory authority for matters involving airports is vested in the FAA. Some of the proposed requirements (especially those relating to tarmac contingency plans) may have a limited impact on airport operations, but we have not est imated the costs, if any, that would be incurred by airport authorities.Preliminary Regulatory Analysis 1029

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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) representatives. One provision in the NPRM would require covered carriers to coordinate their tarmac contingency plans with CBP authorities at diversion airports . This would ensure that arriving international passengers could be deplaned and allowed to leave the airport in a timely fashion.

1.5. 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 compl y 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

stand

- alone basis and sometimes as part of a package that may include accommodations, activities, and ground transportation. Both carrier and non

- carrier websites also offer packages that do not include any air transportation.

According to a recent study, abou t 17 percent of travel agencies have online ticketing capability. However, four large online travel agencies (OTAs)

— Expedia, Orbitz, Priceline, and Travelocity

— reportedly account for 96 percent of all online sales by travel intermediaries in the

leisure t ravel market segment. 9 

### Howcver

, the travel agent and tour operator sectors consis t primarily of small businesses with fewer than 20 employees per firm.

Table 5

- Travel Agencies and Tour Operators, 2006

Total Firms L arge

OTAs Online

Sales Capabilit y Offline

Sales Only 20+

Employees <20

Employees

Travel Agencies 12,248 4 2,078 10,166 669 11,579

Tour Operators 2,629 0 447 2,182 254 2,375

Sources: Bureau of the Census, County Business Patterns, 2006; PhoCusWright, The Role and Value of the

Global Di stribution Systems in Travel Distribution , 2009.



## 2

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

This section outlines the current regulatory requirements and/or DOT enforcement policy in each

of the areas fo r which additional passenger protections are being considered

, presents a summary
of current industry practices in each of these areas

, and describes the needs that would be addressed by each of the specific requirements proposed in the NPRM.

9 PhoCusWright, The Role and Value of the Global Distribut ion Systems in Travel Distribution

, November 2009

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### 2.1. Addition al Requirements for Tarmac Contingency Plans

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 (a) passengers on planes delayed on the tarmac for 2 hou rs will have access to food, water, clean lavatories, and the assistance of medical personnel if needed, and (b) passengers on planes delayed on the tarmac for 3 hours will be permitted to deplane, unless there is a safety and/or security

- related impedimen t 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 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

hub an d medium

- hub airports.

As noted in Section 2.2 b elow , there were just over 900 tarmac delays of 3 hours or longer involving scheduled domestic flights operated by reporting carriers in 2009. 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 the BTS with tarmac delay information

for all of their scheduled domestic flights. 10 

### However, the EAPP1 Final Rule 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.

Foreign carriers are not required to comply with the EAPP1 Final Rule stipulations relating to carrier handling of lengthy tarmac delays . As T able 4 in Section 1.3 indicates, 4 4 percent of all passengers on international flights departing from the United States in 2008 flew on foreign carriers. Many of these flights departed from large

- hub airports that have a history of problems with leng thy 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 destination s on covered U.S. c arrier s

.

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 fligh t 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 passeng ers may therefore not be allowed off of 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 fl ights.

10 As noted above, the BTS also receives reports on tarmac delays of less than 3 hours on scheduled domestic flights operated by reporting carriers. The BTS may also have some information on delays involvin g flights operated by

non

- reporting carriers. These additional data were not obtained and reviewed as part of this regulatory evaluation.Preliminary Regulatory Analysis 1029

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### 2

. 2. Tarmac Delay Reporting

As noted above, r eporting 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 the BTS. Beginning with Oc tober 2008, these reports were required to include tarmac delays associated with flights that returned to the gate and subsequently departed; those that were diverted from their destination airports; and those that were ultimately cancelled

. 11



### Just over 900 tarmac delays of 3 hours or more were reported to the BTS in 2009 by the 19 reporting carriers. Most of these involved delays at departure . Of the 77 delays associated with arriving flights , 75 involved landings at diversion a irports. As Table 6 shows, t he number of reported tarmac delays varie d substantially on a month

- to

- month basis.

Table 6

- Number and Percent of Flights with Tarmac Times of 3 Hours or More

Total Stage of Operation of the 3

- Hour Tarmac Time

Prior to

Cancellation Multiple

Gat e Departure Taxi

- Out Taxi

- In At

Diversion
Airport

Jan 2009 87 7 10 70 0 0

Feb 2009 43 5 4 34 0 0

Mar 2009 88 6 9 66 0 7

Apr 2009 81 12 10 47 0 12

May 2009 35 7 2 25 1 0

Jun 2009 278 40 42 172 1 23

Jul 2009 164 21 20 105 0 18

Aug 2009 70 7 11 45 0 7

Sep 2009 6 0 0 4 0 2

Oct 2009 12 0 0 12 0 0

Nov 2009 4 0 1 2 0 1

Dec 2009 35 5 3 22 0 5

Year 903 110 112 604 2 75

% of Delays 12.2% 12.4% 66.9% 0.2% 8.3%

Source: BTS, Monthly Summary of Tarmac Times Jan 2009

- Dec 2009



### 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 f oreign carriers. Information

ab out these delays would 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 and proposed requirements for tarmac contingency plans.

11 Final Rule on Revision of Airline Service Quality Performance Reports, Docket No. OST 2007

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### 2. 3

. Minimum Standards for Customer Service Plans (CSPs)

Under the recently adopted Final Rule , a ny domestic certificated or commuter air carrier that operates scheduled passenger service is required to develop a customer service plan (CSP) that

addresses the issues covered by the 12 area s of the Air Transport Association‘s (ATA) Customer

Service Commitment (CSC)

. These carriers are also required to self

- audit their adherence to this customer service plan. Airlines participating in the ATA CSC commit to the f ollowing:

1. Offer ing the lowest fare available

2. Notify ing customers of known delays, cancellations and diversions

3. Deliver ing baggage on time

4. Set ting a reasonable baggage liability limit

5. Allow ing reservations to be held or canceled

6. Provid ing prompt ticket refu nds

7. Properly accommodat ing passengers with disabilities and other special

- needs

passengers 8. Meet ing customers' essential needs during lengthy tarmac delays

9. Handl ing "bumped" passengers with fairness and consistency

10. Ensur ing good customer service from code

- s hare partners

11. Ensuring responsive ness to customer complaints

12. Identifying the services it provides to mitigate passenger inconveniences resulting from

cancellations and misconnects.

T he EAPP1 Final Rule does not establish specific standards for most of thes e 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‖). T he 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 also makes it difficult for both passeng ers 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 t he areas addressed by the ATA CSC

and EAPP1 Final Rule requirements if they choose to fly on a foreign carrier.

2. 4

. Incorporation of Tarmac Contingency Plans and Customer Service Plans into Contracts of Carriage

Under the EAPP1 Final Rule, covered U.S. ca rriers a re required to develop tarmac contingency plans and to post them on their websites. The Final Rule also require s covered U.S. carriers to develop, follow, and self

- audit compliance with customer services plans; these plans must also be posted on c arrier websites

. However, there is no specific requirement that these plans be incorporated into the carriers‘ contracts of carriage; the Department indicated in the Final Rule that it hoped that carriers would do so on a voluntary basis.Preliminary Regulatory Analysis 1029

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### Similarly, the De partment decided not to require that covered carriers incorporate the required CSPs into their contracts of carriage in the EAPP1 Final Rule.

A February 2010 review of the websites of reporting U.S. carriers that sell air transportation to the general publ ic indicated that all have posted their CSPs

, either on a stand

- alone basis or as part of their contracts of carriage on their websites. However, we did not attempt to determine whether or not any carriers posted tarmac contingency plans or incorporated t hem into their contracts of carriage in advance of the April 2010 effective date for the requirements for these plans included in the Final Rule.

2. 5

. Requiring Foreign Carriers to Respond to Customer Complaints

The EAPP1 Final Rule requires covered U.S. c arriers to acknowledge customer complaints in writing and to provide substantive response s to the concerns raised within specified time limits.

In 2008 t he Department received reports of almost 9,200 problems concerning service on U.S.

carriers and an addi tional 1,200 complaints related to problems on foreign carriers. The share of total complaints relating to foreign carriers is higher than the proportion of passengers transported on these airlines.

Table 7

- Passenger Service Complaints Received by the Department, 2008

Complaint C ategory Domestic Foreign Total

Flight problems (cancellations, delays, etc.) 3,011 218 3,229

Baggage 1,671 406 2,077

Reservations/ticketing/ boarding 1,147 186 1,333

Customer service 1,201 116 1,317

Refunds 632 139 771

Di sability 428 46 474

Oversales 370 61 431

Fares 324 44 368

Discrimination 99 16 115

Advertising 28 7 35

Animals 5 0 5
Other (includes frequent flier) 278 33 311

Total 9,194 1,272 10,466

Passengers Boarded 755,827,506 70,066,259 825,893,765

Complain ts per 100,000
Passengers 1.22 1.82 1.27

Source: OST, A ir Travel Consumer Reports , Jan

- Dec 2008; BTS, T

- 100 Segment database,

2008.



### The Department currently lacks the regulatory authority to require that foreign carriers respond

to custo mer complaints wi thin a specified time frame

. As airline passengers become increasinglyPreliminary Regulatory Analysis 1029

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### familiar with the U.S. carrier CSPs mandated in the EAPP1 Final Rule, they are unlikely to be aware that these requirements do not apply to flights operated by foreign carriers when mak ing decisions about booking international travel.

2

. 6. Changes in Denied Boarding Compensation (DBC) Policy

DOT requires that airlines pay specified amounts of denied boarding compensation (DBC) to passengers on an overbooked flight in cases where the carr ier is not able to recruit a sufficient number of passengers to voluntarily surrender their boarding passes in exchange for cash and/or

vouchers. While nearly 90 percent of boarding refusals attributable to carrier oversales in 2008

were resolved by recru iting volunteers

, BTS data indicate that more than 65,000 passengers were involuntarily bumped from oversold flights operated by reporting carriers. 12

Table 8

- Passengers Denied Boarding on Reporting Carriers, 2008

Number % of Total

Involuntarily Bumpe d Passengers 65,431 0.011%
# w/ DBC Paid 56,294 0.011%

Voluntarily Bumped Passengers 623,673 0.107%

Total Passengers Boarded 580,269,246

Source: BTS

, Report of Passengers Denied Confirmed Space , 2008



### Currently, involuntarily bumped travelers are req uired to be given DBC equal to 100 percent of the fare (200 percent if alternative transportation is not provided within the specified time limits) to the next stopover on the flight itinerary, up to the cap specified in the regulation. In 2008, the

maximu m 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. 13


### 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. 14



### The curren t 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 the BTS includes in its statistical

12 Under the prese nt 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 and/or distri bution of weight carried for safety reasons.

13 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.

14 The sample analyzed included over one million records for flights originating in Illinois during the sec ond 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 t ickets accounted for about 10 percent of flights in the sample.Preliminary Regulatory Analysis 1029

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### estimation of the average fares paid by passengers for air travel. 15 

### The Department is requesting information on current carrier practi ces with respect to compensation of these travelers, who may or may not be treated equitably.

Carriers are required to provide a full explanation of the DBC policy in written form, but airline representatives may not always provide complete information abo ut 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 exten t 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 current DBC requirements may not be sufficient to ensure that all passengers bumped from the same flight are treated equitably . T hose 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 p otential volunteers for bumping on oversold flights may vary among passengers and/or gate agents.

2. 7

. Required Disclosure of Full Fares in Advertising and Prohibition on Opt

Out Provisions in Ticket Sales

Existing regulations require that advertising of a ir travel prices must include all fees, surcharges, and taxes. However, the Department has a long

- standing enforcement policy that permits carriers and other sellers of air transportation to break out from the advertised price any airport

or government fe es that are charged on a fixed or per

- segment basis.

In February 2010 , we conducted a review of the prices advertised on the websites of five

mainline carriers, three low

- cost carrier s
, and the four largest online travel agencies (OTAs). 16



### Of the eight car rier 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 at the flight booking stage

. 17



### 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 taxes and fees. However, the full

- fare prices were shown more prominently on the Expedia and Orbitz flight selection pages than on those for Priceline and Travelocity.

15 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 sa mple were below $50.

16 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.

17 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

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### At present there are 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 take s 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. 18



### A dvertised prices that do not include the full amount of the fare being charged , includi ng 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 inc ur additional airport departure and security fees that may partially or even totally offset the price advantage of a non

- direct flight. 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. 19



### In addition, substantial Department resources are required to review carrier, travel agent, and tour operator solicitations that h ave fees and taxes broken out of the advertised prices to determine if these advertisements comply with current enforcement policy.

2

. 8

. Expanded Disclosure of Baggage Fees and Other Optional Fees

In recent years many of the major U.S. carriers have instit uted a dditional charges for checked baggage. 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 th ese fees and incorporate them into the prices displayed in flight

search results . This complicates purchaser price comparisons and reduc es the likelihood that advertised fares accurately represent the actual cost of ai r travel.

DOT issued guidance on May 1 9 , 2008

, published in the Federal Register at 73 F.R. 28854, that

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 requirem ents‖ relating to the avoidance of unfair and deceptive practices with respect to disclosure of checked baggage fees. Specifically, DOT advise d that:

...air carriers and foreign air carriers should place a notice regarding the above

- described additional bag gage charges on the first screen in which the carrier offers a fare quotation of a

18 Our research on full

- fare advertising did not in most cases proceed to the step (after entry of credit card information) at which s ome 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.

19 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 price of these services was lower. For example, it is possible that nearly all passengers would purchase travel insurance if it were offered for $1 or less.Preliminary Regulatory Analysis 1029

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### 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 checked baggage fees and other optional fees appears to be available to most passen gers on major airlines. In addition, information about 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 co nsumers.

However, it is possible that a significant number of travelers may visit only the site of the carrier on which they purchased a flight. 21 

### 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, resulting in them incurring more charges for checked baggage and other optional services than if they had known about the additional costs for these items.

2

. 9

. Prohibition on Post

- Purchase Fare Increases

The Departm ent 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. C onsumers could also possibly find themselves incurring highe r costs for air travel than were contracted for at the time of purchase because of increases in checked baggage fees

, notwithstanding the May 19, 2008 DOT guidance on checked baggage fees

, which sta tes 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 a pply, or when a lower charge applied.



### A February 2010 review of reporting carrier websites indicated that all reported increases in checked baggage fees were accompanied by effective dates for the change specified in terms of when tickets were purchased.

It is possible that t he current DOT guidance may not continue to be effective for enforcing the

current prohibition on post

- purchase price increases. Codifying this policy would also reduce the amount of resources and effort required for the Department to determine if entities are complying with its provisions.

2

. 10. Prompt Passenger Notification of Flight Status Changes

Passengers learn about changes in flight status (most importantly, delays or cancellations) by gate announcements, electronic displays at airports, checking carrier websites, and increasingly,

20 Department of Transportation, ―Guidance on the Disclosure of Policies and Charges Associated with Checked Baggage,‖ 73 F.R. 28854, May 19, 2008.

21 This is particularly likely to be true for passengers on low

- cost airlines. A bout 75 percent of AirTran, JetBlue, and Southwest passengers reportedly book flights directly on the carrier websites.Preliminary Regulatory Analysis 1029

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### by 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 in form passengers about flight status changes.

In particular, carriers are not currently required to offer passengers the option to subscribe to e

mail or text messaging services that provide automatic notification of flight status changes. However, it is po ssible to sign up to receive these notifications on the websites of all but 2 of the

1 1 reporting carriers that 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 mes saging systems offer.

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 avail able. In the absence of any current 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.

2.11. Limitations on Venue Provisions in Contracts of Carriage

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 restrictions 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 ven ue for filing claims in its contract of carriage.

The absence of a prohibition on venue restrictions means that passengers of the same airline with the same complaint or claim may face very different costs to pursue the matter, depending on their proximit y 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 souther n California with the same type of claim on the same round

- trip flight may need to incur substantially higher travel

costs associated with pursu ing a claim that must be filed in southeastern Florida

.



## 3

. Proposed Regulatory Requirements and Alternatives for Addressing Identified Needs

This section outlines the proposed regulatory requirements in each area for which additional passenger protections are being considered; describes the entities that would be affected by eachPreliminary Regulatory Analysis 1029

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### of the proposed requirements; and identifies regulatory and non

- regulatory alternatives that would meet the passenger protection needs identified by the Department.

It is important to note that although the regulatory evaluation attempts to mirror the terms and wording of the proposed reg ulation, no attempt is made to precisely replicate the proposed regulatory language. Readers are cautioned that the actual regulatory text in the NPRM, and not

the text of th is regulatory evaluation , presents the specific proposed regulatory requirements..

3. 1

. Additional Requirements for Tarmac Contingency Plans

The Department is proposing to extend the coverage of the tarmac contingency plan requirements promulgated in the EAPP1 Final Rule to cover foreign carriers operating scheduled passenger service flights to and from the United States. In addition, covered U.S. and foreign carriers would now be required to coordinate their contingency plans with authorities at all U.S. airports with 10,000 or more passenger enplanements annually that the carrier s ervices, including

small

- hub and non

- hub airports that are not within the scope of the current EAPP1 requirements. 22 

### Finally, while U.S. carriers are currently required to coordinate their contingency plans and efforts with regularly used airports, the rece nt Final Rule does not specifically require that carriers must coordinate these contingency plans with Customs and Border Protection (CBP) officials to enable passengers on diverted incoming international flights to deplane after

extended on

- tarmac delays. The Department is proposing to add a requirement 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.

I t is difficult to predict the length of a tarmac delay that would trigger mandatory deplanement of

passengers

— it may be as much as 6 hours for long cross

- Pacific flights, but may be much shorter for flights to and from Canada, Mexico, and the Caribbean. For the base case in this regulatory e valuation, we have assumed that the tarmac delay limit in foreign carrier contingency plans ( other than Air Canada‘s) would be 5 hours. 23



### The number of lengthy tarmac delays that would require carrier actions under the proposed requirements can be projected using the distribution of 2007

– 2008 tarmac delay times for reporting U.S carriers. 24

22 The Final Rule requires this assurance of coordination only with the authorities of large and medium hub airports

— those that account f or at least 1 percent, and between 0.25 and 1 percent, respectively, of total U.S. enplanements.

23 Air Canada and Air Canada Regional already have a tarmac contingency plan in place that affords passengers protections against lengthy on

- board delays that a re at least equivalent to those guaranteed to passengers on U.S.

carriers under the EPP1 Final Rule.

24 This distribution was presented previously in the regulatory evaluation accompanying the EAPP1 Final Rule and is reproduced as ―Number of Flights and Pas sengers with Extended Tarmac Delays

, ‖ in the Source Notes section of the Appendix.Preliminary Regulatory Analysis 1029

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- Projected Annual Numbers of Lengthy Tarmac Delays for Foreign Carriers

Air Canada Other Carriers Total

2+ hour delay 77.30 221.78 299.08

3+ hour delay 17.37 49.83 67.20

4+ hour delay 3.18 9.13 12.31

5+ hour delay 0.45 1.30 1.75

Note: Air Canada's tarmac contingency plan has 60

- minute food and water and 90

- minute deplaning limits.

Source: Econometrica projections based on BTS tarmac delay reports for report ing carriers



### As in the previous rulemaking, the Department may consider setting a maximum allowable time

limit for tarmac contingency plan s on international flights operated by both domestic and foreign carriers. The Department may also consider limiting the required coordination of plans to

exclude non

- hub airports if sufficient information exists to indicate that lengthy tarmac delays do not typically occur at these airports.

3.2. Expanded Reporting of Tarmac Delays

The Department is proposing to requir e all covered U.S. carriers and foreign carriers to report specified information to the 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 t armac delays involving domestic flights of reporting carriers is available

since October 2008. R eporting carriers reported tarmac delays of 3 hours or more for 903 flights in 2009; almost half of these delays occurred in June or July. These r eporting carr iers accounted for 77 percent of domestic departures and 49 percent of international departures in 2008. If tarmac delays of 3 hours or more are uniformly distributed among reporting carriers , non

reporting U.S. carriers , and foreign carriers

, and between domestic and international flights, the projected number of reportable delays would be as shown in Table 10. 25

25 As noted above, of the 903 reported 3

- plus hour tarmac delays reported in 2009, 77 involved arriving flights. We did not use separate delay projections for departures and arrivals in the evaluation of this proposed requirement.Preliminary Regulatory Analysis 1029

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- Projected 3

- Hour Tarmac Delays, 2009

Total Domestic International

U

. S

. Carriers Reporting 989 903 86

Non

- Reporting 289 268 21

Total 1,278 1,171 107
Foreign Carriers 67 0 67

All Carriers 1,345 1,171 174

Source: Projections based on BTS tarmac delay reports for reporting carrier domestic flights (n=903).



### 3. 3

. Minimum Standards for Customer Service Plans (CSPs)

The Depart ment is proposing to establish specific standards for the customer service plans (CSPs) required by the EAPP1 Final Rule. Some of these standards are already fixed by existing regulatory requirements. Foreign carriers would also be required to establish C SPs that would cover passengers on their flights to and from the United States ; they would also be required to
conduct the annual self

- audits of compliance now required of covered U.S. carriers.

The proposed requirement would also stipulate that covered U. S. and foreign carriers would 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 subsi diaries of foreign carriers would not be required to develop independent CSPs . A ll 88 foreign carriers that are not subsidiaries of other foreign carriers with flights to and from the United States would need to develop, adhere to, and self

monitor complia nce with their own CSPs.

3. 4

. Incorporation of Tarmac Contingency Plans and Customer Service Plans into Contracts of Carriage

The Department is proposing that U.S. carriers covered by the EAPP1 Final Rule and foreign

carriers that would be covered under R e quirements 1 and 3 of the proposed rule would be required to incorporate the ir tarmac contingency and customer service plans into their contracts of carriage. Because the EAPP1 Final Rule had not yet taken effect when this regulatory evaluation was prepare d, it is not possible to determine whether any covered carriers may incorporate either of these plans into their contracts of carriage voluntarily in the absence of this proposed requirement being adopted.

3. 5

. Requiring Foreign Carriers to Respond to Cust omer Complaints

The Department is proposing to extend 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

U nited States with the same guarantee of response.Preliminary Regulatory Analysis 1029

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### For this analysis, we have assumed that all 88 foreign carriers tha t 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 proposed requirement. 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. 26 

### Improved carrier responsiveness to complaints was estimated to reduce the level of complaints by 20

percent in the DOT re gulatory evaluation for the EAPP1 Final Rule.

Table 11

- Projected Number of Consumer Complaints (Foreign Carriers)

Variable Estimate

Number of Complaints Received by DOT 1,272

Ratio of Total to Reported Complaints 61

Estimated Total Complaints 77,59 2

% Reduction from CSP Implementation 20%

Post

- CSP Number of Complaints 62,074
Source: OST, Air Travel Consumer Reports, Jan

- Dec 2008; DOT, “Final Report on Airline Customer
Service Commitment,” Office of the Inspector General, report AV

- 2001

- 020, Febr uary 12, 2001 ; and DOT,

F inal Regulatory Impact Analysis of Rulemaking on Enhanced Airline Passenger Protections

, December 17, 2009.



### 3.6. Changes in Denied Boarding Compensation (DBC) Requirements

The Department is proposing to make five changes in the e xisting requirements relating to denied boarding compensation (DBC):

Carriers would 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 passen ger is involuntarily denied boarding. ‖

The Department is also proposing to increase the maximum amount of DBC that must be paid to involuntarily bumped passengers from $400 to $650 when alternative transportation is provided by the carrier within 2 hours f or domestic flights and within 4 hours for international flights and from $800 to $1,300 otherwise.

A third proposal would clarify the existing DBC rule by explicitly stating that the definition of ―confirmed reserved space‖ on a flight 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 would 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.

26 DOT, “Final Report on Airline Customer Service Commitment,” Office of the Inspector General, report AV

- 2 001

- 020, February 12, 2001.” See the Source Notes section of the Appendix for further detail s.Preliminary Regulatory Analysis 1029

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### The Department is also proposing to implement a bi

- annual 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 would obviate 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.

Another proposed amendment would ensure that involuntarily bumped passengers are informed orally of their ability to receive payment of DBC to which they are entitled by cash or check, rather than in the form of free or discounted air transportat ion.

Changes in the DBC policy would require training and communications with gate agents for carriers in each airport they serve using aircraft with 30 or more seats. In this analysis, we have

assumed that 1⁄4 of the 9 4

, 000 airline employees reported in th e ―passenger handling‖ category on

Schedule P

- 10 for 2008 would need to receive training and information on changes in the current DBC policy. 27



### The Department is considering extending the applicability of the DBC requirements to include flights sold on air craft with 19 to 29 seats. This would increase the number of U.S. carriers covered by the DBC policy from 52 to as many as 87. These additional carriers would be considered small businesses under the definition currently used in Regulatory Flexibility Ac t (RFA) analyses prepared by the Department. In addition, carriers currently covered by the DBC policy that serve additional airports using only aircraft with 19 to 29 seats would incur training and communications costs for additional gate agents and other passenger handling personnel.

3. 7

. Required Disclosure of Full Fares in Advertising and Prohibition on Opt

Out Provisions in Ticket Sales

The Department is proposing to discontinue its current enforcement policy on full

- fare advertising requirement s , whic h 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 per

- segment basis. The proposed regulatory language would prohibit break

- out of these charges and fees from advertised fares. This would have 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 pur chase decisions. 28



### These requirements would cover 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 accommodations), or a tour component (e.g., a hotel stay) that states a price for such air transportation, tour, or tour component .‖ The policy would apply to all carriers, travel agencies, and tour operators, and cover both print and online

advert ising as well as online travel booking engines.

27 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 carrier s is about 7,400, the majority of whom are not likely to have responsibilities associated with boarding passenger flights.

28 A previous reconsideration of this enforcement policy was conducted in Docket No. OST

– 2005

– 23194, which

ended with the Notice of Pr oposed Rulemaking being withdrawn.Preliminary Regulatory Analysis 1029

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### In addition, advertising and solicitations that display one

- way fares for air transportation that are conditional on purchase of a round

- trip ticket would be required to display in a conspicuous

manner that t hey are ―each

- way fares

. ‖

The Department is also proposing to prohibit covered entities from requiring customers to purchase additional optional services in connection with air transportation (such as travel insurance or preferred seating assignment) unles s 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 tr avel packages), the Department is expected to permit covered entities to distribute or post advertising materials booked or produced before the rule date that compl y with the current enforcement policy standards for a short period of time after the rule is published. Th is regulatory evaluation assumes that all print advertising created after the rule publication date will need to comply with the proposed requirement and that all online and print solicitations still in circulation would need to comply

with t he new requirements by the anticipated effective date for the rule

.

In addition, the Department may consider restricting the applicability of this requirement to cover only the price for the air transportation component of a tour or tour component. This would permit covered entities to advertise prices for other travel

- related services, such as hotels and ground transportation, on the same basis as businesses (including hotels and rental car companies) that are not under DOT jurisdiction. However, this a lternative would increase the costs and difficulty of determining whether or not sellers of air transportation are complying with the proposed full

- fare advertising requirements.

3. 8

. Expanded Disclosure of Baggage Fees and Other Optional Fees

The Departme nt is proposing to require that each covered U.S. and foreign carrier disclose checked 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 increa se ; and provide a

link from its home page s to a page that contains a full disclosure of all optional fees for services that passengers may be charged by the airline.

The proposed regulatory language currently defines covered carriers as those that have tic ket

capable websites accessible to the general public. Following this definition, we have assumed that carriers that operate flights only on a contract basis for other carriers would not incur costs to comply with these requirements. The Department may a lso consider extending these requirements to cover online travel agencies and other sell ers of air transportation.

3. 9

. Prohibition on Post

- Purchase Fare Increases

The Department is proposing to prohibit 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, including, but not limited to, increases in checked baggage fees.Preliminary Regulatory Analysis 1029

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### The Department does not beli eve that air carriers, travel agencies, and tour operators currently attempt to impose post

- purchase fare increases on prior p urchasers of air transportation, but lacks adequate information to confirm this assessment.

3.10. Passenger Notification of Flight Status Changes

The Department is proposing to require 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 to the

carrier or should have become available to the carrier

.

No information is currently available on the extent to which flight status up dates are now disseminated to passengers by various communications channels within 30 minutes of new information becoming available. The Department is soliciting comments from parties who are able to provide information on this issue.

3.11. Limitations on Venue Provisions in Contracts of Carriage

The Department is proposing to codify its current enforcement policy on permissible restrictions imposed by venue provisions in carrier contracts of carriage. The proposed requirement would proscribe any such pro visions from eliminating the right of consumers to bring claims against the carrier in any court with jurisdiction, treating any such restrictions as an unfair and deceptive trade practice.

The Department may also consider limiting the restrictions on ven ue provisions to ensure that customers have the ability to file claims in their State of residence, the S tate in which the ticket was purchased , and/ or the S tate(s) of the fl ight‘s origin and destination.



## 4. Framework for Analysis of Benefits and Costs

T he NPRM includes 11 requirements containing more than a dozen provisions that would provide airline passengers with additional protections. While the benefits and costs for each of 11 requirements were evaluated on a stand

- alone basis, there are two dimen sions of the evaluation that cut across the specific requirements: (1) the aspect of passenger air travel that would be addressed, and (2) the ability of passengers (or prospective passengers) to obtain

needed services or information from other sources. T he 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.

4.1. Type of Air Tr avel Issues Being Addressed

The first is the element of passenger air travel that the proposed requirement would address:Preliminary Regulatory Analysis 1029

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### Carrier Service: Several of the requirements under consideration would standardize and/or improve aspects of service provision for p assengers that have already booked flights (such as R equirements 9 and 1 0 ) and, in the case of tarmac delays ( R equirement

1 ), already boarded the aircraft. In many of these areas, some carriers typically provide the level of service contemplated in the pr oposed regulations, but others fall short of the potential 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 would reduce t he 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 would 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 ( R equirements 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 ( R equirement 6 ) and limitations on venue provisions in contracts of carriage ( R equirement 11 )

—

primarily address carrier

- passenger equity issues, but may have

subtle economic effects as well. 29 

### Ensuring equitable treatment of involuntarily bumped passengers may reduce potential passenger reluctance to purchase and/or use consolidator or frequent flyer tickets for trips at busy air travel times. Eliminating restrictions on

venue may prom pt 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 regulatory requirements under consideration into three categories based on the type of impact and benefits they are expected to have. The three major categories involve requirements to: (1) improve the delivery of services to passengers who have already booked air travel; (2) provide

additional or clea rer information to consumers who are making travel purchase decisions; and (3) provide more equitable treatment of similarly

- situated passengers. The benefits that can be expected from adopting each of these three categories of requirements will need to b e estimated using different approaches:

29 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 futu re 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

inconvenience associated wit h 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 states.Preliminary Regulatory Analysis 1029

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### Carrier Service: In general, the benefits of requirements that would provide service improvements have been valued using the approaches already developed in the RIA for the recently adopted EAPP1 Final Rule. Provisi ons which would potentially 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 on diverted internatio nal flights) during travel for affected passengers. In some instances, the benefit of a proposed 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 might attach to air travel services.

Purchaser Information: A consumer surplus methodology has been used to estimate the benefits of requirements tha t are expected to improve the availability and ease

- of

- use of pre

purchase air fare information. Evaluating the benefits for each requirement area involve s developing an estimate of the number of prospective purchasers who would make use of the

additional information and the value to these purchasers 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 decisio ns. In addition, valuation of the benefits from improved information required estimating the per

purchaser time savings from reduced search costs.

Passenger Equity: The proposals that address passenger equity issues involve transfers from carriers to pas sengers. 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.

4.2. Availability of Alternatives to Carrier Services or Information

The second cross

- cutting dimension is the extent to which consumers have available alternatives to relying on the carrier to provide adequate service or to obtaining adequate information to

i nform purchase decisions:

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 Customs and Border Protection at diversion airports fall at one end of the spectrum of situations with readily available alternatives, with well

- publicized instances of passengers being held on

tarmac for prolonged periods of time. The proposals to modify the existing rules on overbooking and prohibit post

- purchase increa ses in checked baggage fees and other optional fees also address situations where the carrier unilaterally makes post

- purchase alterations in the terms of service. In these areas, the proposed requirements would 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 of th e deficiencies in the

pre

- purchase information available to potential purchasers of air travel on carrier websitesPreliminary Regulatory Analysis 1029

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### may be mitigated by use of other online booking services that provide more extensive or more readily accessible information. Similarly, elec tronic 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 increa sed 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 would have access to information that they presently do not know how to obtain. The regulatory ev aluation 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 t he information that is already available.

4.3. 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 a nd assumptions used. The following general assumptions apply throughout the entire analysis of benefits and costs:

In accordance with OMB guidelines, a real discount rate of 7 percent is used in the primary analysis and is supplemented with overall estim ates using a 3 percent discount

rate as well

. The proposed requirements become effective on January 1, 2011, with quantifiable

benefits and costs calculated over the 10

- year period from 2011 through 2020.

S upplementary results are calculated over a 20

- yea r period from 2011 through 2030

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

The number s of flights and passengers are assumed to have declined in 2009 and then

increase annually beginning in 2010, based on current FAA for ecasts. The value of travel time assumed to be at $28.60 per hour for all airline travelers while traveling based on Department guidance

. The value of travel time for these consumers while searching on

- line for fares is a weighted average (based on the po rtion of personal travelers and business travelers) of half of the average hourly earnings of travelers on personal trips and 100% of the average hourly earnings of travelers on personal trips as estimated by the U.S. Department of Transportation ($24.15). 30


### The cost of air travel delay is estimated at $57.11 per minute 31 

### to carriers and $28.60 per

hour 32 

### to passengers.

The cost of a flight cancellation is estimated at $11,600 to carriers 33 

### per flight.

30 U.S. Department of Transportation, ―Revised Departmental Guidance: Valuatio n of Travel Time in Economic Analysis, February 11, 2003.

31 ―Evaluating the True Cost to Airlines of One Minute of Airborne or Ground Delay,‖ University of Westminster, May 2004. Value in 2004 Euros, converted to dollars using the exchange rate of $1.364 p er Euro in 2004, and

inflated to 2008 dollars.

32 Economic Values for FAA Investment and Regulatory Decisions, A Guide, Contract No. DFTA 1

- 02

- C00200, prepared by GRA Inc.

33 Estimate for 1998 in Zalman Shavell, ―The Effects of Schedule Disruptions on the Ec onomics of Airline Operations,‖ The MITRE Corporation, April 14, 2000, adjusted to 2010

.Preliminary Regulatory Analysis 1029

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### A more detailed listing of the baseline data and assumptio ns used in developing these estimate is provided in an attached Appendix.

4.4. Alternatives Considered

The Department is considering several alternatives for achieving the goals of improved
passenger protections in some of the areas addressed by the prop osed rule. B enefits and costs
were specifically estimated for four alternatives for comparison with the proposed rule:

Requirement 1

- Alternative A : The Department requires 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 passen gers on international flights.
Requirement 1

- Alternative B : The contingency plan requirements for foreign carriers
apply only to those carriers with at least one flight designed t o seat 61 or more

passengers. Requirement 7

- Alternative C : The full fare advertising requirement would apply to
carrier websites only.
Requirement 7

- Alternative D : The effective date for full fare advertising for carriers

and other advertisers of air t ravel would be within 30 days of final rule publication.

The benefits and costs of these alternatives are compared with those for the base case in Section

7. 4

.



## 5. Estimated Benefits of Proposed Requirements

This section presents the methodology used to evaluate the benefits for each of the proposed requirements in the NPRM; preliminary estimates for the components that could be evaluated quantitatively; and descriptions of the benefits for which no quantitative estimates could be developed.

5. 1 . Additio nal Requirements for Tarmac Delay Contingency Plans

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 U nited S tates with the same benefits that passengers on flights of domestic carriers currently receive. B enefits are measured as the total value of improvements

in comfort and certainty , measured using premium s on the value of time, for passengers t hat are expected to experience greater comfort in waiting and/ or certainty of departure or arrival time as a result of the proposed requirement . The benefits from greater comfort are estimated as follows: 34

34 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 Rule . The only variance from the approach used in that analysis is that benefits for ―meeters and greeters‖ are not included here, as nearly all arriving international flightsPreliminary Regulatory Analysis 1029

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### T his proposed requirement will shift the portion o f total trip time spent in less comfortable conditions (such as the sixth hour on a plane spent sitting on the tarmac) to being spent in more comfortable conditions (such as waiting in a n airport terminal). N o change in overall trip time is assumed except in cases of flight cancellation.

While studies that specifically address consumer responses to long on

- board air travel delays have not been located

, estimates from studies of consumer behavior and user experience on other modes of transportation are av ailable to use as proxies. Specifically,

a nalyses 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 tra vel

. This regulatory analysis adopts the premiums on the value of time used in the RIA for the EAPP1 to evaluat e applying a similar requirement to covered U.S. carriers. 35



### The value of the projected difference in comfort resulting from the proposed requir ement is estimated using a percentage of the base value of travel time saved (or ― premium‖ ), developed from survey

- based estimates of the values attached by travelers to different waiting, walking and transfer conditions. Since no specific estimate 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, conv enience and reliability for various categories of public transportation and auto users. In this research,

―l evel of service ratings ‖ were used to determine the value of different time spent in

different conditions. Based on this study, a premium of 0.34 w as used for the greater comfort derived from access to food, water and clean lavatory facilities; a premium of 0.68 was used for the greater comfort of waiting in the terminal rather than in a plane on

the tarmac. These premiums are 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 )

. 36

with extensive on

- tarmac delays are at airports to which the planes have been d iverted and therefore are unlikely to keep ―meeters and greeters‖ waiting in the arrival airport.

35 For example, studies show that transit riders value sitting more than standing without regard to any change in total travel time required. Travelers also p refer 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 Transport ation 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, Chapter 2: Congestion Externalities and the Val ue 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

, for

reviews of the literature.

36 Wil liam 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 Minist ry 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).Preliminary Regulatory Analysis 1029

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### In addition, the simple existence of contingency plan to address long on

- tarmac delays may have

a benef it to passengers , because they would have more knowledge about carrier policies and know that there are limits on a plane sitting on the tarmac without working lavatories, as well as how long the plane can sit on the tarmac before food and water are provid ed and before passengers must be allowed to deplane. For instance, if a passenger waits for 1.5 hours on the tarmac, he or she knows that food, water and lavatory facilities will be guaranteed if the delay

continues. Measuring the benefits to passengers p rovided by this guarantee requires the estimation of a ―certainty premium‖ that places a monetary value on the knowledge that future

discomfort will be avoided.

No research studies were located that directly quantify the value of decreased anxiety during

extended on

- tarmac wait ing periods. Consequently, b ased on studies of auto and public transit passengers‘ value of levels of service summarized above, a conservative estimate of a 1 percent premium was selected as a proxy for the value of the decreased an xiety/discomfort passengers would place on knowledge that a contingency plan exists to address conditions and airline commitments during on

- tarmac delay situations. 37 

### The total value of this benefit is calculated as the product of of the hours spent by all passengers waiting on the tarmac for more than one hour, the premium for decreased anxiety/greater security of knowing a tarmac contingency plan exists (assumed to be 0.01), and the DOT

- specified value of time for air travelers.

For passengers waiting o n the tarmac after two hours and who have not deplaned, a premium of 0.34 is used to valued the benefits of ensured access to adequate food, water and lavatory facilities. 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 two hours, the premium for greater comfort (assumed to be 0.34), and the DOT

- specified value of time for air travelers.

Benefits to passengers allowed to deplane after a tarmac delay of a specified lengt h accrue from the greater comfort of waiting in the terminal, instead of on the plane on the tarmac. The total value of this benefit is calculated as the product of the amount of time that would have been spent on the tarmac by passengers, the premium for greater comfort associated with time spent waiting in the terminal rather than on the tarmac (assumed to be 0.68), and the DOT

- specified

value of time for air travelers.

This proposed requirement may result in some flights being cancelled that would not otherwise

have been cancelled in order to free up needed gates. The additional cancellations will result in additional costs to passengers and carriers. 38 

### These passengers would thus experience a ―disbenefit‖ or negative impact because the cancellation w ill increase overall travel time. The

37 A recent review of literatur e on the value of travel time found changes based on various level of comfort as low as 8%, or .8

, (Chapter 5, Transportation Cost and Benefit Analysis

– Travel Time Costs , Victoria Transport Policy Institute, revised August 10, 2007)

. . 38 While there is s ome research into the factors behind flight cancellations (such as hub destination, weather, time of day

, day of the week ) little data exists to estimate the incremental impact on flight cancellations arising from

additional delays due to outside requireme nt s

. One of the few such studies was conducted on airport closures for security reasons and found an additional 5% of flights were cancelled when the closure time was extended by one

hour (Nicholas Rupp, George Holmes and Jeff DeSimone, ― Airline Schedule R ecovery After Airport Closures: Empirical Evidence since September 11th,‖ NBER Working Paper No. 9744, June 2003)

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### increase in travel time is valued using DOT estimates for air travelers and research on the average increase in trip time when a flight is cancelled. 39



### The benefits of the proposed 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 tha t the recently adopted regulations would be adequate to ensure complete compliance by carriers. However, the proposed 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 zero to 1 percent of the total benefits previously estimated for domestic carriers‘ tarmac contingency plans.

The estimates of benefits incorporate two key assumpt ions:

The distribution of on

- tarmac delays among foreign carriers‘ flights to and from U.S. airports is identical to the distribution of reporting domestic carriers‘ flights

. 40



### The rate of increase in flight cancellations due to the implementation of cont ingency plans is similar to the incremental cancellation rate for domestic carriers‘ due to contingency plan requirements

. 41



### The estimated benefits for the proposed requirement are as follows:

Table 12

- Illustration of Benefits Estimation for First Year, Requirement 1

2011

Monetized Time Saved from Comfort (1+ hour delays) $33,949

Monetized Time Saved from Access (2+ hour delays) $179,020

Monetized Time Saved from Comfort (5+ hour delays) $501

Monetized Savings from Added Coordination with CBP $ 0
Monetized Benefits from Coordination w/ Additional Airports $7,984

Monetized Benefits from All Components $221,454

Total Component Benefits (millions) $0.23

39 Estimates of the likely number of flights that would exceed each of the time limits (or triggers) for both arriving and departing flights a re needed for these calculations, but the BTS does not currently collect these data from foreign carriers. Therefore, the distribution of arriving and departing flights of US reporting carriers by the length of

on

- tarmac delay was applied to the numbers of flights operated by foreign carriers. Because carriers would be able to set the time limit for deplaning and the difficulties associated with cancelling international flights, the proposed requirement is expected to result in very few additional flight ca ncellations (see the source notes in the Appendix for

additional detail s )

. 40 Data for the distribution of flights by length of on

- tarmac delay are not available for foreign carriers, which are not required to report on

- time statistics to BTS.

41 The propose d requirement allows a foreign carrier to determine what the time

- limit for deplaning will be, as long as it is made available on its website beforehand, which gives the carrier greater flexibility in limiting cancellations.Preliminary Regulatory Analysis 1029

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### A complete presentation of the procedures used to calculate these benefits is provided i n the attached appendix.

Adoption of this proposed requirement 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 on

- board delays could lead to heightened sensitivity to additional delay costs among foreign carrier management. This could lead to improved management of dela yed flights, diversion schedules, and other flight management issues as carriers have additional incentive to avoid long on

- board delays.

Decreased Anxiety with Regard to Flying . Knowing that contingency plans exist may bring relief during long on

- board d elays and lower overall flight anxiety for some passengers, making some passengers less uneasy about 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 l ead 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 exte nded periods in close quarters.

Improved Overall Carrier Operations . Carriers may be able to improve general operati ons 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 unquantified passenger benefits.

Improved Customer Good Will towards Carriers . As the level of service provided by carriers improves a nd complaints decline, overall customer good will towards carriers should improve. Improved good will may lead to a slight increase in demand.

The Department is expressly soliciting comments regarding the estimation of the percentage of international fligh ts which are likely to have on

- tarmac delays of greater than two hours, greater than three hours, greater than four hours, and greater than five hours. The Department is also expressly soliciting 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 2 hours of on

tarmac delays and for the time spent in an airport instea d of on

- tarmac after an extended period

of time.Preliminary Regulatory Analysis 1029

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### 5.2. Expanded Reporting of Tarmac Delays

This requirement would result in more complete information being made to be available to Department, which could improve their ability to identify, analyze, and res pond to issues and enforcement matters relating to carrier adherence to tarmac contingency plans. Passengers may

also benefit from the BTS making available delay statistics from more carriers of air travel. However, it is not possible to quantify the benef its from these improvements in data coverage and availability.

Since these data will be used for tarmac delay reports published by the BTS, it is also possible that benefits may accrue to consumers as they become more aware of the range of incidents of

lo ng on

- tarmac delays and adjust their purchasing decisions. Such a scenario would result in improved performance among carriers, especially among international carriers who may set a

time limit for on

- 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 on

- board delays could generate increased negative passenge r 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 incen tive to avoid long on

- board delays.

5. 3 . Minimum Standards for Customer Service Plans

The Department believes that the proposed minimum standards will assist carriers in better preparing their customer service plans and decrease confusion among carrier an d consumers as to the Customer Service Plans requirements. Since there has not yet been an opportunity to assess the impact of Customer Service Plans for domestic carriers, benefits for the new guidelines have not been estimated yet.

Regarding the require ment that foreign carriers have customer service plans, it is assumed that adoption of a customer service plan will improve the level of service provided. As noted in the Regulatory Impact Analysis for Enhance Airline Passenger Protections, a review of dat a from

domestic carriers that were self

- auditing compliance with customer service plans previous to the proposed rule showed a greater reduction customer complaints beginning in the two years after adoption of self

- auditing than for carriers that did not a udit in the same time frame. 42 

### 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. A preliminary estimate of bene fits from requiring foreign carriers to implement and self audit

-

42 For carriers implementing se lf audits of adherence to customer service plans, complaints decline in the 2 years following implementation by 39%. During the same years, carriers that did not self

- audit saw only a drop of 19% in complaints. New self auditing carriers are expected to se e a 10% decline in complaints, or half the difference in historical complaint rates between previously self

- auditing carriers and other carriers. See the appendix for more

details.Preliminary Regulatory Analysis 1029

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### customer service plans is presented using a premium on the value of that trip (represented by average ticket price) of 0.05 4 : 43

Table 13

- Illustration of Benefits Estimation for First Year, Requirement 3

2011
Number of Complaints (Foreign Carriers) 1,275

Complaint Multiplier (ratio of higher # of complaints received by carriers vs. sent to BTS) 61

Number of "Ground Level" Complaints 77,775

Percentage Reduction of Complaints by Impleme nting CSP 20%

Reduction in Complaints 15,555

Benefits from Premium on Complaint Free Air Travel

Premium on Foreign Flights for Complaint

- Free Travel 1.054
Average Price of Airfare (Domestic) $316.44

Average Price of Airfare (International) $1,955.0 0

Percentage of Foreign Carriers PAX that Fly Domestic

Routes 0.75%

Weighted Average Air Fare $1,942.69

Average Savings per Complaint Free Flight per Complaining
Passenger $97.13

Benefits from Loss of "Bad Experience" Trips $755,463

Total Componen t Benefits (millions) $0.76



### Adoption of this proposed requirement may provide several additional categories of potential benefits that could not be quantified in this regulatory evaluation, including the following:

Decreased Confusion and Uncertainty Re garding Department’s 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 custom er service plans. The decrease in confusion may also lead to less time spent by carriers 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 shows that carriers that 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 p assengers, including better baggage handling, fewer ticketing errors, less discrimination and other problems for passengers. Carriers

43 This approach requires several assumptions that may be misleading, includ ing: that each avoided complaint affects one individual flight in equal proportion to all complaints; that premiums on the comfort of travel are applicable to all customer complaints, including problems with fares, ticketing, discriminatory events, delayed flights, etc.; and that complaints are equally distributed for all trip lengths and should therefore be considered preliminary and open to public comment.Preliminary Regulatory Analysis 1029

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### are providing service in a better manner to consumers, but the value of this change is

difficult to estimate.

Improved Cu stomer Good Will towards Carriers . Simply having standards to which all carriers can refer may, by itself, lead to improvements in overall customer satisfaction more quickly and more efficiently than without the standards. This effects would, in turn, le ad to greater customer good will sooner than would otherwise be the case, and/or a decrease in costs as carriers implement and manage adherence to their customer service plans.

5. 4 . Incorporation of Tarmac Contingency Plans and Customer Service Plans

into Contracts of Carriage

It was not possible to develop quantitative estimates of b enefits for this requirement. However, i t is possible that simply incorporating the customer service plan into the contract of carriage, independent of any action to audit adh erence to that plan, will cause customer service to improve. Carriers will be required both to incorporate their customer service plans into their contracts of carriage and to self

- audit their adherence to those plans. There are sufficient examples of carr iers that have adopted an audit of their customer service plan to estimate the impact of such action on overall customer service, but not enough information to track the impact of incorporating those plans into the contract of carriage.

5. 5 . Requiring For eign Carriers to Respond to Customer Complaints

The benefits of this provision include reduced barriers to filing a complaint, saving time

, and increasing satisfaction due to more prominently displayed complaint filing information. Quantitative benefits associated with reducing time required to file a complaint, which includes time spent locating the appropriate address to send the letter or email but not the resolution of complaints, are estimated in the same manner as for domestic carriers under the pre vious regulation.

Table 14

- Illustration of Benefits Estimation for First Year, Requirement 5

2011
Number of Complaints (Foreign Carriers) 1,275

Complaint Multiplier (# of Complaints not filed actually received by Carriers) 61

Number of "Ground Lev el" Complaints to Foreign Carriers 77,775
Benefits from Increase in Consumer Surplus

Percent Change in Cost of Complaining 3.23%

Elasticity of Cost of Complaining 1.07

Percentage Increase in Complaints 3.47%

Incremental Increase in Number of Complai nts 2,698

Decrease in the Cost of Complaining $0.32

Benefits from Increase in Consumer Surplus $432

Total Component Benefits (millions) $0.00Preliminary Regulatory Analysis 1029

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### As with passengers on domestic carriers covered under the EAPP1 Final Rule , passengers on flights of fore ign 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. However, t his analysis does not include a quantitative analysis of increased satisfaction from these responses because of a lack of information about likely carrier responses and the degree of impact on consumers. The De partment is expressly so liciting comments regarding estimating the dollar value to customers of receiving a response to their complaint which acknowledges the issues involved

, instead of a more generic acknowledgement of the

communication.

5.6. Changes in Denied Boarding Compensation (DBC) Policy

Several of the proposed changes in the current DBC policy would increase the amounts paid by carriers to passengers who are bumped involuntarily from oversold flights. However, any benefit to passengers in the fo rm of higher DBC compensation payments would be offset by a cost to carriers of the same amount. As such, the value of these additional payments represents a transfer from carriers to passengers and not a net economic benefit of the proposed requirements.

It is possible that some passengers

— those who feel that all the costs of a trip (including monetary outlays, time, risks of travel, etc

. ) just barely outweigh the benefits

— may decide that the improved DBC policies make travel more comfortable or less ris ky and decide to purchase a ticket or a trip that otherwise would not have occurred. This would lead to increased economic activity, which would represent a net benefit to the rule, but more data and research are needed before estimating such benefits.

I t is also possible that carriers may reduce overbooking rates on some flights in response to the potential increase in DBC compensation costs. However, while fewer passengers would be involuntarily bumped in this scenario, it is likely that other passenger s would now not be able to purchase tickets and ultimately travel on their preferred flight s since fewer tickets would be sold. A reduction in involuntary bumping would generate an increase in social welfare, and reduction

in being able to travel on prefe rred flights would result in a loss of social welfare. It is likely that the negative impact would outweigh the positive impact, since involuntary bumping is required to resolve overbooking on only a small percentage of all flights that are oversold.

Ho wever, adequate information to calculate the costs and benefits of this potential impact has not

been located and therefore no estimates of the positive or negative benefits resulting from changes in overbooking rates are included in this evaluation

.

Adop tion of this proposed requirement may 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

requ irement 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 an ample opportunities for confusion.Preliminary Regulatory Analysis 1029

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### Decreased Resentment among Some Passengers Regarding Different Compensation

Received . Under current guidelines, some passengers on the same flight and entitled to

the s ame amount of compensation may unwittingly chose different methods of compensation and resent what that other passengers received (such as cash).

5. 7 . Required Disclosure of Full Fares in Advertising and Prohibition on Opt

Out Provisions in Ticket Sales

Passengers benefit from full

- fare advertising in one of two ways: either by making more informed, and thus ― better ‖ purchasing decisions

, or by saving time searching for the full

- fare in individual or across multiple websites. Passengers are assumed to fal l into one of two categories: 1) those who visit multiple ticketing websites to ensure that they can adequately compare prices with all fees and taxes across the universe of websites (some of which include all taxes and fees and some of which do not) , rath er than comparing currently displayed fares (some of which do not include these taxes and fees) and 2) passengers who do not seek and review pricing data on multiple websites to compare all available prices inclusive of taxes and fees. The first group is

referred to as Multi

- Site Shoppers regarding Taxes and Fees ; the second as One

- Site Shoppers or Non

- Shoppers regarding Taxes and Fees . Only those passengers who purchase tickets online would benefit from this provision of the rule.

Under the proposed ru le, passengers who already search for full fare information and compare ticket prices among carriers, the Multi

- Site Shoppers regarding Taxes and Fees 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 the provision will not eliminate the value of comparison shopping across websites for prices, it will simply eliminate the need to search multiple websites for the best fares including all taxes and fees and/or the need for

additional time to collect full

- fare information on website sites that do not provide full

- fare prices up

- front (such as sites requiring a consumer to select a flight and continue partially through the purchase process i n order to see the full

- fare price).

The analysis uses estimates of domestic travelers and the proportion of tickets purchased online to estimate the total number of consumers who could potentially benefit . We estimate benefits for that portion of the t ravelers assumed to be Multi

- Site Shoppers and the portion who are

assumed to be as One

- Site Shoppers or Non

- Shoppers regarding Taxes and Fees . The Multi

- Site Shoppers regarding Taxes and Fees are assumed to be shopping for an average of 2.6 people,

which is the average travel party size on commercial airlines. The number of tickets purchased online is therefore divided by 2.6 to arrive at an estimate of the number of persons searching multiple web sites and making purchases. The analysis assumes that th ese purchasers would save an average of 5 minutes of search and/or estimation time if all websites presented full

- fare information up

- front. This time saving was multiplied by a value of time derived from the US 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 Source Notes and Appendix for greater detail).Preliminary Regulatory Analysis 1029

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### While independent data is available on the percentage of air passengers who purchase tickets on

line 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 verage amount of time that these consumers would save if all websites presented full

fare information up front.

The estimate of 2 percent of online purchasers searching multiple websites is a conservative estimate prepared for this analysis. The likely amount of search time that would be saved has

been estimated from a review of online purchase websites. The Department is specifically seeking comment on whether these estimates are appropriate and if other, better estimates are available ( s ee the s ource n otes section of the Appendix for more information).

Of the other passengers who do not full y

- search online carrier websites and online travel agencies to ensure that they are making decisions based upon the entire fare, some make a suboptimal choice and purchase air travel at a price higher than desired. A consumer surplus methodology is used with estimates of consumer price sensitivity for airfare, to estimate what is essentially a ― deadweight loss ‖ arising from some consumers at the margins making purchases at a price higher than is optimum. Using estimates of price sensitivity (pric e elasticity), the change in demand due to the increase in full fare due to the undisclosed taxes and fees is estimated, and the value of reduced efficiency from non

- equilibrium purchases is estimated.

The number of potentially affected ticket purchases w as derived from the total number of travelers, adjusted to reflect the proportion of tickets purchased online, and purchasers who searched multiple websites (noted above). This figure was further adjusted by a conservative

estimate that 90 percent of thes e consumers are already purchasing fr om a website which is compliant or may adjust their purchase between different carriers. The analysis does not attempt to value the adjustment of consumer purchases from one carrier to another.

While no evidence was f ound directly measuring the differential impact that the timing of the appearance of the full

- fare purchase price would make on air ticket purchaser decisions, research on the impacts in similar situations demonstrates that the timing of the presentation o f the full

price can have substantial impacts on the final demand. One 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 shel f ( i.e. when first encountering the opportunity to select the product for purchase ) led to an overall decrease in purchases by 8

percent , even though demand for groceries is relatively more inelastic (i.e. less sensitive to unit changes in price) than dema nd for air travel. 44



### This analysis uses a more conservative method of estimating the impact of full

- fare advertising

than the 8 percent decline in demand noted above. A national elasticity of

- 0.4 estimated by the

44 Raj Chety, Adam Looney and Kory Kroft, ―Salience and Taxation: Theory and Evidence,‖ American Eco nomic

Review , 2009.Preliminary Regulatory Analysis 1029

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### International Air Transport Association (―Air Travel Demand‖) was used together with average ticket prices and the costs of fees which are not currently required to be included when prices are first posted in order to estimate average change in price and resulting reduction in demand that

would occur ( estimated at 2 percent ) from full

- fare pricing up

- front. 45

Table 15

- Illustration of Benefits Estimation for First Year, Requirement 7

2011

Number of Tickets for Domestic Flights Sold by Reporting Carriers 236,903,727

Percentage of PAX using U.S . Domestic Reporting Carrier 88%

Number of Total Passengers on Domestics Flights 270,251,225

Percentage of Domestic Passengers to Total Passengers on U.S. Carriers(Dom & Int) 87%

Number of Total Tickets for U.S. Carriers 310,434,804

Percentage of PAX using internet for Airfare Purchase 72%

Tickets Purchased on Websites to Purchase Airfare 223,513,059

Multi

- Site Shoppers r egarding Taxes and Fees

Passengers Who Research Airfare Prices on Multiple Websites for

lowest Taxes and Fees 2%

Passengers Wh o Benefit from Amending Price Advertising 4,470,261

Average Travel Trip Party Size 2.6
Passengers Who Benefit from Amending Price Advertising per Trip Party 1,719,331
Value of Time for Passenger (Personal Non

- Traveling) $24.15

Average Incremental Time Spent by Savvy Passengers finding Taxes and Hidden Fees (hours) 0.08

Average Cost per Search per Passenger for Airline Taxes and Fees $2.01

Monetized Time Saved from Reduction in Search Cost $3,460,154

45 D erived from data in the BTS American Travel Survey; see s ource n otes in the Appendix for greater detail

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### Table 15, ctd.

- Illustration of Benefits Esti mation for First Year, Requirement 7

2011

One

- Site Shoppers or Non

- Shoppers r egarding Taxes and Fees

Passengers 219,042,798

Percentage of Passengers Using Websites Already Presenting Full

Fare 90%

Passengers Benefit from Amending Price Advertising 21,904,280
Percentage of Total Price of Taxes Revealed (Price Increase) 5%
Average Price of Airfare (Domestic) $316.44

Average Price of Airfare (International) $1,955.00

Percentage of Passengers in U.S. Carrier Flights that are Domestic Flights 87%

Weight Average Airfare for Passengers of U.S. Domestic Carriers $528.54

Revelation in Price ("Increase in Price") $26.43

National Level Elasticity for Air Travel Demand

- 0.4

Percentage Decrease in Demand

- 2%

Decrease in Passengers 438,086

Monetize d Benefits from Elimination of Dead Weight Loss $5,788,643

Multiplier to Account for 6

- Month Lag in Benefits 0.5

Total Component Benefits (millions) $4.62



### A complete presentation of the procedures and formulas used to calculate these benefits is

prov ided in the attached appendix.

The full

- fare advertising requirement may also i mprov e c ustomer g ood w ill t owards c arriers. With all carriers consistently providing full

- fare advertising to consumers, customers may perceive the carriers are t reating 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 amenit y
, some customers mistakenly make a purchase they did not want or intend. Some customers may misunderstand or simply miss the fact that an op

- out feature is an

additional , opti onal purchase. By prohibiting op t

- outs for additional services and amenities, this provision will increase consumer welfare by decreasing unwanted purchases. While the nature of this effect is well understood, adequate information needed to estimate th es e benefits has not yet been found.

The Department is expressly soliciting comments regarding the estimation of several factors in the estimation of benefits for this provision, including that average search time saved for

passengers who already search for full fare information ; the percent of passengers who spend time searching websites to find full fare ticket information; the percent of online ticket purchasers who purchase only from websites which provide full

- fare pricing up

- front; the percent of passen gers who are fully aware of added fees and taxes when purchasing tickets from

web pages that do not automatically display that data up front ; t he likely change in demand forPreliminary Regulatory Analysis 1029

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### those passengers not aware of taxes and fees until the end of the purchase process ; and the percentage of airline customers who purchase additional services and amenities due to an opt

- out feature who would otherwise not have made that purchase.

5. 8 . Expanded Disclosure of Baggage Fees and Other Optional Fees

Insufficient data was foun d to adequately estimate the benefits from adoption of this proposed requirement. However, the provisions included in requirement 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 on line at the time of purchase. In such cases, some passengers may be delayed at check

i n 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 increases time spent waiting for those later in line. Ensuring that baggage fees are prominently displa yed will minimize such problems.

Improved Customer Good Will towards Carriers . With all carriers consistently providing full information regarding checked baggage fees to consumers in a conspicuous placement, customers may perceive that carriers are treati ng 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 currently fully aware of baggage fee chang es currently and become so due to the proposed rule, a portion of those 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.

5. 9 . Prohibiti on on Post

- Purchase Fare Increases

The Department has determined that currently, carriers are essentially already compliant but that some tour operators who provide packages which include air transportation (plus cruises, hotel,

etc

. ) may not be . Benefi ts from this provision accrue from the increase certainty in 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 certain ty to the pa ssenger. 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 air travelers.Preliminary Regulatory Analysis 1029

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- Illustration of Benefits Estimation for First Year, Requirement 9

2011

N umber of Tickets for Domestic Flights Sold by Reporting Carriers 236,903,727

Percentage of PAX using U.S. Domestic Reporting Carrier 88%

Number of Total Passengers on Domestics Flights 270,251,225

Percentage of Domestic Passengers to Total Passengers on U.S. Carriers(Dom & Int) 87%

Number of Total Tickets for U.S. Carriers 309,829,668

Percentage of Passengers Who Purchase Airfare Outside of The

Internet 28%

Number of Passengers Who Purchase their Airfare on Travel

Websites 86,752,307

Percentage of No n

- Internet Using Passengers Purchasing Through

Carriers 80%

Number of Passengers Who May Benefits from Prohibition of Post

Purchase Increase 17,350,461

Benefits of Certainty

Value of Time for Passenger (Personal Non

- Traveling) $24.15

Premium on Cert ainty of Purchase 1.01

Incremental Savings per Passenger per Hour 0.24

Average Amount of Time Spent Purchasing Airfare 0.17

Average Savings per Passenger $0.04

Monetized Benefits of Certainty $698,356

Total Component Benefits (millions) $0.70



### 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 non

carrier travel organizations such as ticket agents and tour operators.

The Department is expressly soliciting comments regarding the estimation of the appropriate premium on the value of air ticket purchasers ‘ time from the certainty that there will be no post

purchase price increase, as well as the estimation of the average amount of time to purchase

ticket. In addition, the Department is interested in comments on other methodologies to value the benefit to consumers of knowing that their tour package price is a final price.

5.10. Prompt Passenger Notification of Flight Sta tus Changes

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 passengers) to leave a smaller margin of safety in choosing what time to leave for the airport,Preliminary Regulatory Analysis 1029

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### 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 the proposed requirement. Consequently, it is not possible to develop quantitative estimates of the benefits that passeng ers would receive from any changes in the

p romptness with which carriers notify travelers about flight status changes

.

5.11. Limitations on Venue Provisions in Contracts of Carriage

The benefits from this provision include avoidance of cost that some cl aimants may incur to

travel to other states or for hiring out

- of

- state lawyers

. In addition, some lawsuits with merit may not be filed because of the financial and time costs of filing in another state and potentially having to travel there for adjudicatio n. The courts of law are one avenue of ensuring appropriate company conduct toward consumers. By adding limits as to where a lawsuit can be filed, carriers may stifle the number of legitimate lawsuits filed. If legitimate lawsuits act as a

deterrent to unlawful corporate behavior, it is possible that their limitation may lead to an increase in some inappropriate or unlawful actions unchecked.



## 6

. Estimated Costs of Proposed Requirements

This section presents the methodology used to evaluate the costs f or each of the proposed requirements in the NPRM; preliminary estimates for the components that could be evaluated quantitatively; and descriptions of the costs for which no quantitative estimates could be developed.

The costs for domestic carriers to com ply with R equirements 1 (tarmac contingency plans), 3 (customer service plans), and 5 (complaint response) were estimated in the regulatory evaluation

for the EAPP1 Final Rule. The costs estimates in this analysis assume that the per

- carrier costs of comp liance are equal for domestic and foreign carriers.

Per

- hour costs for various categories of carrier, travel agent, and tour operator employees were estimated using BLS wage rates, increased by 30 percent to reflect fringe benefits (per FAA guidance), and rounded up to the nearest $5 increment. A mark

- up of 150 percent was applied to each of these per

- hour cost estimates to account for supervisory and management communication, training, and oversight time, as well as corporate overhead.

6.1. Additional R equirements for Tarmac Delay Contingency Plans

Foreign carriers (other than Air Canada) 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 rema ins on the tarmac. In Section 3.1 we estimated that t hese carriers would

have need ed to apply these plans to respond to an expected average of 2 22 tarmac delays of 2 or

more hours in 2009

. About nine of these delays would have extend ed to the 4

- hour mark , and a delay of 5 hours or more can be expected to occur once every 9 months

. In the baseline scenario,Preliminary Regulatory Analysis 1029

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### we have assumed that foreign carrier contingency plans will contain a 5

- hour time limit after which passengers must be afforded the opportunity to depl ane in the absence of any Department

specified threshold. Costs were also estimated for an alternative scenario in DOT sets a 4

- hour maximum limit to deplane passengers in foreign carrier contingency plans (Alternative A) and for a scenario in which compl iance with this requirement is limited to foreign carriers that operate flights to and from the U.S. using at least one plane with more than 60 seats (Alternative B)

. 46



### 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.

Per

- person costs to provide adequate food, water, and lavatory facilities and medical attention. The per

- person cost to provide adequate food and water was assumed to be $3.71. 47



### 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 m inute by plane size.

Per

- person costs were also calculated for passengers deplaned on the tarmac and transferred to the terminal by bus. Airport boarding and deplaning fees were included in the unit costs for both groups of passengers.

For this analysis, we have assumed that the unit costs for foreign carriers to comply with the proposed requirements would be equal to those estimated for domestic carriers in the regulatory

evaluation for the EAPP1 Final Rule, as follows:

Table 17

- Unit Costs for Require ment 1

Base Low High

Fixed costs of developing tarmac delay contingency plan, per

- carrier $22,500 $11,250 $45,000

Fuel costs of tarmac delay contingency plans (4+ hours with reboarding), per

- flight $176.48 $88.24 $352.96

Per

- passenger costs of tar mac delay contingency plans (2+ hour delays) $3.71 $1.86 $7.42

Additional per

- passenger costs of tarmac delay contingency plans (4+ hours with reboarding) $2.74 $1.37 $5.48

Source: DOT, “ F inal Regulatory Impact Analysis of Rulemaking on Enhanced Airline Passenger Protections,” December 17, 2009.

46 All but the few smallest foreign carriers would be required to have tarmac contingency plans under this

alternative.

47 C arr ier costs for servicing toilets are expected to be minimal. Th is analysis assumes that no increase in on

- board medical personnel or equipment will be needed to comply with the proposed requirement

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### Based on these estimates and assumptions, costs incurred by affected carriers to comply with proposed R equirement 1 in the base case are expected to be $ 2. 0 9 8 million in 2011 and $ 1 47 ,8 04

in 2012

.

Table 18

- E

stimated Compliance Costs for Requirement 1

2011 2012

Development of contingency plan

Number of foreign carriers without compliant contingency plans 87

Cost per carrier of developing contingency plan $22,500

Cost of developing contingency plans $1,957,500 $0

Variable costs of tarmac delay contingency plans

Average number of passengers per segment, non

- Air Canada foreign carriers 165 165

Projected tarmac delays of 2+ hours, non

- Air Canada foreign carriers 214 218

Passengers affected by tarmac delays of 2+ hours on non

Air Canada foreign carriers 37,865 39,607

Per

- passenger costs of tarmac delay contingency plans, all delays $3.71 $3.71

Projected tarmac delays of 5+ hours, non

- Air Canada foreign carriers 1.3 1.3

Passengers affected by tarmac delays of 5+ hours on non

Air Canada foreign carriers 222 232

Additional per

- passenger costs of tarmac delay contingency plans, 5+ hour delays with reboarding $2.74 $2.74

Per

- flight fuel costs of tarmac delay contingency plans, 5+ hour delays w ith reboarding $176.48 $176.48

Variable costs of tarmac delay contingency plans $141,309 $147,804

Total costs of tarmac delay contingency plans $2,098,809 $147,804

Note: Number of flights and passengers incurring tarmac delays increases in subsequent ye ars by the growth rates for international passengers and flights projected in the 2009 FAA Aerospace Forecast.



### T he estimated costs incurred by affected carriers to comply with proposed R equirement 1 are slightly higher in the A lternative A scenario and slightly lower in the Alternative B scenario

.

6.2. Expanded Reporting of Tarmac Delays

In Section 3.2 we estimate d that in 2009 there were 264 3

- hour tarmac delays on flights operated by non

- reporting U.S. carriers and 61 on flights operated by foreign carriers that would have to be reported to the BTS under Requirement 2

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### Reportable tarmac delays on domestic flights occurred at a rate of about 1 3 per 100,000 departures in 2009. Carriers that expect to report an average of 1 tarmac delay monthly (i.e.,

those that have more than 100,000 departures annually) are assumed to set up systems to program the collection and transmission of tarmac delay data in an electronic format suitable for

submission to the BTS. There are 10 non

- reporting U.S. carriers and o ne foreign carrier that would be expected to exceed this threshold number of reportable tarmac delays annually. 48



### For this analysis, we have utilized the following estimates of per

- carrier costs for the steps that would be required to achieve compliance wi th the provisions in proposed R equirement 2:

Table 19

- Unit Costs for Requirement 2

Base Low High

Set

- up costs to program flight delay data in BTS format (first year) $35,000 $10,000 $60,000

Annual costs to maintain/update
programming (future years) $3,500 $1,000 $6,000

Per

- report costs for data collection, form completion and review, and forwarding to BTS (first year) $1,200 $600 $1,800

Per

- report costs for data collection, form completion and review, and forwarding to BTS (future year s) $600 $300 $900

Sources: Set

- up costs for programming are from RIA in RITA

- 2007

- 28522

- 0012. Per

- report cost based on $30/hour in direct labor wages and benefits, $45/hour for management
review and corporate overhead.

48 The affected carriers would include five regional carrie rs that provide passenger service using at least one aircraft with 61 or more seats (Colgan, Horizon, Mesaba, PSA, and Republic) and five carriers that operate at least one aircraft with 30 to 60 seats (Air Wisconsin, Cape Air, Chautauqua, Piedmont, and Tr ans States). It is possible that Piedmont would be able to report through its parent company (US Airways). Among foreign carriers, only Air Canada/Air Canada Regional would be expected to have an average of 1 or more reportable tarmac delays monthly.Preliminary Regulatory Analysis 1029

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### Based on these estimates and assumptions, cost s incurred by affected carriers to comply with proposed R equirement 2 are expected to be $ 796,309 in 2011 and $ 248,473 in 2012

.

Table 2 0

- Estimated Compliance Costs for Requirement 2

2011 2012

Automated reporting system (carriers w ith >100k departures/year)

Cost of initial system setup $35,000 $0

Maintenance/update costs per year $0 $3,500

Number of carriers not currently reporting with >100k departures/year 11 11

Total cost of automated reporting system $385,000 $38,500
Filing individual reports (carriers with <100k departures/year)

Cost per hour of reporting $75 $75

Hours required per report 16 8 Reportable tarmac delays per year, non

- reporting US

carriers 278 284

Reportable tarmac delays per year, foreign carri ers 65 66

Total cost of filing individual reports $411,309 $209,973

Total cost of reporting tarmac delays $796,309 $248,473

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.



### 6. 3

. Minimum Standards for Customer Service Plans

The 88 foreign carriers that are not subsidiaries of other foreign carriers would have to develop, implement, and self

- audit compliance with customer service plans (CSPs) that meet the minimum standards set forth in the proposed requirement. The regulatory evaluation for the

EAPP1 Final Rule provided separate compliance cost estimates for large and small domestic U.S. carriers. We have adopted a similar treatment h ere, assum ing that the 10 foreign carriers that boarded at least one percent of all international passengers (about 150,000 enplanements) in

2008 would need to develop and implement more extensive CSPs. The Department is soliciting

comments as to whether t his size

- based distinction appropriately captures the likely extent of variation in compliance costs among foreign carriers.

Per

- carrier compliance costs to develop and self

- audit acceptable CSPs are assumed to be equal

to those estimated for domestic car riers in the RIA for the EAPP1 Final Rule:Preliminary Regulatory Analysis 1029

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- Unit Costs for Requirement 3

Base Low High

Develop and implement CSP (large carriers) $35,000 $17,500 $70,000

Develop and implement CSP (other carriers) $3,850 $1,925 $7,700

Annual cost of C SP self

- audit (large carriers) $56,800 $28,400 $113,600

Annual cost of CSP self

- audit (other carriers) $6,248 $3,124 $12,496

Source: DOT, “ F inal Regulatory Impact Analysis of Rulemaking on Enhanced Airline Passenger Protections,” December 17, 2009. Large carriers are those with at least 1% of passengers on international flights to and from the United States.



### Based on these estimates and assumptions, costs incurred by affected carriers to comply with proposed R equirement 3 are expected to be $1,705,644 i n 2011 and $1,055,344 in 2012

.

Table 2 2

- Estimated Compliance Costs for Requirement 3

2011 2012
Cost of developing customer service plans (CSPs)

Number of large foreign carriers (>1% of international passengers) 10 10

Number of other foreign ca rriers 78 78

Cost of implementation, large foreign carriers $35,000 $0

Cost of implementation, other foreign carriers $3,850 $0

Annual self

- audit, large foreign carriers $56,800 $56,800

Annual self

- audit, other foreign carriers $6,248 $6,248

Total cos t of customer service plans $1,705,644 $1,055,344



### 6. 4

. Incorporation of Tarmac Contingency Plans and Customer Service Plans into Contracts of Carriage

Incorporating tarmac contingency plans and customer service plans into carrier contracts of carriage i s estimated to involve minimal administrative and website programming costs. In addition, the Department is not able to estimate the number of carriers that would incorporate these plans into their contracts of carriage voluntarily if this proposed requir ement was not adopted. Therefore, quantitative estimates of carrier compliance costs have not been developed for this provision.

6. 5

. Requiring Foreign Carriers to Respond to Customer Complaints

The 88 foreign carriers that are not subsidiaries of other foreign carriers would have to comply with the minimum standards for responding to customer complaints set forth in the proposed requirement. The regulatory evaluation for the EAPP1 Final Rule provided separate compliance cost estimates for large and sma ll domestic U.S. carriers. We have adopted a similar treatment here, assuming that the 10 foreign carriers that boarded at least one percent of all internationalPreliminary Regulatory Analysis 1029

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### passengers (about 150,000 enplanements) in 2008 would need to develop and implement more

exte nsive systems and procedures to handle complaints from customers on flights to and from

the United States . The Department is soliciting comments as to whether this size

- based distinction appropriately captures the likely extent of variation in compliance c osts among foreign carriers.

Per

- carrier compliance costs are assumed to be equal to those estimated for domestic carriers in

the RIA for the EAPP1 Final Rule:

Table 2 3

- Unit Costs for Requirement 5

Base Low High

Establish/upgrade complaint handl ing system and procedures (large carriers) $41,371 $20,686 $82,742

Establish/upgrade complaint handling
system and procedures (other carriers) $4,261 $2,131 $8,522

Per

- complaint cost to respond $1.85 $0.93 $3.70

Source: DOT, “ F inal Regulatory Impact An alysis of Rulemaking on Enhanced Airline Passenger Protections,” December 17, 2009. Large carriers are those with at least 1% of passengers on international flights to and from the United States.



### Based on these estimates and assumptions, costs incurred b y affected carriers to comply with proposed R equirement 5 are expected to be $ 860,905 in 2011 and $ 114,837 in 2012

.

Table 24

- Estimated Compliance Costs for Requirement 5

2011 2012

Cost of responding to complaints

Number of large foreign carrier s (>1% of international passengers) 10

Number of other foreign carriers 78

Cost of implementation, large foreign carriers $41,371

Cost of implementation, other foreign carriers $4,261

Cost of implementing response systems $746,068 $0

Number of complaints 64,099 67,048

Per

- complaint response cost $1.85 $1.85

Cost of responding to individual complaints $118,583 $124,038

Total cost of responding to complaints $864,651 $124,038

Note: Number of passengers complaining increases in subsequent year s by the international passenger growth rate projected in the 2009 FAA Aerospace Forecast.



### 6.6. Changes in Denied Boarding Compensation (DBC) Policy

As noted in Section 5.3, any increases in the amount of DBC that would be paid under these proposed ame ndments represent transfers from carriers to passengers, rather than actualPreliminary Regulatory Analysis 1029

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### economic costs and benefits. However, there are also real economic costs associated with implementing changes in the DBC policy and updating the maximum amounts payable on a bi

an nual basis. These costs will be higher in the first year than in subsequent years because the proposed changes to the current DBC policy include new provisions relating to zero

- fare tickets and verbal explanations provided to passengers who may be involunt arily bumped from oversold flights.

The 2008 BTS P

- 10 schedule data on airline employment indicate that there were approximately 9 4

, 00 0 people employed in ―passenger handling‖ positions, a category which includes reservations staff (both at airports and in call centers), ticket agents, gate or boarding attendants, and airport lounge staff, but not flight

- related or baggage handling employees. For this analysis we have assumed that carriers will need to train and communicate with one

quarter of these employ ees to implement the new DBC policy in the first year. We have assumed that half as much 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 bien nially in alternating future years. 49



### For this analysis, we have utilized the following estimates of per

- employee costs for the steps that would be required to achieve compliance with the provisions in proposed Requirement 6 :

Table 2 5

- Unit Costs for Requi rement 6

Base Low High

Cost per gate attendant for communication and training (first year changes to DBC policy) $10.00 $5.00 $20.00

Cost per gate attendant for communication and training (biennial updates to maximum DBC amount) $5.00 $2.50 $10.00

Source: Per

- employee cost based $60/hr in direct labor wages and benefits, $90/hour for
management review and corporate overhead.

49 F or this analysis, the Department has assumed that any bi

- annual changes in the maximum DBC limit will be made using the July CPI

- U and become effective on January 1 st 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.Preliminary Regulatory Analysis 1029

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### Based on these estimates and assumptions, costs incurred by affected carriers to comply with proposed Requirement 6 in the base case are expected to be $235,000 in 2011 and $117,500 in each future year in which the maximum DBC limit is increased.

Table 2 6

- Estimated Compliance Costs for Requirement 6

2011 DBC Update

Years*

Training costs for gate agents

Minutes requ ired to train agents on zero

- fare and verbal notification DBC policy changes 10 0

Minutes required to train agents on biennial DBC inflation adjustments 0 5

Cost per hour of training (gate agent wages + overhead including supervisory review time) $60 $60

Number of gate agents 23,500 23,500

Total cost of training gate agents $235,000 $117,500

* "DBC Update Years" are those years in which the maximum amount of DBC will be adjusted, starting 2013 and biennially thereafter.



### 6. 7

. Required Disclosure o f Full Fares in Advertising and Prohibition on Opt

Out Provisions in Ticket Sales

Compliance costs would be incurred to revise both online and print media advertising by carriers, travel agents, and tour operators that do not currently display in their ad vertising and

solicitations full fares that include all applicable taxes and fees. 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. In the base case analyzed in this evaluation, sellers of air transportation will need to ensure that any new print advertising developed after the rule date will need to comply with the proposed requirement, but will be able to distribute advertising already in produ ction or distribution until the effective dat e for 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 transpor tation being sold, or are not expected to remain in circulation by the effective date of the rule. 50 

### We also estimated costs

for an alternative scenario (Alternative D) in which 25 percent of current print media advertising

materials would have to be revise d

.

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 small er per

- firm costs to revise print advertising materials.

50 For example, advertising for spring break travel packages that does not reflect full fares for any air travel could be distributed after an assumed rule publication date of January 1, 2010, as long as it did not offer tours that could be booked 180 days later.Preliminary Regulatory Analysis 1029

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### The unit costs for revising online and print adv ertising materials to comply with the proposed requirement are as follows:

Table 2 7

- Unit Costs for Requirement 7

Base Low High

Website reprogramming to display full fares,

remove any opt

- outs (large firms) $12,000 $6,000 $24,000

Website reprogrammi ng to display full fares,

remove any opt

- outs (small firms) $3,000 $1,500 $6,000

Modify print media advertising (large firms) $12,000 $6,000 $24,000

Modify print media advertising (small firms) $3,000 $1,500 $6,000

Source: Unit cost for both web program ming and print advertising assumed to be $60/hr in direct labor wages and benefits, $90/hour for management review and corporate

overhead.



### It should be noted that t hese per

- advertiser cost estimates do not include costs for carrier, travel agency, and to ur operator websites to bring the price displays on their online flight selection pages into compliance with current Department guidelines and enforcement policy ( s ee the

discussion in Section 2. 7 )

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### Based on the base case estimates and assumptions, costs incurred by affected carriers to comply with proposed R equirement 7 are expected to be $ 6.86 million in 2011

. Of this total, $5.4 million is associated with revisions to print media advertising materials. If the provisions in this requirement are applied o nly to carrier websites (Alternative C), then compliance costs would be much lower ($1.4 million in 2011). For the second alternative scenario (Alternative D ), compliance costs are estimated to be $15.0 million in 2001 ; $13.6 million of this total would be associated with revisions to print media advertising materials.

Table 2 8

- Estimated Compliance Costs for Requirement 7

2011 only

Reprogramming websites to show full fares
Number of large U.S./foreign carriers 110

Largest online travel agencies (OTAs) 4

Number of small/very small U

. S

. carriers (assume 1⁄2 have websites currently showing full fares, none have opt

- outs) 40

Hours required to reprogram noncompliant websites, large carriers/largest OTAs 80

Hours required to reprogram noncompliant web sites, small/very small carriers 20

Cost per hour of web programming (wages plus overhead including supervisory review) $150

Total cost of reprogramming $1,428,000

Modification of print advertising to reflect full fares
Number of large U.S./foreign c arriers 110
Largest online travel agencies (OTAs) 4

Number of other large online travel agencies/tour operators
(20+ employees) 923

Hours required to modify large firm print advertising 80

Number of small/very small U

. S

. carriers (assume 1⁄2 have
print a ds currently showing full fares, none have opt

- outs) 40

Number of offline travel agencies (tickets sold via GDS or other airline systems) 11,579

Number of offline tour operators (assume tickets not sold independently of package) 2,375

Hours required to modify small firm print advertising 20

Percentage of advertising requiring revision with effective date of 07/01/2010 (full

- fare only) 10%

Cost per hour of print advertising revision (wages plus overhead including supervisory review) $150

Total cost of revising print advertising $5,436,600

Total cost of revising websites and advertising $6,864,600Preliminary Regulatory Analysis 1029

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### No additional compliance costs w ould be incurred in subsequent years, as sellers of air transportation have the option of displaying full

- fare prices in all future advertising and

solicitations.

6. 8

. Expanded Disclosure of Baggage Fees and Other Optional Fees

Because most carriers already post notices on their websites with current fees for checked baggage and other optional products and services, the comp liance 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 changes. However, carriers may incur more significant costs to

program e

- ticket generato rs to display any checked baggage fees that may apply. The Department does not have extensive information about the likely magnitude of these costs

. For this analysis, we have utilized the following estimates of per

- carrier costs for the steps that would

b e required to achieve compliance with the provisions in proposed R equirement 8 :

Table 29

- Unit Costs for Requirement 8

Base Low High

Add/remove notice of increased baggage fees to website (1 time/year) $600 $300 $1,200

Program e

- tickets to includ e bag fees (one

time cost) $6,000 $3,000 $12,000

Post list of optional fees (1 time/year) $1,200 $600 $2,400

Source: Unit cost for both web programming and print advertising assumed to be $60/hr in direct labor wages and benefits, $90/hour for management review and corporate

overhead.Preliminary Regulatory Analysis 1029

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### Based on these estimates and assumptions, costs incurred by affected carriers to comply with proposed R equirement 8 are expected to be $9 06,000 in 2011 and $ 246,000 in 2012

.

Table 3 0

- Estimated Compliance Costs for Requi rement 8

2011 2012

Reprogramming websites after baggage fee increases
Number of large/small/foreign carriers 110 110

Hours required to update/post/remove increased fee

notices 4 4

Cost per hour of web programming (wages plus
overhead including supervisory review) $150 $150

Total cost of baggage fee disclosure updates $66,000 $66,000

Reprogramming e

- tickets to display baggage fees
Number of large U.S./foreign carriers 110

Hours required to reprogram e

- tickets 40

Cost per hour of web programming (wages plus overhead including supervisory review) $150

Total cost of reprogramming e

- tickets $660,000 $0

Reprogramming websites after optional fee increases
Number of large U.S./foreign carriers 110 110
Number of small/very small U

. S

. carriers 40 40

Hours required to update/post/remove increased fee

notices 8 8

Cost per hour of web programming (wages plus overhead including supervisory review) $150 $150

Total cost of optional fee disclosure updates $180,000 $180,000

Total cost o f posting baggage/optional fee information $906,000 $246,000



### 6. 9

. Prohibition on Post

- Purchase Fare Increases

M ost, if not all, domestic and foreign carriers are believed to be currently complying with this proposed requirement. Some travel agents an d 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. However, we have no information on the number of travel agents and tour operators that may engage in practices that would be proscribed by this requirement. In any event, it is unlikely that there are significant compliance costs

associated with refrain ing from imposing post

- purchase price increases on future purcha sers of air transportation and travel packages.Preliminary Regulatory Analysis 1029

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### 6.10. Prompt Passenger Notification of Flight Status Changes

The Department does not have information on the extent to which the 19 reporting U.S. carriers currently comply with the proposed requirement. C onsequently, it is not possible to develop quantitative estimates of the compliance costs, if any, that may be incurred by the carriers to which this requirement would apply.

6.11. Limitations on Venue Provisions in Contracts of Carriage

Air travelers ar e expected to be slightly more likely to pursue claims against carriers in the absence of venue restrictions in carrier contracts of carriage, because they would be able to avoid

the time and financial costs of out

- of

- state travel to adjudicate these claim s. However, the Department does not possess adequate information to estimate the costs associated with lawsuits that would be incurred by carriers.



## 7

. Results and Discussion of the Benefit and Cost Analysis

The goal of a regulatory impact analysis is t o estimate the incremental benefits and costs of adopting proposed requirements . The difference between benefits and costs quantified over the planning horizon lifecycle and discounted to the present represents the primary indicator of regulatory value. 51 

### 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 proposed requirements included in the NPRM. A requirement

- by

- requirement comparison of benefits and

costs, and estimates for benef its and costs for possible regulatory alternatives

, follow.

7

. 1. Overall Net Benefits of the Proposed Requirements

All quantified benefits and costs estimated for individual requirements were translated into current values for each year in the 10

- and 20

- year periods beginning with calendar year 2011. 52


### In 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 present value (P V) of passenger benefits from the proposed requirements included

in the NPRM over a 10

- year period using a 7 percent discount rate is estimated at $87.59 million. The expected present value of costs incurred by carriers and other sellers of air

transportat ion to comply with the proposed requirements is $25.98 million over 10 years,

51 This follows the guidance of OMB Circular A

- 4, which stipulates that this difference

— t h e 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 r equirements.

52 The affected parties are assumed to be compliant with the proposed regulations by January 1, 2011, with the exception of the full

- fare advertising provision of proposed Requirement 9.Preliminary Regulatory Analysis 1029

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### discounted at 7 percent. The PV of net benefits for a 10

- year period at a 7 percent discount rate is thus $61.61 million. Using a 3 percent discount rate, the PV of net benefits for 2011 through

2012 is estimated at $ 75.73 million.

Table 3 1

- Present Value of Net Benefits for Proposed Requirements, 2011

- 2020

PV (millions)

Total Quantified Benefits 10 Years, 7% discounting $87.59

10 Years, 3 % discounting $104.18

Total Qu antified Costs 10 Years, 7% discounting $25.98

10 Years, 3% discounting $28.45

Net Benefits 10 Years, 7% discounting $61.61

10 Years, 3% discounting $75.73
*Note: Totals may not sum due to rounding.



### The NPV of net benefits is higher when estim ated over a 20

- year period, with the present values of benefits and costs estimated at $150.51 million and $34.09 million, respectively, using a 7 percent discount rate. This is because many of the benefits from the proposed requirements will

accrue to pa ssengers on an ongoing basis, while most of the costs to comply with these requirements will be incurred by carriers, travel agents, and tour operators on a one

- time basis.

The estimated NPV of net benefits for the 20

- year period is $116.41 million using a 7 percent discount rate, and $170.44 if a 3 percent discount rate is used.

Table 3 2

- Present Value of Net Benefits for Proposed Requirements, 2011

- 2030

PV (millions)
Total Quantified Benefits 20 Years, 7% discounting $150.51

20 Years, 3% discount ing $212.84
Total Quantified Costs 20 Years, 7% discounting $34.09

20 Years, 3% discounting $42.40

Net Benefits 20 Years, 7% discounting $116.41

20 Years, 3% discounting $170.44Preliminary Regulatory Analysis 1029

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### 7.2. Net Benefits of Specific Proposed Requirements

A requir ement

- by

- requirement summary of benefit and cost estimates, as well as the unquantifiable benefits identified, is provided in the table below.

Table 33

- Comparison of Requirement

- Specific Benefits and Costs, 201 1

- 2020
(discounted at 7%/year to 201 1 $ mi llions)

Requirement 1: Expansion of tarmac delay contingency plan requirements and extension of EAPP1 Final Rule requirements to cover foreign carriers Total

Estimated Quantified Benefits $ 1.99

Estimated Quantified Costs $3. 24

Net Benefits

- $ 1

. 25

Addi tional Benefits not Quantified in this Evaluation:

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 towards Ca rriers Requirement 2: Expanded tarmac delay reporting and application to foreign

carriers Total

Estimated Quantified Benefits not estimated

Estimated Quantified Costs $ 2.31

Net Benefits not estimated

Additional Benefits not Quantified in this Evaluati on:

Increased Efficiency of US DOT Oversight and Enforcement Office Operations

Improved Management of Flight Delays Requirement 3: Establishment of minimum standards for customer service plans (CSPs) and extension of EAPP1 Final Rule requirements to cov er foreign carriers Total

Estimated Quantified Benefits $ 6.25

Estimated Quantified Costs $ 8.58

Net Benefits

- $2. 33

Additional Benefits not Quantified in this Evaluation:

Decreased Confusion and Uncertainty Regarding Department’s Requirements

Value of Improved Customer Service Based on Self

- Auditing of Adherence to Customer Service Plans for Foreign

Carriers

Improved Customer Good Will towards CarriersPreliminary Regulatory Analysis 1029

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- Comparison of Requirement

- Specific Benefits and Costs, 201 1

- 2020

(discounted at 7%/year to 201 1 $ millions)

Requirement 4: Incorporation of tarmac delay contingency plans and CSPs into carrier contracts of carriage Total

Estimated Quantified Benefits not estimated

Estimated Quantified Costs not estimated

Net Benefits not estimate d

Additional Benefits not Quantified in this Evaluation:

Decreased Occu r rence of and Improved Resolution of Customer Complaints

Requirement 5: Extension of EAPP1 Final Rule requirements for carriers to respond to consumer complaints to cover foreign car riers Total

Estimated Quantified Benefits $0.0 0

Estimated Quantified Costs $ 1.82

Net Benefits

- $ 1.82

Additional Benefits not Quantified in this Evaluation:

Decreased Anger toward Carriers During Resolution of Complaints
Requirement 6: Changes in deni ed boarding compensation (DBC) policy Total

Estimated Quantified Benefits not estimated

Estimated Quantified Costs $0. 66

Net Benefits not estimated

Additional Benefits not Quantified in this Evaluation:

Decrease in Confusion Regarding Denied Boarding Compensation Provisions

Decreased Resentment among Some Passengers Regarding Different Compensation Received
Requirement 7: Full

- fare advertising and prohibition on opt

- out provisions Total

Estimated Quantified Benefits $ 73.50

Estimated Quantified Cost s $ 6.86

Net Benefits $ 66.64

Additional Benefits not Quantified in this Evaluation:

Travelers Less Likely to Mistakenly Purchase Unwanted Services and Amenities

Improved Customer Good Will Towards Carriers Requirement 8: Expanded requirements for discl osure of baggage and other optional fees Total

Estimated Quantified Benefits not estimated

Estimated Quantified Costs $ 2.51

Net Benefits not estimated

Additional Benefits not Quantified in this Evaluation:

Decrease in Time at Check

- in

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- Comparison of Requirement

- Specific Benefits and Costs, 201 1

- 2020
(discounted at 7%/year to 201 1 $ millions)

Requirement 9: Prohibiting Post

- Purchase Increase Total

Estimated Quantified Benefits $ 5.83

Estimated Quantified Costs not estimated

Net Benefits not estimated

Additional Benefits not Quantified in this Evaluation:

Improved Customer Good Will towards Carriers Requirement 10: Prompt passenger notification of flight status changes Total

Estima ted Quantified Benefits not estimated

Estimated Quantified Costs not estimated

Net Benefits not estimated

Additional Benefits not Quantified in this Evaluation:

Greater Comfort and Certainty from Knowing that Information Will Be Available In Timely Man ner Requirement 11: Limitations on venue provisions in contracts of carriage Total

Estimated Quantified Benefits not estimated

Estimated Quantified Costs not est

Net Benefits not est

Additional Benefits not Quantified in this Evaluation:

Improved Cus tomer Good Will towards Carriers
Requirements 1

- 11: TOTAL Total

Estimated Quantified Benefits $ 87 .6

Estimated Quantified Costs $ 26.0

Net Benefits $ 61 .6



### Substantial portions of the estimated benefits, costs, and net benefits from the proposed rule ar e attributable to the full

- fare advertising provision of Requirement 7 . The expected benefits estimated for this single provision total $73.50 million over the 10

- year period from 2011 through 2020 using a discount rate of 7 percent. Benefits estimated fo r the full

- fare advertising provision represent 84 percent of the total benefits estimated for all 11 proposed requirements during the period from 2011 through 2020.

The expected costs of complying with the full

- fare advertising provision of Requirement 7 are estimated at $6.86 million over the 10

- year period from 2011 through 2020 using a discount rate of 7 percent. Costs estimated for the full

- fare advertising provision in Requirement 7 represent 26 percent of the total costs estimated for all 11 propose d requirements during the period from 2011 through 2020.

None of the present values for quantified benefits or costs associate d with any of the other 10 requirements from 201 1 through 2020 ( discounted at 7 percent) are estimated to exceed $10

million.Preliminary Regulatory Analysis 1029

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### 7 .3. Annualized Benefits and Costs

This preliminary regulatory evaluation also includes a presentation of the annual benefits and expenditures associated with this proposed rule. The table provides our best estimate of the

annual ized dollar amount of these benefits and costs expressed in 201 1 dollars at 7 percent and 3
percent discount rates. We estimate that the benefits will be $ 25.59 million annualized at a 7

percent discount rate, or $ 25.01 million annualized at a 3 percent discount rate. Cost s of this

p roposed rule are estimated to be approximately $ 5.97 million annualized at a 7 percent discount rate, or $ 5.26 million annualized at a 3 percent discount rate, over a 10

- year period of analysis. 53

Table 3 4

- Annualized Benefits and Costs, 2011 through 2020, $ m illions 201 1

Estimates Units

Primary
Estimate Low

Estimate High

Estimate Year

Dollar Discount

Rate Period

Covered

Annualized Monetized
Benefits $25.59 $11.27 $53.41 201 1 7% 2011

- 2020

$25.01 $10.99 $52.24 201 1 3% 2011

- 2020
Annualized Monetized
C osts $5.97 $4.64 $7.52 201 1 7% 2011

- 2020

$5.26 $4.16 $6.54 201 1 3% 2011

- 2020



### 7. 4

. Benefits and Costs for Alternative Requirement Scenarios

Benefit and cost estimates were also developed for four alternative requirement scenarios: two for Requirement 1 (Alternatives A and B) and two for Requirement 7 (Alternatives C and D). The only significant variation in benefits is for Alternative C, in which the full

- fare advertising provision is assumed to cover only carrier websites.

Table 35

- Benefits and Cost s for Base Case and Four Alternative Scenarios

Present Value, 2011

- 2020 ($ millions 201 1 )

Discount

Rate Base Case Requirement 1 Requirement 7

Alternative A Alternative B Alternative C Alternative D

Total Benefits 7% $87.59 $87.68 $87.59 $48.80 $92.19

3% $104.18 $104.28 $104.18 $57.96 $108.78

Total Costs 7% $25.98 $25.28 $25 .84 $ 20. 49 $ 34.1 3

3% $28.45 $27.70 $ 28.32 $ 22.97 $ 36.6 0

Net Benefits 7% $61.61 $62.40 $61. 75 $ 28.31 $ 58.06

3% $75.73 $76.58 $75. 87 $ 34.99 $ 72.18

Se e Section 4.4 for a description of the four alternative scenarios analyzed.

53 This statement is presented in essentially the format a s the a ccounting statement that OMB Circular A

– 4 requires

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### 7.5. Conclusion

This preliminary regulatory analysis indicates that adoption of the proposed requirements would result in projected benefits to the public that outweigh the est imated costs of the proposed rule.Preliminary

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## Appendix : Estimation of Benefits

The table below lists overall inputs and assumptions into the benefits calculations. Inputs that are sourced as ― estimate ‖ are subject matter expert estimates that are used where m ore precise data were not found. The Department is particularly interested in any additional, evidence

- based estimates for these variables which are more robust than the current estimates. Following the table below are formulas listing for the benefits c alculations and tables detailing the first year‘s estimates.

Overall Inputs Assumptions in Benefits Analysis

Common Assumptions Average Value Growth

Rate

Used Source

data

year Source Notes

U.S. Carrier Flight Data

Number of Annual Passengers using Air Travel (Domestic & International) for All U.S. Carriers, Market 740,454,238 FAA 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics Only includes Scheduled Passenger Flights. Uses the FAA forecasted growth

of

- 8.03% in 2009 , 1.96% in 2010, and 2.6% beyond.

Percentage of PAX (Dom & Int) using Reporting U.S. Carriers, Market 87.93% 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Number of Annual Passengers using Air Travel (Domestic) fo r All U.S. Carriers,

Market 651,703,245 FAA 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics Only includes Scheduled Passenger Flights. Uses the FAA forecasted growth

of

- 8.8% in 2009, 1.9% in 2010, and 2.4% and beyond.

Percentage of PAX (Dom) using Reporting U.S. Carriers, Market 87.66% 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Number of Annual Passengers using Air Travel (International) for All U.S. Carriers,

Market 88,750,9 93 FAA 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics Only includes Scheduled Passenger Flights. Uses the FAA forecasted growth

of

- 2.4% in 2009, 2.4% in 2010, and 4.4% beyond.

Percentage of PAX (Int) using Reporting U .S. Carriers, Market 89.93% 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

StatisticsPreliminary

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### Overall Inputs Assumptions in Benefits Analysis

Common Assumptions Average Value Growth

Rate

Used Source

data

year Source Notes

Number of Annual Passengers using Air Travel (Domestic & International) for All U.S. Carriers, Segment 755,827,506 FAA 2008 Bureau of Transp ortation Statistics (BTS)

- RITA Database, Aviation

Statistics Only includes Scheduled Passenger Flights. Uses the FAA forecasted growth

of

- 8.03% in 2009, 1.96% in 2010, and 2.64% beyond.

Percentage of PAX (Dom & Int) using Reporting U.S. Carriers, Segme nt 88.01% 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Number of Annual Passengers using Air Travel (Domestic) for All U.S. Carriers, Segment 666,990,665 FAA 2008 Bureau of Transportation Statistics (BTS)

- RITA Da tabase, Aviation

Statistics Only includes Scheduled Passenger Flights. Uses the FAA forecasted growth

of

- 8.8% in 2009, 1.9% in 2010, and 2.4% beyond.

Percentage of PAX (Dom) using Reporting U.S. Carriers, Market 87.76% 2008 Bureau of Transportation St atistics (BTS)

- RITA Database, Aviation

Statistics

Number of Annual Passengers using Air Travel (International) for All U.S. Carriers, Segment 88,836,841 FAA 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics Only include s Scheduled Passenger Flights. Uses the FAA forecasted growth

of

- 2.4% in 2009, 2.4% in 2010, and 4.4% beyond.

Percentage of PAX (Int) using Reporting U.S. Carriers, Market 89.87% 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Number of Annual Flights (Domestic & International), All U.S. Carriers 10,200,023 FAA 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics Only includes Scheduled Passenger Flights. Uses the FAA forecasted growt h

of

- 5.7% in 2009, and 2.1% beyond.

Percentage of Flights (Dom & Int) from Reporting U.S. Carriers 64.12% 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics Only includes Scheduled Passenger Flights. Uses the FAA forec asted growth

of

- 5.7% in 2009, and 2.1% beyond.

Number of Annual Flights (Domestic), All

U.S. Carriers 9,373,657 FAA 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics Only includes Scheduled Passenger Flights. Uses the FA A forecasted growth

of

- 5.7% in 2009, and 2.1% beyond.

Number of Annual Flights (International), All

U.S. Carriers 826,366 FAA 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics Only includes Scheduled Passenger Flights. U ses the FAA forecasted growth

of

- 5.7% in 2009, and 2.1% beyond.Preliminary

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### Overall Inputs Assumptions in Benefits Analysis

Common Assumptions Average Value Growth

Rate

Used Source

data

year Source Notes

Foreign Carrier Flight Data

Number of Annual Passengers using Air Travel (Domestic & International) for All Foreign Carriers, Market 68,976,137 FAA 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics Only includes Scheduled Passenger Flights. Uses the FAA forecasted growth

of

- 0.9% in 2009, 4.2% in 2010, and 4.6% beyond.

Number of Annual Passengers using Air Travel (Domestic) for All Foreign Carriers,

Market 34,450 FAA 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics Only includes Scheduled Passenger Flights. Uses the FAA forecasted growth

of

- 0.9% in 2009, 4.2% in 2010, and 4.6% beyond.

Number of Annual Passengers using Air Travel (International) for All Foreign Carriers,

Market 68,941,687 FAA 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics Only includes Scheduled Passenger Flights. Uses the FAA forecasted growth

of

- 0.9% in 2009, 4.2% in 2010, and 4.6% beyond.

Number of Annual Passengers using Air Travel (Domestic & International) for All Foreign Carriers, Segment 70,066,349 FAA 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics Only includes Scheduled Pass enger Flights. Uses the FAA forecasted growth

of

- 0.9% in 2009, 4.2% in 2010, and 4.6% beyond.

Number of Annual Passengers using Air Travel (Domestic) for All Foreign Carriers, Segment 526,450 FAA 2008 Bureau of Transportation Statistics (BTS)

- RITA Data base, Aviation

Statistics Only includes Scheduled Passenger Flights. Uses the FAA forecasted growth

of

- 0.9% in 2009, 4.2% in 2010, and 4.6% beyond.

Number of Annual Passengers using Air Travel (International) for All Foreign Carriers, Segment 69,539,809 FAA 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics Only includes Scheduled Passenger Flights. Uses the FAA forecasted growth

of

- 0.9% in 2009, 4.2% in 2010, and 4.6% beyond.Preliminary

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### Overall Inputs Assumptions in Benefits Analysis

Common Assumptions Average Value Growth

Rate

Used Source

data

year Source Notes

Number of Annual Flights (Domestic &

Intern ational), All Foreign Carriers 513,845 FAA 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics Only includes Scheduled Passenger Flights. Uses the FAA forecasted growth

of

- 5.9% in 2009, and 2.1% beyond.

Number of Annual Flights (Domestic), All Foreign Carriers 2,562 FAA 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics Only includes Scheduled Passenger Flights. Uses the FAA forecasted growth

of

- 5.9% in 2009, and 2.1% beyond.

Number of Annual Flights (International), All Foreign Carriers 511,283 FAA 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics Only includes Scheduled Passenger Flights. Uses the FAA forecasted growth

of

- 5.9% in 2009, and 2.1% bey ond.

Tarmac Delays (Taxi

- In and Tax

- Out Delays)

Taxi In

- Percentage of Passengers with Tarmac Delay Over 1 hours 0.0420% 2007

- 2008 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis

of data o n Reporting Carriers as per

On

- Time Performance database, Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Taxi In

- Percentage of Passengers with Tarmac Delay Over 2 hours 0.0030% 2007

- 2008 Distribution of flights by dela y time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Taxi In

- Percentage of Fligh ts with Tarmac Delay Over 1 hours 0.0323% 2007

- 2008 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Taxi In

- Percentage of Flights with Tarmac Delay Over 2 hours 0.0024% 2007

- 2008 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis

of data on Reporting Carriers as perPreliminary

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### Overall Inputs Assumptions in Benefits Analysis

Common Assumptions Average Value Growth

Rate

Used Source

data

year Source Notes

On

- Time Performance database, Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Taxi In

- Percentage of Passengers with Tarmac Delay Over 3 hours 0.0006% 2007

- 2008 Distribution of flights by de lay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Taxi In

- Percentage of Fli ghts with Tarmac Delay Over 3 hours 0.0004% 2007

- 2008 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transportatio n Statistics (BTS)

- RITA Database, Aviation

Statistics

Taxi In

- Percentage of Passengers with Tarmac Delay Over 4 hours 0.0001% 2007

- 2008 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis

of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Taxi In

- Percentage of Flights with Tarmac Delay Over 4 hours 0.0001% 2007

- 2008 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

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### Overall Inputs Assumptions in Benefits Analysis

Common Assumptions Average Value Growth

Rate

Used Source

data

year Source Notes

Taxi In

- Percentage of P assengers with Tarmac Delay Over 5 hours 0.0000% 2007

- 2008 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transpor tation Statistics (BTS)

- RITA Database, Aviation

Statistics

Taxi In

- Percentage of Flights with Tarmac Delay Over 5 hours 0.0000% 2007

- 2008 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Taxi In

- Percentage of Passengers with Tarmac Delay Over 6 hours 0.0000% 2007

- 2008 Distribution of flight s by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Taxi In

- Percentage of Flights with Tarmac Delay Over 6 hours 0.0000% 2007

- 2008 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transp ortation Statistics (BTS)

- RITA Database, Aviation

Statistics

Taxi Out

- Percentage of Passengers with Tarmac Delay Over 1 hours 0.7347% 2007

- 2008 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections ana lysis of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transportation StatisticsPreliminary

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### Overall Inputs Assumptions in Benefits Analysis

Common Assumptions Average Value Growth

Rate

Used Source

data

year Source Notes

(BTS)

- RITA Database, Aviation

Statistics

Taxi Out

- Percentage of Passengers with Tarmac Delay Over 2 hours 0.0755% 2007

- 2008 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Taxi Out

- Pe rcentage of Flights with Tarmac Delay Over 1 hours 0.8391% 2007

- 2008 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis of data on Reporting Carriers as per

On

- Time Performance database,

Bureau o f Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Taxi Out

- Percentage of Flights with Tarmac Delay Over 2 hours 0.0881% 2007

- 2008 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protection s analysis of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Taxi Out

- Percentage of Passengers with Tarmac Delay Over 3 hours 0.0182% 2007

- 2008 Distributi on of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Taxi Out

- Percentage of Flights with Tarmac Delay Over 3 hours 0.0200% 2007

- 2008 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysisPreliminary

Regu latory Analysis

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### Overall Inputs Assumptions in Benefits Analysis

Common Assumptions Average Value Growth

Rate

Used Source

data

year Source Notes

of data on Reporting Carriers as per

On

- Time Performance database,

Bur eau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Taxi Out

- Percentage of Passengers with Tarmac Delay Over 4 hours 0.0039% 2007

- 2008 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Pr otections analysis of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Taxi Out

- Percentage of Flights with Tarmac Delay Over 4 hours 0.0037% 2007

- 2008 Distr ibution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Tax i Out

- Percentage of Passengers with Tarmac Delay Over 5 hours 0.0005% 2007

- 2008 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis of data on Reporting Carriers as per

On

- Time Performance datab ase, Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Taxi Out

- Percentage of Flights with Tarmac Delay Over 5 hours 0.0005% 2007

- 2008 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passeng er Protections analysis of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

StatisticsPreliminary

Regu latory Analysis

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### Overall Inputs Assumptions in Benefits Analysis

Common Assumptions Average Value Growth

Rate

Used Source

data

year Source Notes

Taxi Out

- Percentage of Passengers with Tarmac Delay Over 6 hours 0.0001% 2007

- 20 08 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistic s

Taxi Out

- Percentage of Flights with Tarmac Delay Over 6 hours 0.0001% 2007

- 2008 Distribution of flights by delay time

from U.S. DOT Final RIA Enhanced Airline Passenger Protections analysis of data on Reporting Carriers as per

On

- Time Performance database, Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics

Value of Time

Value of Travel Time Per Passenger (Personal Travel) $23.30 2000 FAA Office of Aviation Policy and

Plans

- "Economic Values for FAA

Investment and Regulatory Decisions,

A Guide"

Value of Travel Time Per Passenger (Business and Personal) $28.60 2000 FAA Office of Aviation Policy and

Plans

- "Economic Values for FAA Investment and Regulatory Decisions,

A Guide"

Value of Time for Air Passenger (Time Not Traveling) $24.15 HDR|Decision Economics; FAA Office of Aviation Policy and Plans

- "Economic Values for Weighted value using 50% of hourly earnings of air travelers on personal travel and 100% of hourly earnings of business air travelers; earnings estimates from FAA Office of Aviation Policy and

Plans

- "Economic Values for FAA Investment and Regulatory Decisions, A

Guide"

Other VariablesPreliminary

Regu latory Analysis

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### Overall Inputs Assumptions in Benefits Analysis

Common Assumptions Average Value Growth

Rate

Used Source

data

year Source Notes

Percentage of Flights Canceled (same

- day) 1.95% 2008 Bureau of Transportation Statistics (BTS)

- RIT A Database, On

- Time

Performance Statistics

Average Price of Airfare (Domestic) $246 2008 American Express Business Travel

Average Price of Airfare (International) $1,955 2008 American Express Business Travel

Number of Complaints (Both U.S. a nd Foreign Carriers) 10,473 2008 Office of Aviation Enforcement and Proceedings "Air Travel Consumer Report" Issued January 2009

- December 2009

Number of Complaints (Foreign Carriers) 1,275 2008 Office of Aviation Enforceme nt and Proceedings "Air Travel Consumer Report" Issued January 2009

- December 2009

Complaint Multiplier (# of Complaints not filed actually received by Carriers) 61 2009 ―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.‖

Average Travel Trip Party Size 2.60 Bureau of Transportation Statist ics (BTS), American Travel Survey

Percentage of Passengers That Are Round

Trips 71% 2008 Bureau of Transportation Statistics (BTS)

- RITA Database, Aviation

Statistics h ttp://www.transtats.bts.gov/Oneway.asp ?Display_Flag=0&Percent_Flag=0

Req 5: Application of Tarmac Delay Policy and Contingency Plan to Foreign Carriers

Number of Passengers Who Travel on Foreign Carriers Already in Compliance 25,341,355 2007

- 2008 Bureau of Transportation Statistics

(BTS)

- RITA Database, Aviation

Statistics

Number of flights From Foreign Carriers Already in Compliance 115,907 2007

- 2008 Bureau of Transportation Statistics

(BTS)

- RITA Database, Aviation

StatisticsPreliminary

Regu latory Analysis

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### Overall Inputs Assumptions in Benefits Analysis

Common Assumptions Average Value Growth

Rate

Used Source

data

year Source Notes

Estima ted Number of Flights 3

- Hour Tarmac Delay for Foreign Carriers 61 1% 2009

Average Wait Time After An Hour Tarmac Delay (Taxi

- In Passengers) (hours) 0.36 2009 Flight on

- tarmac delay distribution

from U.S. DOT Final RIA Enhanced Airline Passenger Prot ections Calculated using BTS data subject matter expert using distribution of delays for domestic flights in the U.S. DOT Final RIA Enhanced Airline Passenger

Average Wait Time After An Hour Tarmac Delay (Taxi

- Out Passengers) (hours) 0.45 2009 Flight on

- tarmac delay distribution

from U.S. DOT Final RIA Enhanced Airline Passenger Protections Calculated using BTS data subject matter expert using distribution of delays for domestic flights in the U.S. DOT Final RIA Enhanced Airline Passenger

Average Wait T ime After 2 Hours Tarmac Delay (Taxi

- In Passengers) (hours) 0.51 2009 Flight on

- tarmac delay distribution

from U.S. DOT Final RIA Enhanced Airline Passenger Protections Calculated using BTS data subject matter expert using distribution of delays for

dome stic flights in the U.S. DOT Final RIA Enhanced Airline Passenger

Average Wait Time After 2 Hours Tarmac Delay (Taxi

- Out Passengers) (hours) 0.68 2009 Flight on

- tarmac delay distribution

from U.S. DOT Final RIA Enhanced Airline Passenger Protections Cal culated using BTS data subject matter expert using distribution of delays for domestic flights in the U.S. DOT Final RIA Enhanced Airline Passenger

Average Wait Time After 3 Hours Tarmac Delay (Taxi

- In Flights) (hours) 0.53 2009 Flight on

- tarmac delay d istribution

from U.S. DOT Final RIA Enhanced Airline Passenger Protections Calculated using BTS data subject matter expert using distribution of delays for domestic flights in the U.S. DOT Final RIA Enhanced Airline Passenger

Average Wait Time After 3 Hou rs Tarmac Delay (Taxi

- Out Flights) (hours) 0.59 2009 Flight on

- tarmac delay distribution

from U.S. DOT Final RIA Enhanced Airline Passenger Protections Calculated using BTS data subject matter expert using distribution of delays for domestic flights in t he U.S. DOT Final RIA Enhanced Airline Passenger

Average Wait Time After 4 Hours Tarmac Delay (Taxi

- In Flights) (hours) 0.56 2009 Flight on

- tarmac delay distribution

from U.S. DOT Final RIA Enhanced Airline Passenger Protections Calculated using BTS dat a subject matter expert using distribution of delays for domestic flights in the U.S. DOT Final RIA Enhanced Airline Passenger

Average Wait Time After 4 Hours Tarmac Delay (Taxi

- Out Flights) (hours) 0.58 2009 Flight on

- tarmac delay distribution

from U.S . DOT Final RIA Enhanced Airline Passenger Protections Calculated using BTS data subject matter expert using distribution of delays for domestic flights in the U.S. DOT Final RIA Enhanced Airline Passenger

Average Wait Time After 5 Hours Tarmac Delay (Tax i

- In Flights) (hours) 0.50 2009 Flight on

- tarmac delay distribution

from U.S. DOT Final RIA Enhanced Airline Passenger Protections Calculated using BTS data subject matter expert using distribution of delays for domestic flights in the U.S. DOT FinalPreliminary

Regu latory Analysis

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### Overall Inputs Assumptions in Benefits Analysis

Common Assumptions Average Value Growth

Rate

Used Source

data

year Source Notes

RIA Enhanced Airline Passenger

Average Wait Time After 5 Hours Tarmac Delay (Taxi

- Out Flights) (hours) 0.71 2009 Flight on

- tarmac delay distribution

from U.S. DOT Final RIA Enhanced Airline Passenger Protections Calculated using BTS data subject matter

exp ert using distribution of delays for domestic flights in the U.S. DOT Final RIA Enhanced Airline Passenger

Average Wait Time After 6 Hours Tarmac Delay (Taxi

- In Flights) (hours) 0.50 2009 Flight on

- tarmac delay distribution

from U.S. DOT Final RIA Enhan ced Airline Passenger Protections Calculated using BTS data subject matter expert using distribution of delays for domestic flights in the U.S. DOT Final RIA Enhanced Airline Passenger

Average Wait Time After 6 Hours Tarmac Delay (Taxi

- Out Flights) (hours ) 0.71 2009 Flight on

- tarmac delay distribution

from U.S. DOT Final RIA Enhanced Airline Passenger Protections Calculated using BTS data subject matter expert using distribution of delays for domestic flights in the U.S. DOT Final

RIA Enhanced Airline Pa ssenger

Comfort Knowing There is a Contingency Plan

Number of Tarmac Delays of 1 or more of

Non

- Compliant Foreign Carriers 2,022 Distribution of flights by delay time from

U.S. DOT Final RIA Enhanced Airline Passenger Protections

Percentage of 1+ Hr Delays that Are Arrivals 4% Distribution of flights by delay time from

U.S. DOT Final RIA Enhanced Airline Passenger Protections

Premium for Reduced Anxiety from Contingency Plan 1.01 2009 As used for domestic carriers in U.S.

DOT Final RIA En hanced Airline Passenger Protections See source notes

Benefit from Provision of Adequate Food, Drink, and Lavatory AccessPreliminary

Regu latory Analysis

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### Overall Inputs Assumptions in Benefits Analysis

Common Assumptions Average Value Growth

Rate

Used Source

data

year Source Notes

Number of 2+ Tarmac Delays From Non

Compliant Foreign Flights 210 Calculated using BTS data from subject matter expert using distribution of delays for domestic flights in the U.S. DOT Final RIA Enhanced Airline Passenger

Protection

Percentage of 2+ Hr Delays that Are Arrivals 3% Calculated using BTS data from subject matter expert using distribution of delays

for domesti c flights in the U.S. DOT Final RIA Enhanced Airline Passenger

Protection

Premium for Access to Food, Drink, and Lavatory 1.34 2007 As used for domestic carriers in

U.S. DOT Final RIA Enhanced Airline Passenger Protections See Source Notes titled ―Val ue of Time Premiums for Differing Qualitative
Levels of Service‖ Waiting at Gate Instead of the Tarmac

Premium of Waiting at Gate Instead of on

Tarmac 1.68 As used for domestic carriers in U.S.

DOT Final RIA Enhanced Airline Passenger Protections S ee Source Notes, ―Value of Time Premiums for Differing Qualitative
Levels of Service‖

Benefits to Carriers

Average Cockpit Crew Wage (per hour) $68.50 2009 Standardized Occupational Components for Research and Analysis of Trends in Employments System , from Occupational Employment and Wages (OES) program, BLS

Average Cockpit Crew per Airplane 2.00 2009 As used in U.S. DOT Final RIA Enhanced Airline Passenger

Protections See Source Notes, ―Average Cockpit Crews per Type of Aircraft.‖

Average Flig ht Attendant Crew Wage (per hour) $42.43 2009 Standardized Occupational Components for Research and Analysis of Trends in Employments System, from Occupational Employment and Wages (OES) program, BLSPreliminary

Regu latory Analysis

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### Overall Inputs Assumptions in Benefits Analysis

Common Assumptions Average Value Growth

Rate

Used Source

data

year Source Notes

Average Flight Attendant Crew per Airplane 12.00 2009 As used for domestic carriers in U.S.

DOT Final RIA Enhanced Airline Passenger Protections Assuming Large Aircraft for Foreign Carriers. See Source Notes, ―Average Number of Flight Attendents per Aircraft Type.‖

Benefits from Extending Coordination to CBP to Small Hub and Non Hub Airports Annual Benefits from Component 1 in EAPP1 Rule RIA (includes large and medium hubs already) $ 1,596,885 U.S. DOT Final RIA Enhanced Airline Passenger Protections See Source Notes, ―Benefits to Passengers from Deplaning, Annually.‖ Percentage of Benefits that can accrue due to

coordination with CBP and that were not

considered in RIA for Enhanced Airline Passenger Protections previously 0.5% Estimate Estimate

Application of Customer Service Plan (CS P) to Foreign Carriers

Percentage Reduction of Complaints by Implementing CSP 20% U.S. DOT Final RIA Enhanced Airline Passenger Protections Estimate from historical complaint data. See Source Notes, ―Change in Complaints due to Self Auditing of
Customer Service Plans.‖

Benefits from Premium on Complaint Free Air travel

Premium on Foreign Flights for Complaint

Free Travel 1.05 Estimate Estimated as a value between the premium for knowing that a plan exists and the premium for greater c omfort from

access to food and water

Applying the Requirements to Respond to Consumer Problems to Foreign Carriers for

Their Scheduled Service to and from U.S.

Benefits from Increase in Consumer Surplus and Decline in Deadweight Loss

Percent Change in Cost of Complaining 3.23% 2009 Derived from BLS, subject matter experts as in Table A

- 22 from U.S.

DOT Final RIA Enhanced Airline Passenger Protections See Source Notes, ―Value of Time to Prepare and File a Complaint.‖Preliminary

Regu latory Analysis

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### Overall Inputs Assumptions in Benefits Analysis

Common Assumptions Average Value Growth

Rate

Used Source

data

year Source Notes

Elasticity of Cost of C omplaining 1.07 1980 Morris, David. "The Cost of Complaining and the Efficiency of Consumer Complaints Agencies".

Journal of Consumer Studies and Home Economics, 1980

Decrease in the Cost of Complaining $ 0.32 2009 Derived from change in cost of complaining as per U.S. DOT Final RIA Enhanced Airline Passenger

Protections

Amend Price Advertising (Full Fare and Opt

Out)

Percentage of Passengers Who Use the Internet

for Ticket Purchases 74% 2009 Hoffman, Cole. "The Role and Value of the Global Distribution Systems in

Travel Distribution". Interactive

Travel Services Association. Average Incremental Time Spent by Passengers who already search for full fare information finding Taxes and Hidden Fees (hours) 0.08 Estimate Estimated from examined of carrier and ticketing websites

Passenger Benefits for Passengers Who Already Compare Full Fares Passengers Who Research Airfare Prices on Multiple Websites Specifically for lowest

Taxes and Fees 2 % Estimate Estimate

Passenger Benefits for Passengers Not Currently Comparing Full Fares Percentage of Passengers Not Searching to Compare Full Fare Who Purchase from Compliant Websites 90% Estimate Estimate

Percentage of Total Price of Taxes Re vealed (Price Increase) 5.0% 2006 Bureau of Transportation Statistics (BTS), American Travel Survey Used the 16 percent as a high, and then subtracted 7.5% of USDOT tax already

shown in all airfares

National Level Elasticity for Air Travel

Demand

- 0.4 2009 International Air Transport

Association. "Air Travel Demand" The lowest elasticity (since not really measuring a change in price, but a revelation in price)Preliminary

Regu latory Analysis

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### Overall Inputs Assumptions in Benefits Analysis

Common Assumptions Average Value Growth

Rate

Used Source

data

year Source Notes

Average Price of Airfare (Domestic) $246 2008 American Express Business Travel

Averag e Price of Airfare (International) $1,955 2008 American Express Business Travel

Prohibiting Post

- Purchase Increase

Benefits of Certainty

Percentage of Passengers Who Purchase

Airfare Outside of The Internet 28% 2009 Hoffman, Cole. "Th e Role and Value of the Global Distribution Systems in

Travel Distribution". Interactive

Travel Services Association.

Percentage of Non

- Internet Using Passengers Purchasing Through Carriers 80% Estimate Estimate

Premium on Certainty of Purchase 1. 01 Estimate As proxy used s ame premium as used for Premium for Reduced Anxiety from Contingency Plan Average Amount of Time Spent Purchasing Airfare (hours) 0.17 Estimate EstimatePreliminary Regulatory Analysis 1029

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### Req. 1: Application of Tarmac Delay Policy and C ontingency Plan to 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)

Overall Assumptions (1) Passengers Who May Benefit= PAX using Foreign Carriers (Dom & Int‘l), Segment 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= Pa ssengers Who May Benefit (1) ÷ Flights That May Benefit (2)

Benefits from Comfort of Knowing There is a Contingency Plan

In

- Scope Passengers (Arrivals) = Number of Flights with a Tarmac Delay Over 1+ hour On Foreign Carriers Not Already Complian t X % of Flights with Tarmac Delay Over 1+ hour that are

Arrivals X Avg. No. of PAX Who May Benefit Per Flight (3)

Flight In

- Scope Passengers (Departures)= Number of Flights with a Tarmac Delay Over 1+ hour

On Non

- Compliant Foreign Carriers

X % of F lights with Tarmac Delay Over 1+ hour that are

Departures X Avg. No. of PAX Who May Benefit Per Flight (3)

Incremental Savings per Hour from Contingency Plan= Value of Travel Time

X Premium of Comfort

Total Savings from Arrivals= In

- Scope Passengers (Arrivals) X Incremental Savings per Hour from Contingency Plan X Avg. Wait Time After Hour Tarmac Delay (Arrivals)

Total Savings from Departures= In

- Scope Passengers (Departures) X Incremental Saving per Hour from Contingen cy Plan X Avg. Wait Time After Hour Tarmac Delay (Departures)

Calculation of Benefits= Total Savings from Arrivals + Total Savings from Departure

Benefit from Provision of Adequate Food, Drink, and Lavatory

In

- Scope Passengers (Arrival s) = Number of Flights w/ Long Tarmac Delays Two+ Hours 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 Fl ights 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)Preliminary Regulatory Analysis 1029

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- 18 Econometrica, Inc. Last Revised March 29, 2010 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, Lav X Avg. Wait Time After 2 Hour Tarmac Delay (Arrivals)

Total Savings from Departures= In

- Scope Pass engers (Departures) X Incremental Saving per Hour from Food, Drink, Lav X Avg. Wait Time After 2 Hour Tarmac Delay (Depart)

Calculation of Benefits= Total Savings from Arrivals + Total Savings from Departures

Benefit from Waiti ng at Gate Instead of Airplane

In

- Scope Passengers (Arrivals): Number of Flights with On Tarmac Delays 6+ hours

On Non

- Compliant Foreign Carriers X % of 6+ Hr Delays that are Arrivals = No. of Flights with 6+ Hr Arrivals Tarmac Delays No. of Flights that get Canceled after 6 Hour Tarmac Delay (Arrivals) = No. of Flights with a ―true‖ Tarmac Delay over 6 hours

X Avg. No. of PAX Who May Benefit Per Flight (3)

In

- Scope Passengers (Depart): Number of Flights with On Tarmac Delays 6+ hours

On Non

- Compliant Foreign Carriers X % of 6+ Hr Delays that are Departures = No. of Flights with 6+ Hr Departure Tarmac Delays No. of Flights that get Canceled after 6 Hour Tarmac Delay (Departures)

= No . of Flights with a ―true‖ Tarmac Delay over 6 hours X Avg. No. of PAX Who May Benefit Per Flight (3)

Incremental Savings per Hour from Waiting at the Gate= Value of Time
(Value of Time ÷ [1 + Premium of Comfort])

Total Savings from Arrivals= In

- Scope Passengers (Arrivals) X Incremental Savings per Hour from Waiting at Gate X Avg. Wait Time After 6 Hour Tarmac Delay (Arrivals)

Total Savings from Departures= In

- Scope Passengers (Departures)

X Incremental Saving per Hour from Waiting at Gate X Avg. Wait Time After 6 Hour Tarmac Delay (Depart)

Calculation of Benefits= Total Savings from Arrivals + Total Savings from DeparturesPreliminary Regulatory Analysis 1029

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- 19 Econometrica, Inc. Last Revised March 29, 2010 Benefits to Carriers

In

- Scope Flights= Number of Flights with On Tarmac Delays 6+ hours

On Non

- Compliant Foreign Carriers X % 6+ Hr Tarmac Delays that are Arrivals

Average Hourly Cost for Flight Crew= ( Avg. Cockpit Crew Wage X Avg. No. of Cockpit Crew Per Flight)

+ (Avg. Flight Attendant Wag e X Avg. No. of Flight Attendants per Flight)

Calculation of Benefits= In

- Scope Flight X Average Hourly Cost for Flight Crew X Avg. Wait Time a fter 3 Hour Tarmac Delay (Arrival)

Dis

- Benefits to Consumers from Cancelled Flights

In

- Scope Flights Cancelled Due to Rule= Number of Flights with On Tarmac Delays 6+ hours

On Non

- Compliant Foreign Carriers X Additional cancelled flights

Calculation of Dis

- Benefits= Number of In

- Scope Flights Cancelled Due to Rule X Average Numbe r of Passengers per flight X Net Increase in Total Trip Time (avg. increase in trip time

due to a cancelled flight minus the 5 hours spent delayed on tarmac) (hours) X Passengers value of time (hours)

Application of Tarmac Delay Policy and Contingen cy Plan to
Foreign Carriers

- General Assumptions 2011
Number of Annual Passengers using Air Travel (Domestic & International) for All Foreign Carriers, Segment 72,352,053

Number of Passengers Who Travel on Foreign Carriers Already in Compliance 25,939,7 91

Passengers Who May Benefit 46,412,262

Number of Annual Flights (Domestic & International), All
Foreign Carriers 494,732

Number of flights From Foreign Carriers Already in Compliance 118,644

Number of Flights that May Benefit 376,088

Average Passeng ers per Flight for Potential Benefits 123Preliminary Regulatory Analysis 1029

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Foreign Carriers

- Benefits After 1+ Hr Tarmac Delay 2011

Comfort Knowing There is a Contingency Plan

Number of 1+ Tarmac Delays From Non

- Compli ant Foreign Flights 2,137
Value of Time for Passenger (All Purpose) $28.60

Premium for Reduced Anxiety from Contingency Plan 1.01

Incremental Savings per Hour per Passenger with a Contingency

Plan $0.29

Percentage of 1+ Hr Delays that Are Arrivals 3. 83%

Number of Arrival Flights with 1 hr Tarmac Delays that May

Benefit 82

Passengers Who May Benefit & Experience Over an Hour Tarmac Delay during Arrivals 10,101

Average Wait Time After An Hour Tarmac Delay (Taxi

- In Passengers) (hours) 0.36

Average Sa vings per Passenger with a Contingency Plan during

Arrivals from Comfort $0.11

Total Savings with a Contingency Plan during Arrivals from

Comfort $1,111

Number of Departure Flights with 1 hr Tarmac Delays that May Benefit 2,055

Passengers Who May Bene fit & Experience Over an Hour Tarmac Delay during Departures 253,603

Average Wait Time After An Hour Tarmac Delay (Taxi

- Out Passengers) (hours) 0.45

Average Savings per Passenger with a Contingency Plan during Departures from Comfort $0.13

Total Saving s with a Contingency Plan during Departures from

Comfort $32,968

Monetized Time Saved from Comfort $34,080Preliminary Regulatory Analysis 1029

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- 21 Econometrica, Inc. Last Revised March 29, 2010 Benefit from Provision of Adequate Food, Drink, and Lavatory

Access

- Benefits After 2+ Hr Tarmac Delay 2011
Value of Time for Passenger (A ll Purpose) $28.60

Premium for Access to Food, Drink, and Lavatory 1.34

Incremental Savings per Hour per Passenger with Access to Food, Drink, and Lavatory $9.72

Number of 2+ Tarmac Delays From Non

- Compliant Foreign Flights 222

Percentage of 2+ Hr De lays that Are Arrivals 2.89%

Number of Arrival Flights with 2 hr Tarmac Delays that May

Benefit 6

Passengers Who May Benefit & Experience Over 2+ Tarmac Delay during Arrivals 792

Average Wait Time After 2 Hours Tarmac Delay (Taxi

- In Passengers) (hours) 0.51

Average Savings per Passenger with Access to Food, Drink, and Lavatory during Arrivals $4.96

Total Savings with Access to Food, Drink, and Lavatory during

Arrivals $3,927

Number of Departure Flights with 2 hr Tarmac Delays that May Benefit 215

P assengers Who May Benefit & Experience Over 2 Hours Tarmac Delay during Departures 26,533

Average Wait Time After 2 Hours Tarmac Delay (Taxi

- Out Passengers) (hours) 0.68

Average Savings per Passenger with Access to Food, Drink, and Lavatory during Depart ures $6.61

Total Savings with Access to Food, Drink, and Lavatory during
Departures $175,443

Monetized Time Saved from Access $179,369Preliminary Regulatory Analysis 1029

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- Benefits After 6+ Hr Tarmac Delay 2011
Value of Time for Passenger (A ll Purpose) $28.60

Premium of Waiting at Gate Instead of on Tarmac 1.68

Incremental Savings per Hour per Passenger Waiting in Airport $20.09

Number of X+ Tarmac Delays From Non

- Compliant Foreign Flights 0.3

Percentage of X+ Hr Delays that Are Arrival s 0%

Number of Arrivals with X+ Hrs Tarmac Delays from Non Compliant Foreign Flights

- Percentage of Flights Canceled (same

- day) 2%

Number of Flights Canceled After Over X Hours of Tarmac Delay during Arrivals

- Number of Flights that Experience Over X Hours Tarmac Delay during Arrivals (minus Cancellations)

- Passengers Who May Benefit & Experience Over 3 Hours Tarmac Delay during Arrivals 0

Average Wait Time After 6 Hours Tarmac Delay (Taxi

- In Flights) (hours) 0.5

Average Savings per Passenger Wait ing at the Airport during

Arrivals $9.72

Total Savings Waiting at the Airport during Arrivals $0

Taxi Out

- Percentage of Flights with Tarmac Delay Over 6

hours 0.00%

Number of Flights that May Benefit & Experience Over 3 Hours Tarmac Delay during Depa rtures 0
Percentage of Flights Canceled (same

- day) 2%

Number of Flights Canceled After Over 3 Hours of Tarmac Delay during Departures 0

Number of Flights that Experience Over 3 Hours Tarmac Delay during Departures (minus Cancellations) 0

Passengers Who May Benefit & Experience Over 3 Hours Tarmac Delay during Departures 36

Average Wait Time After 6 Hours Tarmac Delay (Taxi

- Out Flights) (hours) 0.71

Average Savings per Passenger Waiting at the Airport during
Departures $13.81

Total Savings Waiting at the Airport during Departures $501

Monetized Time Saved from Comfort $501Preliminary Regulatory Analysis 1029

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- Benefits After 6+ Hr Tarmac Delay 2011

Taxi In

- Percentage of Flights with Tarmac Delay Over 6 hours 0.00%

Number of Flights that May Benefit & Expe rience Over 3 Hours Tarmac Delay during Arrivals 0

Average Wait Time After 6 Hours Tarmac Delay (Taxi

- In Flights) (hours) 0.5
Average Cockpit Crew Wage (per hour) $68.89

Average Cockpit Crew per Airplane 2
Average Flight Attendant Crew Wage (per hour) $42.26

Average Flight Attendant Crew per Airplane 11.57

Average Hourly Cost for All Flight Crew $627

Average Savings from Flight Crew Wage per Flight that Experiences Over 3 Hours Tarmac Delay during Arrivals $313

Monetized Savings from Added Coord ination with CBP $0

Benefits from Extending Coordination to Small Hubs and Non

hub Airports

- General Benefits 2011

Annual Benefits from Component 1 in EAPP1 Rule RIA (includes large and medium hubs already) $1,596,885

Percentage of Benefits that ca n accrue that were not considered previously 0.50%

Monetized Benefits from Coordination with Small Hubs and

Non

- hub Airports $7,984Preliminary Regulatory Analysis 1029

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### Req. 7: Amend Price Advertising (Full Fare and Opt

- Out) The formula below illustrates the inputs and calculations used to estim ate benefits for this provision:

Overall Assumptions No. of Round Trip Purchases= No. PAX Who Use U.S. Carriers (Dom & Int‘l),

Market

X % of PAX Who Purchase Airfare via Internet

= No. of PAX who Purchase Airfare via the Internet

X % of PAX that are Making Round Trips

No. of One

- Way Purchases= No. PAX Who Use U.S. Carriers (Dom & Int‘l),

Market

X % PAX Who Purchase Airfare via the Internet

= No. of PAX who Purchase Airfare via the

Internet

X % of PAX that a re Making One

- Way Trips

In

- Scope Passengers= No. of Round Trip Purchases

+ No. of One

- Way Purchases

Benefits to Passengers who already search for full fare information

In

- Scope Passengers= (1) Passengers Who May Benefit

X % of On

- Line Cus tomers 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/Fe es X Value of Time

Benefits to Passengers Who Do Not Currently Compare Full Fares (Elimination of Dead

- Weight Loss)

In

- Scope Passengers= (1) Passengers Who May Benefit X (1

- On

- Line Customers Who Research on Multiple Websites (one of which uses

hidd en 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 DemandPreliminary Regulatory Analysis 1029

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### Calculation of Benefits= (In

- Scope Passengers X Decrease in Price) + (Increase in Market Demand

X 1⁄2 X Decrease in Price)

Req. 9: Prohibiting Post

- Purchase Increase

The formula below il lustrates the inputs and calculations used to estim ate benefits for this provision:

Overall Assumptions

In

- Scope Passengers= No. of Passengers Using U.S. Carriers, Market X % of Passengers Who Buy Airfare Outside

Online X (1

- % of Non

- int ernet PAX buying through Carriers) Benefits of Uncertainty

Calculation of Benefits= In

- Scope Passengers

X Value of Time X Premium for Increased Comfort from Knowing

Will Be NotifiedPreliminary Regulatory Analysis 1029

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## Source Notes

Number of Flights and Passengers with Extende d Tarmac Delays

Variable Description: The number of flights and passengers for foreign flagged carriers by

amount of on

- tarmac delay time is estimated using the distribution of flights by on

- tarmac delay for domestic  ̳reporting carriers‘ (those with 1% or more of scheduled passenger service) since foreign carriers do file the necessary detailed statistics with the Federal government. To estimate delays, the ratios each of delay, by length, for reporting domestic carriers were used on the foreign carrier f

light population to estimate number of delays at each time interval.

Source: Percentages as reported in Enhanced Airline Passenger Protection (EAPP1) Regulatory Impact Analysis. Original data flight data are from the Bureau of Transportation Statistic s (BTS)

.

Percentage Distribution of Tarmac Delays
Arrivals (Taxi

- In) Passengers Percentage Flights Percentage
Up to 1/4 hours 309,583,268 49.79397% 3,689,525 50.12271%
1/4 and1/2 hours 18,414,418 2.96181% 172,488 2.34327%
1/2 and 3/4 hours 2,215,131 0.3 5629% 20,584 0.27964%
3/4 and 1 hours 477,573 0.07681% 4,279 0.05813%

1

- 1.25 hours 153,870 0.02475% 1,404 0.01907%

1.25

- 1.5 hours 53,289 0.00857% 482 0.00655%

1.5 and 2 hours 35,826 0.00576% 316 0.00429%

2 and 2.5 hours 12,888 0.00207% 122 0.00166 %

2.5 and 3 hours 2,434 0.00039% 27 0.00037%

3 and 3.5 hours 2,434 0.00039% 18 0.00024%

3.5 and 4 hours 239 0.00004% 4 0.00005%

4 and 4.5 hours 295 0.00005% 3 0.00004%

4.5 and 5 hours 0 0.00000% 0 0.00000%

5 and 6 hours 51 0.00001% 1 0.00001%

More t han 6 hours 0 0.00000% 0 0.00000%

Total Population 621,728,440 100% 7,360,984 100%Preliminary Regulatory Analysis 1029

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- Out) Passengers Percentage Flights Percentage
Up to 1/4 hours 166,397,035 26.76362% 2,404,297 32.66271%

1/4 and1/2 hours 139,537,841 22.44354% 1,638,73 0 22.26238%
1/2 and 3/4 hours 23,204,937 3.73233% 277,711 3.77274%
3/4 and 1 hours 5,948,002 0.95669% 76,709 1.04210%

1

- 1.25 hours 2,246,710 0.36137% 29,968 0.40712%

1.25

- 1.5 hours 1,023,316 0.16459% 13,900 0.18883%

1.5 and 2 hours 828,564 0.13327 % 11,415 0.15507%

2 and 2.5 hours 269,388 0.04333% 3,729 0.05066%

2.5 and 3 hours 86,689 0.01394% 1,284 0.01744%

3 and 3.5 hours 64,326 0.01035% 911 0.01238%

3.5 and 4 hours 24,667 0.00397% 289 0.00393%

4 and 4.5 hours 14,378 0.00231% 167 0.00227%

4. 5 and 5 hours 6,528 0.00105% 65 0.00088%

5 and 6 hours 2,682 0.00043% 30 0.00041%

More than 6 hours 495 0.00008% 8 0.00011%

Total Population 621,728,440 100% 7,360,984 100%



### 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 a) 100% times the average hourly earnings of those traveling by air on business and b) 50% 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) $24.15 $21.74 $26.57
Value of Time for Passenger (All Purpose Traveling) $28.60 $23.80 $35.60

Meeter

- and

- Greeter V OT $10.60 $8.82 $13.19Preliminary Regulatory Analysis 1029

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### Number of Air Carrier Complaints

Variable Description: This is the annual number of complaints filed with an air carrier i. Complaints can relate to flight problems, oversales, customer service, lost baggage, etc. Baseline

fi gures are taken from data compiled by the US Department of Transportation. But since carriers receive many more complaints than are filed with the US Department of Transportation a complaint  ̳multiplier‘ is used calculate the actual number of ―ground

- lev el‖ 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 Commitm ent,‖ 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.

2008 Filed Complaints

Lower 10% Limit Median Upper 10% Limit
Number of Comp laints (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, US
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 Cover ed Carriers that Do Not Already

Self

- Audit Adherence to Customer Service Plans

Variable Description: Using complaint data reported for domestic carriers as proxy for foreign carriers, m easures the average number of complaints to all covered carriers that a re not already

self

- auditing adherence to customer service plans. 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 c omplaints 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 Consum er 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, re port AV

- 2001

- 020, February 12, 2001 and ―Air Travel Consumer Report, U.S. Department of Transportation.Preliminary Regulatory Analysis 1029

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### Average Travel Trip Party Size

Variable Description: This figure is the estimated average number of people per group or trip

on a commercial airline f light. 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 2.6.

Source: American Travel Survey, 1995, downloaded from RITA Database.

Aver age 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 T ravel, ―Domestic and International Airfare Increased in 2008 as Hotel Rates Decreased‖, April 2009.

Average Price of Airfares

Median

Average Price of Airfare (Domestic) $246

Average Price of Airfare (International) $1,955

Weighted Average Airfare $46 4



### Percentage of Passengers Purchasing Airfare Online

Variable Description: Estimate of the proportion of passengers purchasing airfares on websites. This data also distinguishes between passengers purchasing on online travel agencies (OTAs) or carrier web sites, but is combine d to for m an estimate of all online air ticker purchases.

Source: Pho C usWright and Interactive Travel Services Association, ―The Role and Value of Global Distribution Systems in Travel Distribution‖, 2009.

Proportion of Online Con sumers for Flight Travel

Median

Percentage of Passengers Who Purchase Airfare on Carrier Websites 34%

Percentage of Passengers Who Purchase Airfare on OTAs 38%Preliminary Regulatory Analysis 1029

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### Elasticity of Air Travel Demand

Variable Description: This elasticity estimates the perc entage 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.

Elasticity of Demand for Complaining

Variable Description: This figure (1.0741) estimates the change in number of com plaints 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.

Value of Time Premiums for Differing Qualit ative Levels of Service

Variable Description: Several aspects of Provision 5 of the Proposed Rule will shift the portion of total trip time spent in less comfortable conditions (such as the fifth hour on a plane waiting on the tarmac) to time spent in mor e comfortable conditions (the fifth hour spent in the terminal). The value of the difference in comfort is estimated using the base value of travel time saved (as noted above) and applying a premium to that time. 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 a nd are used to determine the

value of different levels. The values used can be seen 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 P olicy Institute, 2007.Preliminary Regulatory Analysis 1029

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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 t he 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 rat ing

A

- C and LOS rating E for transit passengers is used to estimate a premium for the greater comfort of wa iting in the terminal

instead on in the plane on the tarmac. 54



### Cockpit Crew per Aircraft Type

Variable Description: Average cockpit crew per aircraft type. Based on the variety of sub

- types of aircraft (e.g., there are six commonly used versions of the 7 47), crew members for some types of aircraft are based on unweighted averages of these versions. Data as prepared for Final RIA on Rule Enhancing Airline Passenger Protections, December 2009

Data Sources: Variety of airline manufacturer websites.

Average Cockpit Crews per Type of Aircraft

54 These premiums are similar to premiums estimated for the value of sitting instead of standing during a transit trip, which have ranged from 20% to 50%. 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 Br itish Columbia, August 2004 and P.B. Goodwin, ― Human Effort and the Value of Travel Time

, ‖ Journal of Transport Economics and Policy , January 1976

. Average Cockpit Crews per Type of Aircraft

Variable Lower 10% Limit Median Upper 10% Limit

Average Cockpit Crew for “Large” Aircraft (747) 2 2 2

Average Cockpit Crew for “Medium” Aircraft (A320) 2 2 2

Average Coc kpit Crew for “Small” Aircraft (Fairchild F

- 27) 2 2 2

Average Cockpit Crew for “Tiny” Aircraft (Saab

Fairchild 340/B) 2 2 2

Note: 747 is for 747

- 400 and 747

- 8 models;

Source: Various Aircraft Manufacturer websites.Preliminary Regulatory Analysis 1029

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### Number of Flight Attendants by Airc raft Type

Variable Description: Average number of non

- cockpit crew members. These are predominantly, if not entirely, flight attendants. Data as prepared for Final RIA on Rule Enhancing Airline Passenger Protections, December 2009.

Data Sources: Various ai rcraft manufacturer websites.

Average Number of Flight Attendants per Aircraft Type



### Average Commuting Times to and From Airports

Variable Description: This is the average time it takes an individual to travel from the airport to the Hilton Hotel located closest to the airport or in the closest downtown metropolitan area

– for example, the time it would take to travel from the Cincinnati Airport to the downtown Cincinnati

Hilton. If a Hilton Hotel was not available, a hotel of similar reputation was used as a proxy.

This term was calculated by estimating travel time from each class of airport (i.e., large hub, medium hub, etc.). This, in turn, was done by estimating the travel ti mes for each airport that composed each category. Travel times were weighted by airline passengers departing from each airport. These figures can be seen in the below table. Average travel time for all airports was also calculated. This was weighted by pas senger departures from each category of airport. The upper and lower 10% boundary ranges were the actual 10% upper and lower ranges based on the results derived for each category of airport.

All times are for ―non

- peak,‖ as defined by GoogleMap.com‘s ―des tination‖ feature. It is assumed that travel times to and from airports ar e equal.

Data Sources: Travel times estimated from ―directions‖ feature of GoogleMaps.Com for airports. Passenger departures used as a basis of weighing were from the Federal Aviati on Administration‘s Air Carrier Activity Information System. Average Number of Flight Attendants per Aircraft Type

Variable Lower 10%

Limit Median Upper 10%

Limit

Average Flight Attendant Crew for “Large” Aircraft (747) 9 12 14

Av erage Flight Attendant Crew for “Medium” Aircraft (A320) 4 5 6

Average Flight Attendant Crew for “Small” Aircraft (Fairchild F

- 27) 1 1 1

Average Flight Attendant Crew for “Tiny” Aircraft (Saab

- Fairchild 340/B) 1 1 1

Note: Information for Fairchild F

- 27 FH

- 227E variant; Data for A320 and 747 based on unweighted average of commonly used

variants of A320 and 747.

Source: Various Aircraft Manufacturer websites.Preliminary Regulatory Analysis 1029

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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 airli ne 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 Air line’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. 2 2, 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 2 008 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

Updated with the Congressional Budget Office (CBO) 2009 inflation forecast, 0.1%.Preliminary Regulatory Analysis 1029

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### Average Cost to an Air Carrier of a Flight Cancellation

Variable Descript ion: This is the cost to airlines, of a flight cancellation. In 1998 this value was estimated at $11,600. 55



### Source: Zalman Shavell, ―The Effects of Schedule Disruptions on the Economics of Airline Operations,‖ The MITRE Corporation, April 14, 2000.

Foreca st Average Growth of Airline Passenger Traffic (per Year) on U.S. Airlines

Variable Description: This is the estimated annual growth in airline passenger traffic (defined as paying passengers) transported by U.S. carriers on both domestic and international trips from and to airports in the U.S. forecast for the future. These rate s are applied in the year 2011 and beyond.

Source: US DOT 2007 FAA Aerospace Forecast Fiscal Years 2007

– 2020, available at: http://www.faa.gov/data_statistics/aviation/aerospace_forecasts/2007

- 2020/

Forecast Growth of Airline Passenger Traffic (per Year) on U.S. Airlines
Domestic & Int’l Flights Domestic Flights International Flights

2.6% 2 .4% 4.4%

Forecast Growth of Airline Passenger Traffic (per Year) on Foreign Airlines
Domestic & Int’l Flights Domestic Flights International Flights

4.6% 4.6% 4.6%



### Cost of Complaining

Variable Description: These are the elements that comprise the c ost 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 compo nents 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.

55 Zalman Shavell, ―The Effects of Schedule Disruptions on the Economics of Airline Operations,‖ The MITRE

Co rporation, April 14, 2000.Preliminary Regulatory Analysis 1029

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Cost Component Lower 10%

Limit (1 0 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% $

- $

- $

-
T ime 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

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 N on

- 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% 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 $1 3.99. 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 Y ear 2006 Passenger Activity Commercial Service Airports in US‖

, 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 maintenan ce employee one 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 total costs of $27 2,925 by 43 carriers results in a mean airline cost of $6,347.Preliminary Regulatory Analysis 1029

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### It is assumed that since reporting carriers have much larger operations, on average, than non

reporting carriers, the implementation costs for non

- reporting carriers would be proportionally

sma ller. 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 there fore assumed to be lower than for reporting carriers, and is estimated at 11% 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 prov ide data for additional reporting requirements per Final Rule on Airline Service Quality Performance Reports (as reported in Draft Regulatory Evaluation on Revision of Airline Service Quality Performance Reports, U.S. Department of Transportation, Docket N o. OST

2007

- 28522, November 2007)

, used as a proxy. This also used to as proxy for cost to implement customer service plan.

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. Theses responses need not be resolutions to the problems raised, rather a targete d 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 assumed to be the equal to the additional labor cost of handling a complaint, estim ated 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 than king 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

bene fits of 35% of wages ($18.10). Assuming that a standard, targeted response to an average complaint can be sent in six additional minutes yields a cost of $1.85 per hour.

Source: Office and Administrative Support Worker wage data from the Bureau of Labor

S tatistics, 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.

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### 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 BL S, was $31,040. The Department of Homeland Security 2006 Cost

- Benefit Analysis Guidebook 56


### recommends using a mark

- up of 32.8% to wages to take into account benefits received over and above wages.

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 contracts a third party to place ―mystery calls‖ to five reservations centers to test DOT mandates and other compliance issues. The N orthwest Airlines customer service plan (available at www.nwa.com/plan/comm5.html ) describes that this service is extrapolated to include 100 calls per center per quarter (500 calls/quarter) to test their cu stomer 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.

It is assumed that since reporting carriers have much larger operations, on average, than non

reporting carriers, the implementation costs for non

- reporting carriers would be proportionally smaller. The average cost for non

- reporting carriers to self

- audit is at 11% 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 represent ative was from the Bureau of

Labor Statistic‘s 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 a subject matter expert.

Annual Costs to Airlines of Self Auditing Customer Complaint Calls

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 which have already implemented self audits (Alaska in 2000, Conti nental in 2001, Northwest in 1999,

56 Page 15. Cost

Customer Service Cost $41,798
Mystery Calling Contract $15,000

Total $56,798

Source: Bureau of Labor Statistics’ May 2007 National Occupational Employ ment 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.Preliminary Regulatory Analysis 1029

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- 38 Econometrica, Inc. Last Revised March 29, 2010 

### Southwest in 1999) , the average change in complaints in the two years following implementation

was calculated to be

- 39%. During those same periods, the change in complaints to carriers that

did not self audit was calcula ted to be

- 19%, 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

t hat 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% decrease in complaints.

Source: Calculations base d on data from DOT Air Travel Consumer Report, 1998 through 2007. Information on self auditing of customer service plans from DOT and email communication.