Order 2012

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UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

On the Fifth day of October , 201 2

Jetstar Airways Pty Limited Docket OST 2012

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Violations of Article 17 of the

Montreal Convention and 49 U.S.C. § 41712 Served October 5 , 201 2

CONSENT ORDER

This consent order concerns violations by Jetstar Airways Pty Limited (Jetstar)

, an Australian air carrier, of Article 17 of the Montreal Convention (Convention) and the statutory prohibition against unfair and deceptive trade practices, 49 U.S.C. § 41712

, involving the carrier’s blanket exclusion on reimbursement for a class of items contained

in lost bags on Jetstar flights to or from the United Sta tes

. It directs Jetstar to cease and

desist from future similar violations of Article 1 7 and section 417 12 , and assesses the carrier a compromise civil penalty of $ 3 0 ,000

.

Applicable Law

The Convention sets forth rules on certain international flights that govern air carrier liability for lost, delayed, and damaged checked baggage. 1 Article 17 of the Convention provides that carriers are liable for loss of or damage to checked baggage in the custody of the carrier, except to the extent that the loss or damage “resulted from an inherent defect, quality, or vice” of the baggage. Under the Convention, carriers may cap their liability for lost, delayed, or damaged checked baggage, but Article 22 requires that any such cap be no lower than 1,131 Special Draw ing Rights (SDRs). 2

1 Convention for the Unification of Certain Rules for International Carriage by Air , adopted on May 28,

1999. The Convention entered into force for the United States of America on November 4, 2003, and for Australia on January 4, 2009.

2 Inflation Adjustments to Liability Limits Governed by the Montreal Convention Effective December 30,
2009, 74 F ed. R eg. 5901 7 (Nov. 16, 2009) available at http://airconsumer.dot.gov/rules/guidance.htm

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The Convention does not permit blanket exclusions or other wise allow carriers to disclaim liability for any class or category of item, such as jewelry, electronics, or high value goods that they have accepted for transport as checked b aggage. Rather, such

exclusio ns contravene Article 17 because they have the effect of limiting

— with respect to items falling within their ambit

— a carrier’s liability to an amount lower, i.e., zero, than the minimum level required by Article 22. (By notice dated March 26, 2009, the Department reminded all airlines engaged in foreign air transportation 3 of this proscription and gave them 90 days from the date of the notice to revise their tariffs, statements, and policies related to baggage liability. ) 4 Und er Departmental enforcement case precedent, violations of Articles 17 also constitute unfair and deceptive practice s and

unfair method s of competition in violation of 49 U.S.C. § 41712. 5 In addition, Article 26

states that any contractual provision tendin g to relieve the carrier of liability or to fix a lower liability than set forth in the Convention is null and void.

Facts

According to Article 7.4 of Jetstar’s contract of carriage, passengers:

“must not include in [their] checked Baggage: fragile, d elicate or perishable items, computers, items with a special value, such as money, jewelry, precious metals, silverware, negotiable papers, share certificates, securities or other valuable documents, cameras, electronic equipment, commercial goods or

busin ess documents, or passports and other travel documents. As [Jetstar’s] liability is limited (see 14) , [it] will not be liable for any inconvenience or Damage [passengers] suffer if [they] have ignored [Jetstar’s] requirements and

included the item/s as Checked Baggage.”

Article 14.3(a) of Jetstar’s contract of carriage provides:

Except to the extent required by law, [Jetstar is] not liable for Damage to items which [passengers] are asked not to include in... checked baggage (under 7.4).

While we note that Article 14.3 includes language that appears to condition the blanket exclusion set forth in Article 7.4, Jetstar’s response to the Department acknowledged that

their policy regarding baggage liability “ to comply with all applicable laws had not been applied consistently.”

3 “Foreign air transportation” means the transportation of passengers or property by aircraft as a common carrier for compensation... between a place in the United States and a place outside the Uni ted States when any part of the transportation is by air. 49 U.S.C. § 40102(a)(23).

4 Guidance on Airline Baggage Liability and Responsibilities of Code

- share Partners Involving

International Itineraries , 74 Fed. Reg. 14837 (Mar. 26, 2009), available at http://airconsumer.dot.gov/rules/guidance.htm

.

5 See, e.g., Emirates, Violations of Articles 17 and 19 of the Montreal Convention and 49 U.S.C. § 41712

, Order 2011

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- 24 (Aug. 30, 2011).3

Mitigation

Jetstar states that it takes its responsibilities to comply with all applicable laws and regulations very seriously, including the Montreal Conventi on and the Department’s

rules. Jetstar notes that it has cooperated fully with the Department with respect to this

matter.

Jetstar asserts that it conducted its own thorough review of the airline’s baggage claim

ha ndling policies and practices. As a result of this review, Jetstar clarified the wording in

its Co nditions of Carriage and in its int ernal policies and procedures. Jetstar also states
that it retrained relevant employees and third

- party contractor s to ensure that they

understand and are able to correctly apply the baggage liability policy.

Decision

T he Enforcement Office has carefully considered the information provided by Jetstar but

continues to believe that en forcement action is warranted. T he Enforcement Office and

Jetstar have reached a settlement of this matter in order to avoid litigation. Without admitting or denying the violations described above, Jetstar consents to the issuance of an

order to cease and desist from future violations of Article 17 of the Montreal Convention and 49 U.S.C. § 41712 and to the assessment of $ 3 0 ,000 in compromi se of potential civil penalties otherwise due and payable pursuant to 49 U.S.C. § 46301.

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

violations described herein and the size and sophistication of the carrier a nd se rves the public interest. It represents a strong deterrent against future noncompliance with the

Montreal Convention by Jetstar

, as well as by other air carriers and foreign air carriers.

This order is issued under the authority con tained in 49 CFR Part 1

.

ACCORDINGLY,

1. Based on the above discussion, we approve this settlement and the provisions of this order as being in the public interest;

2

. We find that Jetstar Airways Pty Limited violated Article 17 of the Montreal Convention by seeking to limit its liability resulting from a blanket exclusion on

reimbursement for a class of items contained in lost baggage , as described above ;

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. We find that by engaging in the conduct and violations described in ordering paragraph 2, above, Jetstar Airways Pty Limited has also violated 49 U.S.C. § 41 712 ;

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. We order Jetstar Airways Pty Limited and all other entities owned or controlled by or under common ownership with Jetstar Airways Pty Limited and their successors and assignees, to cease and desist from violations of Article 17 of the4

Montreal Convention and 49 U.S.C. § 41712

. Failure to comply with this cease and desist provision shall subject Jetstar Airways Pty Limited and its successors an d assignees to further enforcement action;

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. We assess Jetstar Airways Pty Limited $3 0,000 in compromise of civil penalties that might otherwise be assessed for the violations described above. O f this total penalty amount, $15 ,000 shall be due and payable within 30 days of the date of issuance of

this order. The remaining $15 ,000 shall become due and payable immediately if Jetstar Airways Pty Limited violates this order’s cease and desist provision within one year following the date of issuance of this order or fails to comply with the order’s payment provisions; and

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. We order Jetstar Airways Pty Limited to pay the penalty through Pay.gov to the account of the U.S. Treasury. Payments shall be made in accordance with the instructions contained in the Attachment to this order. Failure to pay the penalty as

ordered s hall subject Jetstar Airways Pty Limited to the assessment of interest, penalty, and collection charges under the Debt Collection Act and to further

enforcement action for failing to comply with this order

.

This order will become a final order of the Department 10 days after its service date unless a timely petition for review is filed or the Department takes review on its own

motion.

BY:

SAMUEL PODBERESKY

Assistant General Counsel for

Aviation Enforcement and Proceedings

(SEAL)

An electronic version of this document is available at www.regulations.gov