• • ' !•! P U: f| 3 

UNITED STATES DEPARTMENT OF 

TRANSPORTATION 

FINAL REGULATORY IMPACT ANALYSIS OF 

RULEMAKING ON 

ENHANCED AIRLINE PASSENGER 

PROTECTIONS 

FINAL REGULATORY EVALUATION 

December 17,2009 
This Page Intentionally Left Blank 

HIR I Decision Economics Pag e * 
TABLE OF CONTENTS 

ACRONYMS AND ABBREVIATIONS Vll 

EXECUTIVE SUMMARY 1 

1 INTRODUCTION 8 

1.1 Stated Need for Regulation 8 

1.1.1 Need for Intervention , 9 

1.1.2 Recommendations of the Department of Transportation's Inspector General. 13 

1.1.3 industry Actions 14 

1.2 Final Regulation 14 

1.3 Alternatives 16 

2 BENEFIT-COST ANALYSIS APPROACH 19 

2.1 Overview of Analytical Framework 19 

2.1.1 Value of Time 20 

2.1.2 Value of Reliability and Certainty 23 

2.1.3 Key Assumptions 23 

2.1.4 Limits to Available Information 25 

2.2 Component 1: Develop and Implement a Contingency Plan for Extended Tarmac 

Delays 25 

2.2.1 Component Assumptions 31 

2.2.2 Scenarios for Long Tarmac Delays 31 

2.2.3 Cost and Benefit Calculations for Component 1 39 

2.2.4 Adjustments to Component 1 Covered by Alternatives 1, 2 and 3 45 

2.3 Component 2: Provide Information for Filing Complaints and Respond to Consumer 

Problems 45 

2.4 Component 3: Chronically Delayed Flights to be Declared Unfair and Deceptive 

Practices and an Unfair Method of Competition .' 48 

2.4.1 Arrival Delay 50 

2.4.2 Summary of Cost and Benefit Calculation for Component 3 50 

2.4.3 Adjustment to Component 3 Covered by Alternative 4 50 

2.5 Component 4: Carriers to Publish Delay Data on Websites 51 

2.5.1 Summary of Cost and Benefit Calculation for Component 4 53 

2.5.2 Adjustments to Component 4 Covered by Alternative 5 54 

2.6 Component 5: Carriers to Adopt Customer Service Plans and Self-Audit Compliance55 

3 UPDATES TO THE REGULATORY EVALUATION 57 

4 RESULTS AND DISCUSSION 60 

4.1 Net Results 60 

4.2 Risk Analysis 75 

4.3 Sensitivity Analysis 80 

4.4 Qualitative and Non-monetized Benefits 83 

5 FINAL SMALL BUSINESS IMPACT ANALYSIS 85 

APPENDIX A. DATA SOURCES 89 

HXtlDocision Economics Page • iii 
LIST OF FIGURES 

Figure 1: Complaints per 100,000 Enplanements in 2007 by Category, by Airlines with Reporting 

Requirements 10 

Figure 2:2003 - 2007 Complaints per 100,000 Enplanements, for Airlines with Reporting 

Requirements 11 

Figure 3: Taxi Out Time for Airports (minutes) 11 

Figure 4: Taxi Out Time for All Airports, time segments as % of total 12 

Figure 5: Taxi Out Time for All Airports: Only flights with Taxi out time greater than 60 minutes, 12 

Figure 6: Change in Consumer Surplus from Reduced Time of Filing Complaints as a Function of 

Unit Generalized Cost 47 

Figure 7: Net Present Value, Using 3% and 7% Discount Rates, Probability Distribution for the 

Rule 77 

Figure 8: Present Value of Costs Using a 3% and 7% Discount Rate, Probability Disthbution for 

the Rule 78 

Figure 9: Present Value of Benefits Using a 3% and 7% Discount Rate, Probability Distribution for 

the Rule 79 

Figure 10: Present Value of Net Benefits Using a 7% Discount Rate, Probability Disthbution for 

the Final Rule and Alternatives 80 

HIR I Decision Economics Page • Iv 
LIST OF TABLES 

Table 1: Summary of Alternatives 17 

Table 2: Top 1% of Domestic Passenger Carriers 18 

Table 3: Small Carriers (with Fleets Consisting Only of Planes between 30 and 60 Seats) 18 

Table 4: Value of Time for Air Passengers 21 

Table 5: Value of Time Premiums for Differing Qualitative Levels of Service 22 

Table 6: Select Airline Terms and Conditions to Handle Long, On-board Flight Delays 27 

Table 7: Summary of Component 1 Requireiiients, Costs, and Benefits 29 

Table 8: Summary of Segments of Trip That Could Experience Change in Quality or Quantity of 

Time 30 

Table 9: Segments of Trip That Could Experience Change in Quality or Quantity of Time: 

Adoption of Contingency Plan 32 

Table 10: Segments of Trip That Could Experience Change in Quality or Quantity of Time: 

Provision of Adequate Food, Water, and Lavatory Facilities and to Medical Attention.... 34 

Table 11: Segments of Trip That Could Experience Change in Quality or Quantity of Time: 

Opportunity to Deplane at Gate 35 

Table 12: Segments of Trip That Could Experience Change in Quality or Quantity of Time: 

Cancelled Flights (after passengers boarded) 37 

Table 13: Segments of Trip That Could Experience Change in Quality or Quantity of Time: 

Cancelled Flights (before passengers boarded) 38 

Table 14: Average of 2007 and 2008 Flights and Passengers per Taxi Delay Time Group, for 

Carriers Covered By Rule But Not Already Compliant for Contingency Plans 40 

Table 15: Total Costs to carriers of Component 1 42 

Table 16: Total Costs to passengers of Component 1 42 

Table 17: Benefits to Passengers from Deplaning, Annually 44 

Table 18: Summary of Component 2 Requirements, Costs and Benefits 46 

Table 19: Total Annual Benefits of Component 2 48 

Table 20: Total Costs of Component 2 48 

Table 21: Summary of Component 3 Requirements, Costs and Benefits 49 

Table 22: Summary of Component 4 Requirements, Costs and Benefits 51 

Table 23: Reporting Carriers and Posting of Delay Data 53 

Table 24: Total Costs of Component 4 54 

Table 25: Total Benefits of Component 4 54 

Table 26: Total Costs Associated with Alternative 4 55 

Table 27: Summary of Component 5 Requirements, Costs and Benefits 56 

Table 28: Costs of Component 5 56 

Table 29: Summary of Costs and Benefits for Final Rule and Alternatives 61 

K R I Decision Economics Page • 
Table 30: Costs and Benefits for Final Rule by Year and Component of Final Rule (millions), not 

discounted..^ , 62 

Table 31: Costs and Benefits for Alternatives only for Components Which Differ from Final Rule 

(millions), not discounted ......67 

Table 32: Provisional Estimates of Expected Benefits of Component 5, Implementing and SelfAuditing Customer Service Plan 75 

Table 33: Summary Results of Risk Analysis 76 

Table 34: Sensitivity Analysis Results, Costs 81 

Table 35: Sensitivity Analysis Results, Benefits 82 

Table 36: Small Carriers with Planes Only between 30 and 60 Seats 86 

Table 37: Total Costs (in millions) for each Component 86 

Table 38: Annualized Costs per Firm, Ten Years 87 

Table 39: Receipts for Small Carriers 87 

Table 40: Annualized costs as a percent of annual receipts per firm : 88 

( x R I Decision Econoniics Page • Vi 
ACRONYMS AND ABBREVIATIONS 

ANPRM - Advance Notice of Proposed Rulemaking 

AOTP - Airline On-Time Performance 

ATA - Air Transport Association 

ATC - Air Traffic Control 

BLS - Bureau of Labor Statistics 

BTS - Bureau of Transportation Statistics 

CPI - Consumer Price Index 

Department or DOT or USDOT - Department of Transportation 

FAA - Federal Aviation Administration 

GDS - Global Distribution Systems 

IG - Inspector General of the Department of Transportation 

LOS - Level of service 

NPRM - Notice of Proposed Rulemaking 

NPV - Net Present Value 

0MB - Office of Management and Budget 

OTC - online travel companies 

RAP - Risk Analysis Process 

RIA - Regulatory Impact Analysis 

SBA - Small Business Administration 

TSA - Transportation Security Administration 

H I R I Decision Economics Page • Vii 
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H^RlDBcision Economics Pag e • Viii 
EXECUTIVE SUMMARY 

The U.S. Department of Transportation (DOT) is presenting this Final Regulatory Impact 

Analysis (regulatory analysis or RIA) prepared by HDRjDecision Economics (HDR) in support 

of the Final Rulemaking on Enhanced Airline Passenger Protections. This RIA estimates the 

economic impact, in terms of all costs and benefits, accruing to passengers, air carriers and other 

entities regulated under this action, as required by Executive Order (EO) 12866. Economic 

impacts are measured on an incremental basis and against the current status of passenger rights 

on domestic airline carriers. 

A detailed description of the Proposed Rule and an initial assessment of the stream of costs and 

benefits of the Proposed Rule were provided to the public for comment. The Department has 

reviewed the public comments to both the Proposed Rule and the initial Regulatory Impact 

Analysis and has made relevant adjustments to both the Rule and RIA. A discussion of the 

comments and responses to the conunents can be found in the Preamble to the Final Rule. The 

estimates of total costs and benefits of the Final Rule and the alternatives assessed presented in 

this RIA reflect updates in response to the public comments and as a result of further research. 

In addition to complying with EO 12866, this document addresses requirements of three other 

acts: 

The Trade Agreements Act requires agencies to consider existing international standards and 

avoid uimecessarily interference with international trade. The Department has determined that 

the Final Rule does not impose any significant barriers to international trade. 

The Unfunded Mandates Reform Act of 1995 requires agencies to assess the impact of a new 

Rule or regulatory change on state, local, and/or tribal governments; The Department has 

determined that the Final Rule will not impose additional costs to state, local or tribal 

governments. 

The Regulatory Flexibility Act of 1980 requires that agencies assess the economic impact of a 

new Rule or regulatory change on small businesses and consider alternatives to achieve the same 

goal with less impact. The impact of this Final Rule on small carriers is discussed below. 

Need for Regulation 

A history of persistent and significant flight delays and increasing consumer complaints led DOT 

to identify a need for a regulation to secure airline passenger rights. Notable delays in 1999 led 

carriers to agree to take voluntary action to reduce customer complaints. For the last decade, 

efforts to improve customer service focused on self-regulation, but repeated and significant 

incidents of on-board delays and continuing increases in consumer complaints has led DOT to 

the conclusion that, in this industry, voluntary response falls short of identified needs: 

• Only 7 of 18 airlines with at least 1% of domestic scheduled-service passenger revenues 

have instituted fixed limits to on-tarmac delays prior to providing passenger amenities 

and/or deplanmg; 
• Only 5 of 18 airlines with at least 1% of domestic scheduled-service passenger revenues 

have adopted customer service plans with regular self-audits; and 

• Only 3 of 18 airlines with at least 1% of domestic scheduled-service passenger revenues 

publish delay data on their public websites. 

DOT believes that regulation is warranted to ensure that airlines meet minimum standards for 

passenger service and to avoid diminishment of passenger care beyond acceptable levels. 

Final Rule 

A Notice of Proposed Rulemaking (NPRM) on Enhancing Airline Passenger Protections 

announced DOT's consideration of a proposed rule that included five components to ensure that 

airline passenger care and service meet minimum standards. These five components are 

summarized below.' 

1. Require carriers to adopt and publish contingency plans for lengthy tarmac delay 

their websites. Any certificated or commuter air carrier that operates domestic scheduled 

passenger service (including any charter services) that uses any aircraft with 30 or more 

passenger seats will be required to develop a contingency plan for long ground delays on 

the tarmac for all its flights, including those on aircraft containing fewer than 30 seats. 

Each contingency plan will specify that the carrier will ensure a) that passengers on 

planes delayed on the tarmac for two hours will have access to food, water, clean 

lavatories, and the assistance of medical personal if needed, and b) passengers on planes 

delayed on the tarmac for three hours will be permitted to deplane, unless there is a safety 

and/or security-related impediment to deplaning passengers or air traffic control (ATC) 

advises the pilot that permitting passengers to return to the gate or disembark would 

significantly disrupt airport operations (as described in the preamble). Contingency plans 

must be made available on carrier websites. 

Carriers will also be required to maintain information for two years on delays that trigger 

the contingency plan. The information will include the length of the delay, the cause of 

the delay and identify steps taken by the carrier to alleviate passenger discomfort. 

2. Require carriers to respond to consumer problems. Every certificated and commuter 

air carrier that operates scheduled domestic passenger service using any aircraft with 30 

or more passenger seats will be required to designate an employee at its system 

operations center and at each airport dispatch center to monitor delays and to have input 

on decisions regarding flight cancellations. Each such carrier will also be required to 

provide information on how to file consumer complaints at each airport dispatch center, 

on its website, and on all e-ticket confirmations. Each such carrier will be required to 

send a substantive response to each consumer complaint within 60 days of receipt and 

acknowledge receipt of the complaint within 30 days.^ 

For more detail, see tiie accompanying Notice of Final Rulemaking. 

The Rule will not require resolution of the complaint, but rather a target response upon receipt. 

H X ( I Decision Economics Page • 2 
3. Declare the operation of flights that remain chronically delayed to be an unfair and 

deceptive practice and an unfair method of competition. The Final Rule defines a 

chronically delayed flight as a flight that is operated by a carrier that is carrying 1% or 

more of all domestic passengers, that is flown at least 10 times in a month, and that 

arrives more than 30 minutes late more than 50% of the time. If this flight continues to 

operate for four consecutive months at this level of delay, it will be considered an unfair 

and deceptive practice and subject to enforcement action. 

4. Require carriers to publish delay data on their websites. The DOT proposes to require 

that airlines that are currently required to report on-time performance data to the Bureau 

of Transportation Statistics (BTS) (i.e., reporting carriers) to publish some delay 

information on their websites for each flight it operates and for each flight its U.S. codeshare partners operate for which schedule information is available. This information is to 

include the percentage of on-time arrivals, the percentage of arrivals delayed more than 

30 minutes with special highlighting if the flight was late more than 50% of the time, and 

the percentage of cancellations if 5 percent or more of the flight's operations were 

canceled in the covered month. There will be two options for data presentation - on the 

web page with the initial listings or by hyperlink on that page. 

5. Each carrier must adopt a customer service plan and self-audit adherence to it. The 

DOT proposes requiring any certificated or commuter air carrier that operates scheduled 

domestic scheduled passenger service to adopt a customer service plan into that addresses 

the issues covered by the 12 parts of the Air Transport Association's (ATA) Customer 

Service Commitment and to self-audit adherence to this customer service plan. 

Alternatives Evaluated 

The Office of Management and Budget (0MB) states that regulatory analyses should consider 

alternatives to the Rule or regulation being evaluated and publish results as part of the 

rulemaking process.^ The initial RIA published with the NPRM evaluated four alternatives to 

various components which were considered by the Department before coming to decisions on the 

Final Rule. The costs and benefits for these alternatives, as well as for the option presented as the 

proposed rule, have been updated in response to comments by the public on cost and benefit 

assumptions and values and are included in this Final RIA. These alternatives are: 

Alternative 1: This alternative affects Component 1 (contingency plans for lengthy tarmac 

delays) and assumes DOT-imposed tarmac delay limits of two hours before guarantee of food, 

water, etc., and four hours (instead of three hours) before allowing passengers to deplane. This 

contingency plan would be required for all carriers with aircraft seating 30 passengers or more. 

All other components of the Final Rule are maintained. 

Alternative 2: This alternative also affects Component 1 and allows carriers to determine the 

time triggers. This was the proposed option for the Rule described in the NPRM. Based upon 

existing carrier contingency plans, it was estimated that time limits instituted by carries will 

converge onto a tarmac delay limits of two hours before guarantee of food, water, etc, and five 

^ Circular A-4, Office of Management and Budget, September 17,2003. 

H ] R I Decision Economics Page • 3 
hours before allowing passengers to deplane.'* Contingency plans would be required for all 

carriers with aircraft seating 30 passengers or more. All other components of the Final Rule are 

maintained. 

Alternative 3: This alternative requires the contingency plan (defined in Component 1) to apply 

to carriers that operate at least one flight with aircraft seating 60 or more passengers (instead of 

30 or more). All other components of the Final Rule are maintained. 

Alternative 4: This alternative redefines what constitutes a chronically delayed flight in 

Component 3 (which declares chronically delayed flights "unfair and deceptive") to one that 

arrives at least 30 minutes late at least 60% of time, (not 50% of time) in three consecutive 

quarters. All other components of the Final Rule are maintained. 

Alternative 5: This alternative would require reporting carriers and online travel agencies to post 

delay data on their websites (Component 4 of the Final Rule). Travel agencies that operate 

exclusively online, as well as those that allow customers to purchase airline tickets online, would 

be required to publish some delay information on their websites before the point of purchase, 

similar to this requirement for reporting carriers. 

Summary of Updates to the Regulatory Impact Assessment 

In response to the comments submitted in response to the NPRM, and as a result of further 

research and data collection, changes have been made to some of the variables that make up the 

estimations of costs and benefits in this RIA. Commenters included many private citizens, 

consumer advocacy groups, airline industry associations, airline carriers, travel agency 

associations, airport associations, and lawmakers. 

One of the most frequent comments made by airline industry associations and airline carriers was 

that the range of costs estimated was too low, and specifically did not include the costs of 

litigation which may arise despite carriers' compliance. The estimate to collect and post delay 

data on carrier websites was increased. The Department believes that such litigation costs would 

be a regular function of doing business. Nevertheless, the Department has decided not to require 

at this time that carriers incorporate their contingency plans and customer service plans into their 

contracts of carriage. All changes are discussed in detail in chapter 3. 

Summary of Results 

The goal of this analysis is to assess the incremental benefits and costs attributable to adoption of 

the regulations. A fundamental indicator of a publicly acceptable rule is one in which public 

benefits exceed public costs. The difference between benefits and costs quantified over the 

planning horizon lifecycle and discounted to the present represents a fundamental indicator of 

projected worth. OMB Circular A-4 stipulates that this difference, the net present value (NPV), 

should be regarded as a principal measure of value produced by a benefit-cost analysis. Further, 

EO 12866 states that agencies should attempt to maximize the net benefits of their rulemakings, 

subject to statutory requirements. A NPV greater than zero indicates that benefits exceed costs 

'' For more detail see Initial Regulatory Impact Analysis of Proposed Airline Passenger Protections, September 

2008. 

H R I Decision Economics Page • 4 
and that the regulation can be expected to increase the general level of economic welfare 

accordingly. 

Monetized outcomes were estimated for all impacts that met two conditions: (1) volume 

estimates were available or could be estimated; and (2) values of unit changes in outcomes could 

be determined or estimated using analogous experience, available statistics, or with acceptable 

shadow pricing techniques. The time frame for the estimation of the monetized impacts of the 

Enhanced Airline Passenger Protections is set at 20 years. Carriers will be expected to be 

compliant by the end of the first year. 

The expected present value of costs over a 20-year period using a 7% discount rate is $100.6 

million for carriers and passengers; while the expected present value of monetized benefits is 

$169.7 million. NPV of the Final Rule for 20 years at a 7% discount rate is $69.1 million. The 

NPVs for the alternatives range from -$17 to $74 million at a 7% discount rate. The net present 

value of alternatives 1 and 2 are extremely close, while and the net present value of the Rule and 

alternative 4 are also similar. Given the multiple avenues through which uncertainty in specific 

inputs can affect comparative net benefits among alternatives, the Department has chosen the 

option for the Rule which it believes maximizes both quantifiable and unquantifiable net benefits 

to society, without placing an undue burden on the industry. 

Table ES-1: Summary of Costs and Benefits for Final Rule and Alternatives ^ 

20 Year Ufgcyciie Analysl» 

Bwi«flt»(milltoris) Final Ftur» AItt Alt 2 AW$ Alt 4 AttS 

20 Year PV 7% discounting $169.7 $152.7 $149.1 $144.0 $168.2 $168.6 

20 Year PV 3% discounting $249.2 $224.5 $219.2 $211.9 $247.0 $247.5 

Coats (mlHtons) Final Ruto Atti Air2 Alt 3 Alt 4 Alt& 

20 Year PV 7% discounting $100.6 $79.3 $75.4 $80.4 $100.6 $185.8 

20 Year PV 3% discounting $141.3 $110.3 $104.7 $111.9 $141.3 $230.3 

ilnal Rule Altt Alt2 Alts Alt 4 

20 Year PV 7% discounting $69.1 $73.4 $73.7 $63.7 $67.6 ($17.2) 

20 Year PV 3% discounting $107.9 $114.2 $114.5 $100.0 $105.7 $17.2 

Economic forecasts traditionally take the form of a single "expected outcome" supplemented 

with alternative scenarios. The limitation of a forecast with a single expected outcome is that 

while it may provide the single best statistical estimate, it offers no information about the range 

of other possible outcomes and their associated probabilities. This RIA incorporates an analytical 

risk approach that attaches ranges (probability distributions) to the forecasts of each input 

variable, allowing all inputs to be varied simultaneously within their distributions. Applying 

uncertainty to benefit and cost estimates in this maimer provides a range of probability-based 

outcomes for the expected benefits and costs of the Final Rule. The results of the uncertainty 

analysis indicate that using a 7% discount rate, there is an 80% probability that the 20-year NPV 

of the Rule will be between $21.8 and $123.4 million. The results indicate that the Rule will 

most likely have a net positive impact; the probability of the NPV being negative is less than 

10% (see section 4.2 for greater detail) over 20 years. 

HLR I Decision Economics Page • 5 
Table ES-2: Summary Results of Risk Analysis 

20-Year Period 

Final Rule at 7% discount rate 

Final Rule at 3% discount rate 

Median NPV 

($M) 

$66.2 

$101.8 

10% Probability of 

NOT Exceeding 

$21.8 

$37.9 

QCo Probability of 

NOT Exceeding 

$123.4 

$193.2 

The median, risk-adjusted NPV varies slightly from the expected NPV shown in Table ES-1, due to the statistical 

risk analysis calculation. 

Benefits of the Rule that could not be measured or monetized are also assessed in this RIA. Nonquantified benefits may include: 

Under Component 1 (Contingency Plans) 

- Improved Management Of Flight Delays. 

- Reduced Stress Among Delayed Passengers And Crew. 

- Decreased Anxiety With Regard To Flying. 

- Improved Customer Good Will Towards Carriers. 

- Improved Overall Carrier Operations. 

Under Component 2 (Customer Complaints) 

- Decreased Anger Toward Carriers During Resolution of Complaints. 

- Decreased Legal and Administrative Fees from Better Responses to Consumer 

Complaints. 

Under Component 3 (Chronically Delayed Flights) 

- Improved Customer Good Will Towards Carriers. 

- Improved Management Of Flights and Schedules. 

Under Component 4 (Posting Delay Data) 

- Improved Management Of Flights and Schedules. 

Under Component 5 (Incorporating and Auditing Customer Service Plans) 

- Value of Improved Customer Service Based on Self-Auditing of Adherence to 

Customer Service Plans. 

- Improved Customer Good Will Towards Carriers. 

Accounting Statement 

As required by OMB Circular A-4, this RIA includes an accounting statement indicating the 

classification of the annual expenditures associated with this rule. The table provides our best 

estimate of the annual dollar amount of these costs and benefits, expressed in 2009 dollars, at 3% 

and 7% discount rates. We estimate that the benefits will be $15.7 million annualized at a 7% 

discount rate, or $16.3 ihillion annualized at a 3% discount rate. Cost of this rule are estimated to 

be approximately $9.3 million annualized at a 7% discount rate, or $9.3 million annualized at a 

3% discount rate, over a 20-year period of analysis. 

HI^ I Decision Economics Page • 6 
Table ES-3: Accounting Statement 

1 

Over 20-year period j Primary Estimate 

Benefits 

Annualized Monetized 

($millions/year) 

$15.7 

$16.3 

Estimates 

Low Estimate 

$11.7 

$12.2 

Hiqh Estimate 

$21.1 

$22.1 

Year 

Dollar 

2009 

2009 

Units 

Discount 

Rate 

7% 

3% 

Penod 

Covered 

2010-2029 

2010-2029 

Costs 

Annualized Monetized 

($millions/vear) 

$9.3 

$9.3 

$7.5 

$7.6 

$11.5 

$11.6 

2009 

2009 

7% 

3% 

2010-2029 

2010-2029 

Final Regulatory Flexibility Analysis 

The Final Rule is expected to affect small carriers which are defined by DOT as those whose 

fleets are made up exclusively of aircraft with 60 seats or less.^ 

Components one, two, and five of the Final Rule - the development and implementation of 

contingency plans, responding to consumer complaints, and adoption of a customer service planapply to domestic flights of carriers with regularly scheduled passenger flights that have any 

aircraft with 30 or more seats. Small carriers that collect at least 1% of all domestic passenger 

revenue must also comply with components 3, the determination of chronically delayed flights as 

an unfair practice, and 4, the posting of delay information on purchase sites. 

The total present value of the estimated cost of the Rule for the 11 small carriers identified as 

having 60 or fewer seats is $48.9 million. When total costs are aimualized and compared to 

aimual receipts per firm, costs are less than 0.09% of receipts for small carriers for which 

financial data were available. 

Alternative 5 would also impact small travel agencies with online booking engines. 

' See 14 CFR Chapter 11. Note that the Small Business Administration definition is not used. Note also that the 

rule will not apply to carriers with fleets that consist entirely of planes that seat fewer than 30 passenger nor carriers 

that do not have regularly scheduled flights. 

H u R I Decision Economics Page • 7 
1 INTRODUCTION 

The U.S. Department of Transportation (DOT) is presenting this Final Regulatory Impact 

Analysis (regulatory analysis or RIA) prepared by HDR|Decisioii Economics (HDR) in support 

of the Final Rulemaking on Enhanced Airline Passenger Protections. This RIA estimates the 

economic impact in terms of all costs and benefits on passengers, airline carriers and other 

entities affected by this action, as required by Executive Order (EO) 12866. The economic 

impacts are meastlred on an incremental basis and against the current status of passengers' rights 

on domestic airline carriers. 

A detailed description of the Proposed Rule and an initial assessment of the stream of costs and 

benefits of the Proposed Rule were provided to the public for comment. The Department has 

reviewed the public comments to both the Proposed Rule and the initial Regulatory Impact 

Analysis and has made relevant adjustments to the Rule and RIA. A discussion of the comments 

and responses to the comments can be found in the Preamble to the Final Rule. The estimates of 

total costs and benefits of the Final Rule and the alternatives assessed presented in this RIA 

reflect updates in response to the public comments and as a result of further research. 

1.1 Stated Need for Regulation 

Proposals for airline passenger protections have been debated for the last ten years. In January 

1999, major tarmac delays left some Northwest Airlines (Northwest) passengers snowbound on 

planes in Detroit for over eight hours attracting national media attention.^ Incidents such as this 

led to Congressional discussions to enhance passenger rights to basic comfort, safety and 

convenience when subjected to lengthy tarmac delays. This led to Congressional proposals for a 

"Passenger Bill of Rights."^ Congress and the Air Transport Association (ATA) came to an 

agreement that gave the carriers the opportunity to address these concerns as an industry, without 

regulation.^ This led some carriers to adopt more stringent consumer service plans that addressed 

how to deal with major tarmac delays. However, not all carriers adopted such plans; and the 

industry soon faced other issues, including the drop in demand following the terrorist attacks on 

September 11, 2001, and rising fiiel prices. As a result, carriers focus on passenger rights and 

tarmac delays subsided, resulting in incomplete efforts. In 2008, not all carriers have explicit, 

enhanced passenger protections related to lengthy tarmac delays. A review by the DOT Inspector 

General (IG) in 2000, conducted at the request of Congress, concluded that carriers had made 

improvements but had not done enough.^ 

* See US Department of Transportation's Inspector General in "Actions Needed to Minimize Long, On-Board Flight 

Delays," Office of the Inspector General, US Department of Transportation, report AV-2007-077, September 25, 

2007. 

^ Ravich, Timothy M. "Re-Regulation and Airline Passengers' Rights." Journal of Air Law and Commerce. 2002. 

and CNJ^.com, "Clinton administration proposes passenger rights legislation," March 10, 1999. 

* "Actions Needed to Minimize Long, On-Board Flight Delays," Office of the Inspector General. 

^ "Final Report on AWine Customer Service Commitment," Office of the Inspector General, US Department of 

Transportation, report AV-2001 -020, September 12,2001. 

H I R I Decision Economics Page • 8 
Significant tarmac delays of up to nine hours occurred again in late 2006 and early 2007, 

prompting another national discussion of the need for a passenger bill of rights. *° The Office of 

the Secretary of Transportation commissioned the IG to report again on tarmac delays and 

provide recommendations (summarized below in Section 1.1.1.2). This report, "Actions Needed 

to Minimize Long, On-Board Flight Delays," was released September 25, 2007, and led to the 

Advanced Notice of Proposed Rulemaking (ANPRM) of the Passenger Bill of Rights. The 

ANPRM, summarized in Section 1.2, was published in the Federal Register Vol. 27, No. 223, 

November 20,2007. 

1.1.1 Need for Intervention 

In light of the history of persistent flight delays, significant on-board delays and increasing 

customer complaints, the Department concluded that there is a need for regulation to secure 

airline passenger rights. After incidents of notable delays in 1999, carriers agreed to take 

voluntary action to reduce customer complaints and self-regulation had been the focus of efforts 

to improve customer service during the last decade. Continued incidents of long on-board delays 

and an increase in consumer complaints have led DOT to conclude that the industry's voluntary 

response falls short of identified needs: 

• Only 7 of 18 airlines with at least 1% of domestic scheduled-service passenger revenues 

have instituted fixed limits to on-tarmac delays prior to the provision of amenities and 

deplaning; 

• Only 5 of 18 airlines with at least 1% of domestic scheduled-service passenger revenues 

have adopted customer service plans with regular self audits; and 

• Only 3 of 18 airlines with at least 1% of domestic scheduled-service passenger revenues 

publish delay data on their websites. 

The DOT believes that regulation is warranted to ensure that all airlines meet passenger care 

minimum standards and to avoid development of competitive pressure to minimize passenger 

care beyond acceptable levels. 

1.1.1.1 Overview 

In the 12 months ending May 2009, the United States had 105 carriers with scheduled service for 

more than 9.5 million flights serving 625 million passengers. Of the 105 carriers (including 

feeder airlines), 20 accounted for at least 1% of domestic passenger revenues, which required 

them to report on-time performance data to the Bureau of Transportation Statistics (see Table 2 

in Section 1.3 below). 

The airline industry is undergoing consolidation. ATA, Aloha, Frontier, and Skybus airlines have 

declared bankruptcy in 2007 or 2008.'* hi April 2008, Delta Airlines (Delta) and Northwest 

'" "Actions Needed to Minimize Long, On-Board Flight Delays," Office of the Inspector General. 

" Thompson, Marisa E. "Airline Bankruptcies: Who's Next to Fall?" Morningstar, May 28, 2008. 

H I R I Decision Economics Page • 9 
Airlines (Northwest) agreed to merge. United and Continental announced an intent to form a 

marketing alliance. At the same time, increasing fuel prices are creating additional pressures.'^ 

Meanwhile, delay trends, complaints per enplanements, and lengthy tarmac delays have 

increased in recent years. Delays impact both carriers and passengers. Some delays, such as 

those experienced on the tarmac versus those experienced in a terminal, impose greater 

discomfort and/or limited opportunity to use time productively for passengers. 

The figures below illustrate recent trends in complaints and delays. Last year, 40% of complaints 

to airlines concerned flight problems, a category including delays, cancellations and missed 

connections (see Figure 1). Since 2003, the number of complaints per 100,000 enplanements 

increased by nearly 50% (Figure 2). In the same time period, taxi-out times increased by 55% 

(Figure 3), with a decreasing portion of taxi-out times of 15 minutes or less (Figure 4). 

Figure 1: Complaints per 100,000 Enplanements in 2007 by Category, by Airlines with Reporting 

'^equireme^ts 

Southwest 

ExpressJet 

Frontier 

Skywest 

Hawaiian 

Alaska 

JetBlue 

Mesa Airlines 

AirTran 

Pinnacle 

Continental 

Northwest 

American and American Eagle 

Delta, incl. Comair, ASA 

United 

US Airways 

Source: Air Travel Consumer Report, USDOT. 

'^ Wald, Matthew L. "Delta and Northwest Defend a Merger," New York Times, May 9, 2008. 

'^ Stone, Rod. "More Fuel Surcharges Could Curb Air Travel," Wall Street Journal, June 3, 2008. 

H J l I Decision Econoniics Page • 10 
Figure 2: 2003 - 2007 Complaints per 100,000 Enplanements, for Airlines with Fteporting 

Requirements 

i^'.':' 

Source: Air Travel Consumer Report, USDOT. 

igure 3: Taxi Out Time for Airports (minutes) 

8,000,000 

6,000,000 

1,000,000 

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 

Source: Bureau of Transportation Statistics. 

HZR. I Decision Economics Page • 11 
Figure 

100% -

90%-

80% 

70% 

60% 

50% 

40% -

30% 

20% • 

10% • 

4: Taxi Out Time for All i /Virport s, 

- v n p g m~~ 

• :.•.. •,....•:.• i i mm W 

^. 

\ 

i 

• • n I 

( 

r 

1 .• • 

1995 1996 1997 1998 1999 

time segments as % of total 

m m m 

' 1 Kv l 

...•:... .•'...I I I I 

; 

* • 

; 

'•i -

. ••1 ' 

••-.; ' 

. 1 

• 

.-

2000 2001 2002 

• n 11 n B~' 

:-| 1 IJ: 1 1 III 1 III 11 1 

, | 

i^ij 

B Greater than 60 

B31-60 

• 16-30 

1 SO-15 

m 

» 

S 

i 

til 

w 

,•« 

2003 2004 2005 2006 2007 

Source: Bureau of Transportation Statistics, T-lOO database. 

Figure 5: Taxi Out Time for All Airports: Only flights with Taxi out time greater than 60 minutes 

90,000 

10,000 

1996 1997 1 2000 2001 2002 2003 2004 2005 2006 2007 

Source: Bureau of Transportation Statistics, T-100 database 

1.1.1.2 Latest Significant Incidents of Extended Tarmac Delays 

In 2007, the Office of the Secretary of Transportation commissioned the DOT IG to: 

1) Report on two specific incidents involving American Airlines (American) and 

JetBlue Airways (JetBlue) in which passengers were stranded on aircraft for 

extended periods of time; 

H I R I Decision Economics Page • 12 
2) Examine Air Transport Association (ATA) member airlines customer service plans, 

contracts of carriage, and internal policies dealing with long, on-board delays; 

3) Highlight best practices to help deal with these situations; and 

4) Provide recommendations on what airlines, airports, and the government can do to 

prevent recurrence of such events. 

The IG report summarizes the American and JetBlue incidents to establish a foundation for 

recommendations to enhance passenger rights. These incidents were caused by severe weather 

conditions and an uncoordinated effort to resolve issues for passengers on the tarmac. 

The American flight delay occurred on December 29, 2006, when the Dallas-Fort Worth area 

experienced lightning storms and a tornado warning. The airport shut down operations several 

times over an eight-hour period and American diverted over 100 flights to other airports. Many 

passengers on diverted flights were on the tarmac for up to nine hours. 

The JetBlue case happened on February 14, 2007, when a snowstorm hit the Northeast, stranding 

hundreds of JetBlue passengers on the tarmac at JFK International Airport (JFK), some for more 

than ten hours. At one point, JetBlue had 52 aircraft on the ground at JFK with only 21 gates 

available. JetBlue publicly admitted shortcomings in the way it handled this situation. 

The IG report notes that flight delays are increasing, with a cortesponding increase in on-board 

delays. 

1.1.2 Recommendations of tlie Department of Transportation's Inspector General 

The IG report concluded that in light of recent events, DOT should take a more active role in 

overseeing customer service issues, and that some actions by the DOT, the airlines, airports, and 

the Federal Aviation Administration (FAA) can begin immediately. To improve accotmtability, 

enforcement, and protection afforded to air travelers, the IG recommended the following to the 

Secretary of Transportation: 

1. Require each certificated and commuter airline that provides domestic scheduled service 

using any aircraft with more than 30 passenger seats to (a) define what constitutes an 

extended period of time; (b) set a time limit on delay durations before deplaning 

passengers; and (c) incorporate such policies in its contract of carriage and post on its 

Internet site. 

2. Require all airlines that report on-time performance to DOT pursuant to 14 CFR Part 234 

to establish specific targets for reducing chronically delayed or cancelled flights. 

3. Require all airlines that report on-time performance to DOT pursuant to 14 CFR Part 234 

to post on-time flight performance information on their Internet sites. 

4. Require all airlines that report on-time performance to DOT pursuant to 14 CFR Part 234 

to disclose to customers at the time of booking, without being asked, the prior month's 

H K I Decision Economics Page • 13 
on-time performance rate for those flights that have been delayed (i.e., for 30 minutes or 

longer) or cancelled 40% or more of the time. 

5. Require each certificated and commuter airline that provides domestic scheduled service 

using any aircraft with more than 30 passenger seats to self-audit its customer service 

plan. 

6. Require large- and medium-hub airport operators to establish and implement a process 

for monitoring and mitigating long, on-board delays that involves contacting the airline to 

request a plan of action after an aircraft has remained for two hoitfs on the tarmac. 

7. Establish a national task force for airlines, airports, and FAA to coordinate and develop 

contingency plans to deal with lengthy delays, working with carriers and airports to share 

facilities and make gates available in an emergency. 

1.1.3 Industry Actions 

Some carriers have taken steps to enhance passenger protections to prevent future occurrences of 

major delays on the tarmac. 

Alaska Airlines (Alaska), American, Continental, Hawaiian Airlines (Hawaiian), Northwest, 

Southwest Airlines (Southwest) and US Airways have adopted contingency plans to ensure food 

and water during tarmac delays. Each of these airlines (except US Airways) addressed 

procedures to deplane passengers during extended tarmac delays in contingency plans. JetBlue 

also addressed the need to deplane passengers. 

Some carriers post delay data on their websites, but only three major carriers do so: American, 

Continental and United. 

Alaska, Continental, Northwest, Southwest and United have initiated self-audits of their 

customer service plans. 

The Secretary of Transportation commissioned a National Task Force to develop model 

contingency plans to deal with lengthy airline on-board delays by the fall of 2008. 

Despite these actions, DOT believes that for the reasons outlined above, regulation is warranted. 

1.2 Final Regulation 

In the ANPRM on Enhancing Airline Passenger Protections, DOT aimounced it was considering 

adopting a rule that consisted of seven components. After reviewing comments in response to the 

ANPRM, DOT dropped two components — those requiring carriers to publish complaint data on 

their websites and requiring carriers to report on-time performance of international flights. The 

remaining components were presented in the NPRM and are peirt of the Final Rule: '^ 

"^ Readers should note that although the regulatory impact evaluation attempts to mirror the terms and wording of 

the regulation, no attempt is made to precisely replicate the regulatory language and readers are cautioned that the 

t v R \ Decision Economics Page • 14 
1. Require carriers to adopt and publish contingency plans for lengthy tarmac delays 

their websites. Any certificated or commuter air carrier that operates domestic scheduled 

passenger service (including charter services) that uses any aircraft with 30 or more 

passenger seats will be required to develop a contingency plan for long ground delays on 

the tarmac for all its flights, including those on aircraft containing fewer than 30 seats. 

Each contingency plan will specify that the carrier will ensure a) that passengers on 

planes delayed on the tarmac for two or more hours will have access to food, water, clean 

lavatories, and the assistance of medical personal if needed, and b) passengers on planes 

delayed on the tarmac for three hours will be permitted to deplane (unless there is a safety 

and/or security-related impediment to deplaning passengers or ATC advises the pilot that 

permitting passengers to return to the gate or disembark would significantly disrupt 

airport operations). "^^Contingency plans must be made available on carrier websites. 

Carriers will also be required to maintain information for two years on delays that trigger 

the contingency plan. The information will include the length of the delay, the cause of 

the delay and identify steps taken by the carrier to alleviate passenger discomfort. 

2. Require carriers to respond to consumer problems. Every certificated and commuter 

air carrier that operates scheduled domestic passenger service using any aircraft with 30 

or more passenger seats will be required to designate an employee at its system 

operations center and at each airport dispatch center to monitor delays and to have input 

on decisions regarding flight cancellations. Each such carrier will also be required to 

provide information on how to file consumer complaints at each airport dispatch center, 

on its website and on all e-ticket confirmations. Each such carrier will be required to send 

a substantive response to each consumer complaint within 60 days of receipt and 

acknowledge receipt of the complaint within 30 days.'^ 

3. Declare the operation of flights that remain chronically delayed to be an unfair and 

deceptive practice and an unfair method of competition. The Final Rule defines a 

chronically delayed flight as a flight that is operated by a carrier that is carrying 1% or 

more of all domestic passengers, that is flown at least 10 times in a month, and that 

arrives more than 30 minutes late more than 50% of the time. If this flight continues to 

operate for four consecutive months at this level of delay, it will be considered an unfair 

and deceptive practice and subject to enforcement action. 

4. Require carriers to publish delay data on their websites. The DOT proposes to require 

that airlines that are currently required to report on-time performance data to the Bureau 

of Transportation Statistics (BTS) (i.e., reporting carriers) to publish some delay 

information on their websites for each flight it operates and for each flight its U.S. codeshare partners operate for which schedule information is available. This information is to 

include the percentage of on-time arrivals, the percentage of artivals delayed more than 

30 minutes with special highlighting if the flight was late more than 50% of the time and 

actual regulatory text and not the text of the RIA conveys the specific regulatory requirements. For more detail on 

the proposed regulation, see the Notice of Final Rulemaking. 

'^ See preamble to Final Rule for greater detail on safety and/or air traffic control exceptions. 

'* The Rule will not require resolution of the complaint, but rather a target response upon receipt. 

Jr£ R I Decision Economics Page •I S 
the percentage of cancellations if 5 percent or more of the flight's operations were 

canceled in the covered month. There will be two options for data presentation - on the 

web page with the initial listings or by hyperlink on that page. 

5. Each carrier must adopt a customer service plan and self-audit adherence to it. The 

DOT proposes requiring any certificated or commuter air carrier that operates scheduled 

domestic scheduled passenger service to adopt a customer service plan which address the 

issues covered by the 12 parts of the Air Transport Association's (ATA) Customer 

Service Commitment and to self-audit adherence to this customer service plan. 

1.3 Alternatives 

The Office of Management and Budget (OMB) states that a regulatory impact analysis (also 

called a regulatory evaluation) should consider alternatives to the Final Rule or regulation being 

evaluated.' This RIA includes five alternatives to various components of the Final Rule: 

Alternative 1: This altemative affects Component 1 (contingency plans for lengthy tarmac 

delays) and assumes DOT-imposed tarmac delay limits of two hours before guarantee of food, 

water, etc, and four hours (instead of three hours) before allowing passengers to deplane. This 

contingency plan would be required for all carriers with aircraft seating 30 passengers or more. 

All other components of the Final Rule are maintained. 

Altemative 2: This altemative also affects Component 1 and allows carriers to determine the 

time triggers. This was the proposed option for the Rule described in the NPRM. Based upon 

existing carrier contingency plans, it was estimated that time limits instituted by carries will 

converge onto a tarmac delay limits of two hours before guarantee of food, water, etc, and five 

hours before allowing passengers to deplane'^. Contingency plans would be required for all 

carriers with aircraft seating 30 passengers or more. All other components of the Final Rule are 

maintained. 

Altemative 3: This altemative requires the contingency plan (defined in Component 1) to apply 

to carriers that operate at least one flight with aircraft seating 60 or more passengers (instead of 

30 or more). All other components of the Final Rule are maintained. 

Altemative 4: This altemative redefines what constitutes a chronically delayed flight in 

Component 3 (which declares chronically delayed flights "unfair and deceptive") to one that 

arrives at least 30 minutes late at least 60% of time, (not 50% of time) for three consecutive 

calendar quarters. All other components of the Final Rule are maintained. 

Altemative 5: This altemative would require reporting carriers and online travel agencies to post 

delay data on their websites (Component 4 of the Final Rule). Travel agencies that operate 

exclusively online, as well as those that allow customers to purchase airline tickets online, would 

be required to publish some delay information on their websites before the point of purchase, 

similar to this requirement for reporting carriers. 

" Circular A-4, Office of Management and Budget, September 17, 2003. 

'^ For greater detail see Initial Regulatory Impact Analysis of Proposed Airline Passenger Protections, September 

2008. 

FER I Decision Economics Page • 16 
Table 1: Summary of Alternatives ' 

OifferencebetMtteitoAlternBtives and Final Rule by Components <; ' i::::'^;'-- •'>• 

AlftMiiative: 

Final Rule 

Alternative 

1 

Alternative 

2 

Alternative 

3 

Alternative 

4 

Alternative 

5 

Component 1 

Contingency 

plans for long 

on-board 

delays, to 

Include 2 hour 

trigger for 

food/water/ 

clean lavatories 

and a 3 hour 

" limit before 

permitting 

deplaning. 

Applies to 

carriers 

operating at 

least one flight 

with aircraft of 

30 or more 

seats 

Time limits of 2 

hours for food 

and water and 4 

hours for 

deplaning 

Carrier 

determined time 

limits of 2 hours 

for food and 

water and 5 

hours for 

deplaning 

Applies only to 

carriers operating 

at least one flight 

with aircraft of 

more than 60 

seats (Instead of 

30+ seats) 

No difference 

No difference 

Component 2 

Provide 

Information for 

filing a complaint. 

Provide 

substantive 

response within 

60 days. 

Applies to 

carriers with 

scheduled 

domestic service 

operating at least 

one flight with 

aircraft of 30 or 

more seats 

No difference 

No difference 

No difference 

No difference 

No difference 

Component 3 

Declare flights that 

arrive 30+ minutes 

late more than 

50% of the time to 

be chronically 

delayed. 

Applies to carriers 

with 1% of 

domestic 

passenger 

revenue 

No difference 

No difference 

No difference 

Different definition 

of a chronically 

delayed flight (late 

30+ minutes at 

least 60% of the 

time over two 

consecutive 

quarters) 

No difference 

:c<mptiHmA 

Reporting 

carriers to 

publish delay 

data on website. 

Applies to 

carriers with 1% 

of domestic 

passenger 

revenue 

No difference 

No difference 

No difference 

No difference 

Applies to online 

travel agencies In 

addition to 

reporting carriers 

Coitipomrtts 

Carriers with 

scheduled 

domestic service 

to self-audit 

compliance with 

customer 

service plans. 

Applies to 

carriers with 

scheduled 

domestic service 

operating at 

least one flight 

with aircraft of 

30 or more 

seats 

No difference 

No difference 

No difference 

No difference 

No difference 

Table 2 lists carriers required to comply with all components. The 12 small cartiers with fleets of 

aircraft that seat 30 to 60 passengers are listed in Table 3. These small carriers will be subject to 

H Z R Decision EconiHnics Page* 17 
some but not all components of the Final Rule. Carriers with fleets composed only of aircraft that 

seat fewer than 30 are not covered by the Final Rule.'^ 

Table 2: Top 1% of Domestic Passenger Carriers 

AirTran 

Alaska 

America West 

American and American Eagle 

Continental 

Delta, incl. Comair, ASA 

ExpressJet 

Frontier 

Hawaiian 

JetBlue 

Mesa Airlines 

Northwest 

Pinnacle (Northwest Airlink) 

SkyWest 

Soutiiwest 

United 

US Airways 

Air Transport International 

Ameristar Air Cargo 

Cape Air 

Chautauqua Airlines Inc. 

Table 3: Small Carriers (with Fleets Consisting Only of Planes between 30 and 60 Seats) 

3Oan40«tS<Mlr^ 

•>•• • • 

Colgan Air 

Com m utair Aka Cham plain Enterprises, Inc. 

Era Aviation 

ExpressJet Airlines Inc. 

Island Air Hawaii 

Piedmont Airlines 

Trans States Airlines 

" For Regulatory Evaluations, small carriers are those with plane fleets all of which have 60 seats or fewer, as per 

14 CFR Chapter 11. See Regulatory Flexibility Analysis in chapter six. Other carriers have allied for and received 

certification from the Department as small carriers, but do not have regularly scheduled flights on aircraft seating 

more than 30 passengers, and thus are not required to comply. The small carriers were identified by reviewing flight 

arrival data from BTS and calculating the average number of seats for each flight flown in 2007. 

K R ] Decision Economics Page* 18 
BENEFIT-COST ANALYSIS APPROACH 

This chapter discusses the methodological framework used to estimate the costs and benefits of 

the Final Rule, Enhancing Airline Passenger Protections. It includes an overview of the 

framework used to predict likely carrier actions to comply with the Rule's five components and a 

discussion of associated costs and benefits to carriers and the public. The five components of the 

Final Rule (see Section 1.2) and altematives considered by DOT are noted. Overall assumptions 

are also presented, including key data assumptions. 

OMB Circular A-4 stipulates that a regulatory analysis should account for only costs and benefits 

that arise as a result of the regulatory action. This RIA estimates the costs and benefits likely to 

arise from the Final Rule, taking into account that certain carriers are already compliant with 

parts of the Final Rule. The RIA estimates incremental costs and benefits from the Final Rule 

and the altematives, i.e., the additional costs and benefits generated by actions taken specifically 

for compliance relative to a non-regulated envirormient. 

2.1 Overview of Analytical Framework 

The purpose of the Final Rule is to increase air passenger protections through improved 

management of flight delays, dissemination of delay information, and enhanced customer 

service. Three of the Final Rule's five components relate to flight delays; two relate to passenger 

complaints. The components relating to delays (Components 1, 3, and 4) are assumed to require 

carrier actions that will affect the quality of the traveler's experience by either decreasing the 

portion of the trip spent in less comfortable situations (such as waiting on the tarmac versus 

waiting in the terminal) or by increasing the passenger's confidence in the reliability of the 

flight's on-time arrival. Specifically, for Components 1 (Implementing Contingency Plans), 3 

(Designation of Chronically Delayed Flights), and 4 (Publication of Delay Data on Carrier 

Website) benefits are calculated as changes to the value passengers are likely to put on a portion 

of their trip perceived as potentially more comfortable or the value they put on increased 

certainty of arrival time. 

The components relating to passenger complaints are assumed to either make filing complaints 

easier or to improve customer service. Component 2 makes it easier for a passenger to find 

information to file a complaint and requires timely and specific responses to complaints. By 

requiring easy access to information on how to complain (on e-tickets, websites, and at gates and 

ticket counters), the amount of time needed to file a complaint will decrease, lessening the total 

cost to the consumer to take this action. Benefits are calculated as costs saved in filing a 

complaint due to time saved. A likely increase in complaints is also incorporated by using a 

consumer surplus methodology that attempts to measure the total value to consumers of a decline 

in cost along with a corresponding increase in quantity. ^° Meanwhile, the substantive carrier 

response to complaints should provide increased satisfaction from a targeted response. 

^° The incremental increase in compensation to consumers has not been estimated because of a lack of information 

about the types of complaints that will be made based on the declining cost of complaining and lack of detail about 

likely carrier responses. Thus, the actual benefits of this component are likely underestimated. 

H I R I Decision Economics Page • 19 
Component 5 requires carriers to adopt standard customer service commitments and to audit 

adherence to those commitments, which should lead to systematic improvements to overall 

customer service (based on the experience of carriers that have already undertaken these 

practices). Indeed, among cartiers required to report delay data to the Bureau of Transportation 

Statistics (BTS), those that self-audited their customer service plans saw greater declines in 

complaints than carriers that did not self-audit in the same time-frame.^' The benefits of this 

requirement will include improved levels of service in carriers that did not already self-audit. To 

date, no good estimate of the value to customers of this expected decline in complaints has been 

identified. Therefore, this RIA does not attempt to estimate the quantitative value of the benefits 

of Component 5, addressing benefits solely in discussion of qualitative (i.e., non-monetized) 

impacts. Because the cost of compliance is included in the quantitative evaluation, it is expected 

that the NPV would be higher if the benefits of this component could be adequately monetized. 

Costs to carriers are estimated as the additional cost to undertake an action required by or 

generated by a requirement in the Final Rule, such as posting delay data on a carrier website or 

deplaning passengers to avoid an extended tarmac delay. 

Details of the costs and benefits related to each component are described in subsections below 

detailing the framework for each component. 

As noted in OMB Circular A-4, while not all potential benefits can be measured or even 

monetized, they should be noted because they can still be significant. Section 4.4 describes 

qualitative benefits that caimot be quantitatively measured. 

2.1.1 Value of Time 

Value of Travel Time Saved 

Certain components of the Final Rule (such as Component 1) will result in time saved (or lost) 

for individuals. In addition, certain components (Components 1,3, and 4) will result in improved 

travel conditions for passengers, through greater physical comfort or increased confidence in ontime arrival. Economists measure the value of time saved using set estimates derived from 

average wages to reflect the cost to the individual of time spent in transit instead of on another 

activity. DOT has developed values to calculate air travel time savings for leisure and business 

passengers, with a range of high to low values (see Table 4 below). This RIA uses these figures 

to estimate the value of passenger time saved or lost based on carriers' compliance with the Final 

Rule. In addition, time saved by persons coming to meet arriving passengers is also calculated 

and valued at $10.60 per hour, the DOT-recommended value for local personal travel.^^ 

^' This analysis is based on complaints reported in the Air Travel Consumer Report, Aviation Consumer Protection 

Division, U.S. Department of Transportation. For details see Section 2.1.6. 

^^ U.S. Department of Transportation, "Revised Departmental Guidance Valuation of Travel Time in Economic 

Analysis," 2003 

t T R I Decision Economics Page • 20 
i, lS!«|ifitment of Transportation Determined Values of Time for Air Passengers to be Used In Travel Time 

Air travel 

Personal 

Business 

All Purposes 

Recommended 

Hourly Values of TTS 

$23.30 

$40.10 

$28.60 

Plausible Ranges - Low 

$20.00 

$32.10 

$23.80 

Plausible Ranges - High 

$30.00 

$48.10 

$35.60 

Source: US Department of Transportation, "Revised Departmental Guidance: Valuation of Travel Time in Economic 

Analysis," 2003, tables 4 and 5. Also discussed in "Economic Values for FAA Investment and Regulatory Decisions" A 

Guide," FAA Office of Aviation Policy and Plans, December 31, 2004. 

Time Premiums for Comfort/Quality of Experience 

Several aspects of the Final Rule are designed to increase traveler comfort during delays. 

Transportation economists have conducted studies of consumer behavior and different aspects of 

user experience in transit systems. These analyses have led to estimates of premiums on the 

value of user time based on the value people place on quicker/easier access to move from one 

place to another and analysis of the value of improved comfort during a travel experience. For 

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

change in total travel time required. Travelers also prefer to spend time in transit rather than part 

of the time waiting for service if total trip length is the same 2? 

Several aspects of the Final Rule will shift the portion of total trip time spent in less comfortable 

conditions (such as the fourth hour on a plane spent sitting on the tarmac) to time spent in more 

comfortable conditions (the fourth hour spent in a terminal). This RIA assumes no change in 

overall trip time except in cases of cancellation (see section on key assumptions below). 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" are 

developed from research literature in transportation economics. These premiums were derived 

from survey-based data that reflect travel time values that incorporate the quality of waiting, 

walking and transfer conditions. "Level of service" ratings are used to determine the value of 

different levels. 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, convenience and reliability (see Table 5 below) for various categories of public 

transportation and auto users.^'* Although this study did not attempt to estimate level of service 

^' See William Waters, The Value of Times Savings for the Economic Valuation of Highway Investments in British 

Columbia, BC Ministry of Transportation and Highways, 1992 as discussed in Transportation Cost and Benefit 

Analysis - Travel Time Costs, Victoria Transport Policy Institute, revised August 10, 2007 and Marcus von 

Wartburg and W.G. Waters II, Chapter 2: Congestion Externalities and the Value of Travel Time Savings, in 

Towards Estimating the Social and Environmental Costs of Transportation in Canada, Anming Khang, et al, eds. 

Center for Transportation Studies, University of British Columbia, August 2004, for recent reviews of the literature. 

^ Under this framework, most travel falls under level of service (LOS) ratings of A-C. The difference in the value of 

time to public transport or auto passengers between the average for LOS ratings A-C and LOS rating D is used to 

estimate a premium (.34) to airline passengers for the greater comfort from access to food, water and clean lavatory 

facilities, since that is the next level of change in comfort and quality. The change from a standard level of comfort 

H I R I Decision Economics Page • 21 
premiums for airline passengers, we believe they are the most accurate estimates cmrently 

available to us. Based on this study, a premium of .34 was used for the greater comfort derived 

from access to food, water and clean lavatory facilities; a premium of .68 was used for the 

greater comfort of waiting in the terminal rather than in a plane on the tarmac.'^^ These premiums 

are similar to those found for the value transit passengers place on being able to sit versus stand, 

which range from .20 to .87 in two studies that address measuring the quality of travel 

experience.^^ In the future, we hope to have studies that directly measure airline passengers' 

values of levels of service on which to base our decisions. 

No data was found to quantify the value of decreased anxiety during extended wait periods. 

Based on the studies of auto and public transit passengers' value of levels of service summarized 

above, a .01 premium was selected as a proxy for the value of decreased anxiety/discomfort 

based on knowledge that a contingency plan exists during time greater than one hour spent on the 

tarmac and until allowed to deplane.^^ 

Table 5: Value of Time Premiums for Differing Ouaiitatlve Levels of Service 

Value of Travel Time for Differing Qualitative Levels of Service (LOS) 

As a Percent of Average Wages 

Category 

Personal Vehicle driver 

Adult car passenger 

Adult transit passenger -

seated 

Adult transit passenger -

standing 

LOS 

A - C 

50% 

35% 

35% 

50% 

LOSD 

67% 

47% 

47% 

67% 

LOSE 

84% 

58% 

58% 

83% 

LOSF 

100% 

70% 

70% 

100% 

Ratio of 

A-C to D 

1.34 

1.34 

1.34 

1.34 

Ratio of 

A-C to E 

1.68 

1.68 

1.68 

1.68 

Premium 

Used For 

Adequate 

Food, Water 

Lavatories 

and Access 

to Medical 

Attention 

0.34 

0.34 

0.34 

0.34 

Premium 

Used For 

Deplaning 

0,68 

0.68 

0.68 

0.68 

LOS refers to level-of-servlce and Incorporates qualitative factors such as comfort, convenience, and reliability for various modes 

reflecting waiting, walking and transfer conditions. LOS A refers to the best conditions and F to ttie worst 

Source: Level of service estimates of value of travel time from Todd Litman, "Valuing Transit Service Quality 

Improvements," the Victoria Transport Policy Institute, 2007. 

and quality to the next level of service was the best proxy found for the premium between waiting with and without 

basic amenities. The difference in the value of time between LOS ratings A-C and LOS rating E, assumed to 

represent the subsequent change in comfort and quality, is used to estimate a premium for the greater comfort of 

waiting in the terminal instead in the plane on the tarmac (.68). 

^' See Table A-17 in Appendix. 

^* William Waters presents data that the difference between the value of time sitting versus standing is .20 of the 

prevailing wage rate (William Waters, The Value of Times Savings for the Economic Valuation of Highway 

Investments in British Columbia, BC Minisfry 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 .25 to .87 (averaging .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). 

^^ A sensitivity analysis is conducted applying this premium to all passengers, irrespective of time on tarmac. See 

section 4.3. 

\ x R I Decision Economics Page • 22 
2.1.2 Value of Reliability and Certainty 

Components 3 and 4 of the Final Rule, Designation of Chronically Delayed Flights and 

Publication of Delay Data on Carrier Websites, respectively, will lead to greater reliability as 

perceived by passengers. The impact on the value of this time can be estimated. 

For Component 3, Designation of Chronically Delayed Flights, the RIA assumes that carriers 

will adjust published schedules of flights in danger of being classified as chronically delayed to 

ensure that such flights no longer meet the delay criteria from the Final Rule in the next quarter. 

While artiving earlier than expected may cause some aimoyance for a few passengers, artiving 

later than expected can create significant travel disraptions and generate significant concem. 

The RIA prepared a conservative estimate of the benefits of Component 3 that does not include 

an attempt to estimate the value of possible missed non-airline connections at arrival (such as a 

scheduled bus). Instead, the value of increased reliability to the passenger is estimated. A 

common measure of reliability~the standard deviation of travel time across events-is used to 

measure the value of reliability in travel, though most often for daily trips to work,^^ The 

expected reduction in standard deviation for flights is 15 minutes. The increase in reliability due 

to the reduction of standard deviation of travel time is reflected as a percentage of a passenger's 

value of time (between 50% and 90%, with 70% most likely). ^^ The value of tim&for passengers 

X the assumed value of reliability (70%) x the reduction in standard deviation results in a value 

of $5.16 per passenger. 

Component 4 requires publication of delay data on carrier websites to provide passengers with 

better information for informed travel choices. Although the primary factors behind a flight 

choice are price and, to a lesser degree, schedule, some passengers may make different choices 

based on delay information. While similar delay data are available on the BTS website, they 

appear to be little used.'^° A portion of flights is assumed to have published arrival times 

rescheduled (see section below for greater detail) in response to consumer choices based on 

published delay times. This will result in more passengers artiving when expected. A similar 

calculation of benefits from increased reliability from rescheduled arrival times of chronically 

delayed flights is assumed here. 

2.1.3 Key Assumptions 

Several key assumptions underlie the development of the framework for this analysis, including: 

• While there are a range of possible actions a carrier may take based on enforcement of the 

Final Rule and its incentives, the RIA assumes that cartiers will take the least costly 

^^ See for instance, David Brownstone and Kenneth Small, "Valuing Time and Reliability: Assessing the Evidence 

from Road Pricing Demonstrations," Transportation Research Part A, 39, 2005. 

^' Estimates calculated in Brownstone and Small (2005). 

^^ Comments to the Notice of Proposed Rulemaking (NPRM) on the publication of delay data included both 

industry and consumer groups. While some in the industry noted existence of delay data on the BTS website, 

consumer groups noted that few people access data at this location. DOT agrees that few passengers use delay data 

on BTS and that most may not even be aware of it. 

H X l I Decision Economics Page • 23 
• 

• 

response. (Other potential responses are noted in the discussion of qualitative and nonmonetized benefits in Section 3.4) 

In general, the Final Rule will not result in changes in overall trip travel time. Component 1, 

the Development and Implementation of a Contingency Plan for Extended Tarmac Delays, 

may move passengers from one place to another (from a plane on the tarmac to the terminal) 

in a few situations, with corresponding changes in comfort or condition/type of experience, 

this is not expected to impact actual trip time except in limited situations where a cartier 

cancels a flight rather than deplaning and reboarding. Exceptions for safety concems and air 

traffic control management are expected to mitigate additional delays. 

The analysis does not attempt to estimate which portion of flights with extensive on-tarmac 

delays beyond three hours will not deplane due to the exceptions for safety and air traffic 

control. As such, the analysis likely overestimates the number of deplaning flights and 

passengers, and therefore likely overestimates total costs and benefits as well. 

The Final Rule will not, in and of itself, generate an appreciable impact on overall travel 

demand, and this RIA does not model change in demand.^' This is deemed a conservative 

assumption as it may result in an imderstatement of benefits. 

• Component 2, requiring carriers to provide complaint contact information and to respond to 

consumer complaints, is assumed to not change the rate at which carriers resolve complaints. 

• It is assumed that cartiers already taking some actions in the Final Rule will continue these 

actions, even without the Rule, and thus, will not incur additional costs to comply with these 

components. Their passengers will also not receive additional benefits for those components. 

(Certain carriers are already compliant with the main portions of Components 1, 4 and 5.) 

Any existing delays beyond the already existing triggers are assumed to be covered under the 

safety and/or air traffic control exceptions. 

• To the greatest extent possible, carriers will undertake responses to the Final Rule that will 

have minimal impact on overall operations. Actions above and beyond those required by the 

Final Rule are not treated as a cost of the Rule. 

• Although cartiers are generally reluctant to cancel flights, they show a preference to cancel 

upcoming flights rather than divert incoming flights if a gate is needed to accommodate 

deplaning passengers from a flight set to exceed the tarmac delay time limit.^^ 

• It is assumed that with increased avenues and ease of access to flight cancellation 

information (on cartier websites and via phone), persons traveling to meet arriving 

passengers ("meeters-and-greeters") can leam of cancelled flights in time to adjust plans 

(since a cancellation always occurs before a flight takes off). Yet they may not always have 

^' There is a fair amount of uncertainty regarding what, if any, impact the various components of the Final Rule 

may have on travel demand. 

'^ The cost to carriers to divert a flight is usually higher than the cost to cancel. See for example the review and 

estimates of diversions and cancellations at three airports in Zalaman Shavell, "The Effects of Schedule Disruptions 

on the Economics of Airline Operations," The Mitre Corporation, April 15, 2000. 

t t R I Decision Economics Pao e • 24 
adequate information regarding delays that are the result of events later in the flight in 

enough time to adjust their travel plans. 

• Real discount rates of 7% and 3% are applied to costs and benefits to reflect the time-value 

of money. This is consistent with direction in OMB circulars A-4 and A-94. 

• The potential impact of ongoing or plaimed improvements to air traffic control (ATC), 

including changes to the Airspace Flow Program, future implementation of the Next 

Generation Air Transportation System (NextGen) or the Adaptive Compressions software 

program, are not incorporated into the baseline. The potential impact on delays may be 

significant, but is as yet unknown.^^ 

2.1.4 Limits to Available Information 

Estimates of cost and benefits are constrained by the limits of available data. Two data 

limitations wartant particular attention. First, available data on tarmac delays (required for 

cartiers with at least 1% of total domestic scheduled-service passenger revenues, the reporting 

carriers) are incomplete because they do not include tarmac delay time by flights that are 

ultimately cancelled or diverted.^'* As such, data from BTS on delays underestimates the number 

of significant on-board delays and the costs and benefits of the Final Rule. Additionally, tarmac 

delay data is not available for non-reporting cartiers (and is therefore assumed to be at the same 

rate as the reporting cartiers). 

The initial RIA which accompanied the NPRM noted another important data limitation - the 

determination of likely carrier actions to comply with the Final Rule's requirements and the 

likely impact of these actions on costs were estimated without input from affected cartiers other 

than that available in conunents to the ANPRM. Cartiers were either unable to or chose not to 

provide information in the time required for that analysis. Subsequently, cartier trade 

associations did provide comments to the initial RIA accompanying the NPRM via the public 

coimnent process and those comments have been considered. 

Data on receipts, used in the assessment of the impact of Rule costs on small cartiers, is not 

readily available for many of the cartiers which fall under the regulatory definition of a small 

business. The Regulatory Flexibility Analysis includes receipts for those cartiers for which that 

data was found, but does not attempt to estimate receipts for other small cartiers. 

2.2 Component 1: Develop and Implement a Contingency Plan for 

Extended Tarmac Delays 

The first component of the Final Rule, the Development and Implementation of a Contmgency 

Plan for Extended Tarmac Delays, will result in the most complicated array of cartier actions and 

impacts on costs and passengers. This component applies to carriers that operate service with any 

•'^ The DOT IG notes that FAA reports that a launch of the Airspace Flow Program at seven Northeast locations was 

followed by a 9% decline in delays at major airports in the region experiencing bad weather days. To be 

conservative, such a decline was not incorporated into the rest of the nation. Delay data from 2007 and 2008 used in 

this RIA incorporates the impact on regions that implemented the Airspace Flow Program. 

^'* Another new regulation requires reporting cartiers to report tarmac delays for cancelled flights. 

HZR I Decision Economics . Page • 25 
aircraft with 30 or more passenger seats. The Final Rule requires cartiers to develop a 

contingency plan for long delays which include a two hour time limit after which adequate food, 

water, and lavatory facilities will be provided, as well as a three hour time liniit after which 

passengers will be allowed to deplane. . 

Tarmac delays long enough to trigger either portion of the contingency plan nearly always occur 

during irtegular operations (EROPS). Addressing these delays successfully depends on 

communication and coordination between carriers, airports, air traffic control, and the 

Transportation Security Administration (TSA). Cartiers, trade associations, and DOT have all 

noted the significant role that inadequate plarming and coordination has played in recent notable 

incidents of lengthy tarmac delays.^ 

The requirement will impact how cartiers and airports service aircraft experiencing long tarmac 

delays and how those aircraft may be deplaned. Cartiers are assumed to be able to prepare 

management plans that can identify aircraft with the potential to hit one of the time triggers early 

to allow cartier operations management an opportunity to address the situation with minimal 

adverse impact. Consensus among carriers is that a primary factor behind recent episodes of 

extraordinary delays was at least partial management failure by cartiers and airports (such as not 

following an airport weather plan or losing situational awareness on the ground). Many cartiers 

have taken initiatives to avoid similar situations.^^ 

This component of the Final Rule will impact carrier operations for flights delayed on the ground 

only in that it would require a) additional aircraft servicing (food, water, lavatories, etc.) and b) 

either having a plane taxi back to the gate or the deployment of stairs and mobile buses to 

deplane passengers. The Final Rule will not require additional deicing or other ground 

operations. 

For those flights that reach the time limit, carriers will provide the amenities listed above. The 

cost to carriers will be the cost of providing the amenities; the benefits to passengers will be the 

value of a more comfortable experience during the delay, due to access to the listed amenities. 

Several top carriers have already instituted a time after which they will ensure basic amenities to 

passengers experiencing long on-board delays. Most of these stipulate the time limit to be two 

hours (see Table 6). 

^' See the "Actions Needed to Minimize Long, On-Board Flight Delays," Office of the Inspector General, US 

Department of Transportation, report AV-2007-077, September 25, 2007; "Excessive Tarmac Delay Causal 

Categories," Causation Work Group Final Presentation to the National Task Force to Develop Model Contingency 

Plans to Deal with Length Airline On-Board Ground Delays, April 28, 2(K)8; and "Airline Delays and Consumer 

Issues," testimony of James C. May, President and CEO of the Air Transport Association of America before the 

Subcommittee on Aviation of the House Committee on Transportation and Infrasfructure, September 26,2007. 

^* Ibid. 

E u R I Decision Economics Page • 26 
Table 6: Select Airline Terms and Conditions to Handle Long, On-board Flight Delays 

AirTran 

Alaska 

American and American Eagle 

Continental 

Delta, incl. Comair, ASA 

ExpressJet ^' 

Frontier 

Hawaiian 

JetBlue 

Mesa Airlines 

Northwest ^ 

Pinnacle * 

Skywest * 

Southwest ^' 

United 

US Airways 

e«ftAM04^t Extended Period of 

,Tlnft»(liirf) Stated in Customer 

Servtee #l«ns and/or Contracts 

Tdf Oarrla$»an(i.GuariMiteeof 

None 

1.5 

2 

2 

None 

• 

None 

2 

None 

None 

* 

Time to Deplane (hrs) Stated in 

Customer Service Plans and/or 

Contracts of Carriage and/or 

defined by Internal PolfeJeft?> 

• ' *.( c 

None 

2 for arrivals 

4 

4 for departures 

None 

* 

None 

2 

5 

None 

1 for arrivals, 3 for departures 

* 

None 

2 

2 

1.5 for arrivals, 4 for departures 

None 

" Unable to determine If ExpressJet has contingency plans; it Is assumed not to have such plans. 

^ Northwest does not have a separate contingency plan for providing access to food, water, clean lavatories and access to medical 

assistance. Northwest does commit to limiting tarmac delays to one hour for arrivals, three hours for arrivals. 

^ Pinnacle Is a feeder airline (operating Northwest Alrlink for Northwest Airlines and Delta Connection for Delta Air Lines). 

** Skywest Is a feeder airline (operating under contract as United Express on behalf of United Airlines, as Delta Connection on behalf 

of Delta Air Lines, and as Midwest Connect on behalf of Midwest Airlines) 

^ Southwest does not have separate contingency plans for providing access to food, water, clean lavatories and medical assistance, 

but does commit to deplaning passengers after two hours of tannac delay. 

Source: "Actions Needed to Minimize Long On-Board Flight Delays," Report of the Inspector General, September 25, 2007, Exhibit 

B, Pg 29, and carrier contracts of carriage as presented on carrier websites, l^ay 2008. 

The requirement that passengers on a plane waiting on the tarmac be allowed to deplane after a 

three hour period could lead to one of many different scenarios. 

• Carriers could taxi to a free gate and deplane passengers until reboarding to meet a new 

wheels-off time. 

• Carriers could taxi back to a free gate and deplane passengers, then cancel the flight and 

put passengers on another flight. 

o Some of these passengers would wait in the airport. 

o Some of these passengers would leave the airport and retum later. 

• Carriers could use mobile gates and buses to deplane passengers and transport them to a 

gate until reboarding. 

H I R Decision Economics Page • 27 
• Cartiers can use mobile gates and buses to deplane and transport passengers to gates, but 

later cancel the flight. 

o Some of these passengers would wait in the airport. 

o Some of these passengers would leave the airport and then retum. 

This RIA does incorporate the possibility that some flights may be cancelled that would not 

otherwise have been cancelled in order to free up needed gates, with resulting costs to passengers 

and cartiers. In commenting on various proposals to improve passenger protections (including 

this Final Rule and other proposals), some carriers expressed concem that requiring deplaning 

after a specific set time on the tarmac could increase cancellations. While there is some research 

into the factors behind flight cancellations, including the relative impact of a carrier hub as 

destination, weather, time of day and even day of the week, little data exists to estimate the 

incremental impact on flight cancellations of flight delays based on carrier actions/decisions with 

respect to an outside requirement such as the Final Rule.'^^ One evaluation of cancellations 

estimated delay and cancellation rates at several airports in 2001 and 2002 related to security 

closures and noted an increased likelihood of cancellation for those flights scheduled at the 

begirming of an airport shutdown, and another study on airport closures for security reasons 

noted an additional 5% of flights were cancelled when the closure time was extended by one 

hour.^^ 

Note that many flights curtently retum to the gate after extended tarmac delays and are 

cancelled, but these cancellations are not the result of the Rule - rather they are the result of other 

conditions (weather, delayed crew, etc) and as such are not an incremental cost of the Rule. The 

regulatory impact analysis is intended to include only the increase in cancellations that would 

occur (to already delayed flights) due to the implementation of the mle. Therefore, a 

conservative estimate is made that 0% to 5% of flights with on-tarmac departure delays of 

greater than three hours that would not have otherwise been cancelled will now be cancelled. In 

95% of these cases, passengers will remain at the airport for a delay of 519 to 549 minutes.^^ A 

sensitivity analysis on the rate of additional flight cancellations, doubling the cancellation rate, is 

also conducted and presented along with final results. 

It is possible that enforcement of this component of the Final Rule may lead to additional 

improvements to cartier operations that would not have otherwise occurted. For instance, 

awareness of the additional cost to deplane flights with long on-board delays may be enough to 

foster better flight management and improved ground operations. The net result will be increased 

benefits to passengers from a decrease in delay time and/or reduction in cancellations. Carriers 

" See Nicholas Rupp and George Homes, "An Investigation into the Determinants of Flight Cancellations," 

Economica, The London School of Economics and Political Science, (2006) and Nicholas Rupp, "Fight Delays and 

Cancellations," Department of Economics, East Carolina University, February 2005 for more detail. 

^* Nicholas Rupp, George Holmes and Jeff DeSimone, "Airline Schedule Recovery After Airport Closures: 

Empirical Evidence since September 11*," Organizao9oes em contexto, December 2007. 

^^ Average delay experienced by passengers on cancelled flights in 2004 and 2005 respectively. Danyi Wang and 

Lance Sherry, "Trend Analysis of Airline Passenger Trip Delays," prepared for the Transportation Research Board 

2007 Annual Meeting. Increase in cancellations derived from estimate of increase in cancellations after airport 

closing lasting an additional hour, as in Rupp, Holmes and DeSimone, "Airline Schedule Recovery After Airport 

Closures: Empirical Evidence since September 11"*". 

H K I Decision Economics Page • 2 8 
may benefit from improved flight management and reduced delay costs (such as crew costs). 

Altemately, carriers may shuffle delayed flights on the ground to avoid hitting either time 

trigger. Thus, overall delay time may decrease for some passengers while increasing for others. 

While these additional benefits are possible, they are not certain. 

The RIA takes the conservative approach that carriers are implementing all cost-effective 

improvements in flight management and that cartier response to the Final Rule would not 

improve flight scheduling or decrease flight delays. The table below summarizes the component 

requirements and their likely costs (to cartiers and passengers) and benefits (to passengers and 

"meeters/greeters"). 

Table 7: Summary of Component 1 Requirements, Costs, and Benefits 

J " " •••iiij"-i"i"ii«i-"i«.-j^w«i ,.B.Mi.»jMiii«ii«iii|i. • y;«w_Tprarp?gr-grTW'.iiiM|ij • • 

" '•*..~-"- ;'":•'-'~''"''. "tflvelopmentandImpiementatioKPIilfliiSgency 

y y ; cort^^iiem #^!uii«m^f s 

1. Carrier must develop a plan which 

includes: 

• Assurance of adequate food, 

water, lavatory facilities, and 

medical attention after two 

hours 

• Assurance that passengers 

allowed to deplane after three 

hours 

• Assurance that the plan is 

coordinated with airports 

2. Plan posted on website 

3. Retention by carrier for 2 years of 

certain data on delays that trigger 

plan Include: 

• length of delay 

• cause of delay 

• steps taken to alleviate 

discomfort 

C O ^ 1*:-'*'" 

Carriers: 

• Fuel for airplane taxi-back 

• Use and purchase and/or 

maintenance of mobile stairs and 

buses 

• Additional deplaning fees 

• Cost of food and water (paid to 

40 

caterer) 

• Website costs to post plan 

• Minimal data collection and 

storage costs 

• Increased cancellations 

Passengers: 

• Increased rate of cancellation 

• Discomfort associated with 

additional deplaning 

Plan 

Benefits 

Passengers: 

• Decreased time on tarmac 

• Greater comfort during 

tarmac delays during 

portion of delay when have 

access to adequate food, 

water, and lavatory 

facilities and medical 

assistance 

• Comfort from knowledge 

that plan exists and 

amenities and deplaning 

are ensured should flight 

be delayed 

Meeters/greeters: 

• Decreased waiting time for 

delayed arrivals 

Benefits 

Total benefits are the sum of improvements in comfort, measured as a premium on the value of 

time, for all passengers that experience great comfort or certainty. The table below presents a 

matrix of overall categories of passenger time that could be affected by implementation of all 

portions of Component 1 of the Final Rule (discussed in detail below). The matrix includes 

impacts on the quantity of time as well as the condition of the experience, ranging from 

increased comfort (food and water provided during extended tarmac delays) to increased 

certainty of on-time artival (based on adjustments in schedules of chronically delayed flights). 

'^ While no data was found for the incremental costs of additional lavatory cleanings, it was assumed that the 

incremental costs would be negligible. 

iiOR I Decision Economics Page • 29 
Table 8: Summary of Segments of Trip That Could Experience Change in Quality or Quantity of 

Time 

Segments of Ttlp Ttiat Could experience Change.|;i Ouallty or Quantity of Time 

Due to Component 1 (All Portions) - Coniingancy Plan tar Long Tarmac Delay 

Ssasneiitpftrlp. 

In transit to airport 

waiting/queuing at 

counter/security 

passing through 

security 

walking In airport 

waiting at gate area 

waiting/queuing to 

board 

transferring from/to 

plane 

in mode (on the plane) 

still 

In mode (on the plane) 

moving 

In transit from airport 

Condition Of Experience That Could Changs 

ppmtort: 

« 

X 

""g ^ 1 Sarm 

h-:y^^^'-

X 

X 

Uncmtain 

Does Rule Impact Quality of Experience 

or Quantity of Tims 

«Wft//jqoa/ffypr 

time 

no 

no 

no 

no 

no 

no 

no 

X YES 

X YES 

no 

chanae In auar^tltv 

suias: 

YES 

YES 

YES 

YES 

YES 

YES 

YES 

YES 

no 

no 

Comfortable/Uncomfortable conditions include: Not worrying (or worrying) about being late as are arriving at the airport and 

thus missing a business appointment, connection, etc; access (or not) to food, water, adequate lavatories; the availability of 

alternate diversion/entertainment (Including shopping, watching videos). 

Certain/Uncertain covers the passenger's internalization of carrier reliability and on-time arrival. 

' The change in the quantity of time occurs from a slight increase in cancelled flights. 

In addition, a small portion of persons waiting at the airport to greet a passenger ("meeters-andgreeters") will experience decreased waiting time based on artiving flights that would have 

previously been on the tarmac for more than three hours but are now required to deplane. 

Costs 

Costs to cartiers include the additional cost of providing food and water, servicing lavatories, for 

buses and mobile stairs to deplane passengers, and additional fuel to taxi back to the gate. Fuel 

costs are the most significant from this list. Cost assumptions are in line with a detailed estimate 

of per-minute costs by trip segment and cost components conducted with survey data from 

European airlines. High, medium, and low maintenance; fuel; flight crew; aircraft depreciation 

costs; and airport charges, among others factors, were examined for time away from the gate for 

active taxi-out, stationary ground and take-off roll (as well as other segments in flight and on 

artival). Incremental cost differences between taxi-out and stationary ground were found only for 

I x R I Decision Economics Page • 30 
fuel (significant levels) with minimal differences for maintenance."^' The RIA framework and 

costs mirtors those used in this study. 

2.2.1 Component Assumptions 

Several assumptions are made specific to the requirements of this component: 

• No increase in medical personnel or equipment will be needed. 

• Cartiers that do not already have a contingency plan are assumed to not provide food, 

water, and lavatory facilities after two hours of tarmac delay and to not deplane 

passengers after three hours on the tarmac. 

• All delay information needed to comply with the Rule is already required to be reported 

to BTS. 

2.2.2 Scenarios for Long Tarmac Delays 

This section details the specific scenarios modeled for each portion of the Final Rule relating to 

contingency plans for long on-ground delays. 

A. Adoption of a contingency plan 

The Final Rule requires adoption and publication on the cartier website of a contingency plan to 

address long on-tarmac delays. Costs include staff and management costs, mostly one-time, to 

develop, post, and monitor the plan and to collect data on actions triggered by the plan. Benefits 

may accme to all passengers experiencing a tarmac delay of at least an hour simply from 

knowing that a contingency plan exists. For instance, as a passenger waits for 1.5 hours on the 

tarmac, he/she knows that food, water and lavatory facilities are guaranteed if the delay 

continues. A value can be placed on the knowledge that future discomfort will be avoided. 

Impact on passengers: 

• Change in quality of experience - increased certainty of access to adequate food, 

water, and lavatory facilities and deplaning after time limits posted in the plan are 

reached. Possible impacts on time components include: 

o Slight increase in certainty during time spent waiting in mode (in the airplane 

waiting on the tarmac) leading up to the plan triggers (time limits) for 

passenger amenities. 

o Slight increase in certainty during time spent waiting in mode leading to the 

plan triggers (time limits) to deplane. 

• Applies to all passengers on flights experiencing a delay of at least one hour. 

•*' "Evaluating the True Cost to Airlines of One Minute of Airborne or Ground Delay," Transport Studies Group, 

University of Westminster, London, February 17,2004. 

H I R I Decision Economics . Page • 31 
The table below presents a matrix of trip segments affected by knowledge of the existence of a 

contingency plan. 

Table 9: Segments of Trip That Could Experience Cliange 

of Contingency Plan 

in Quality oi Quantity of Time: Adoption 

Segments of TVIp that Could Experience Change In Quality or Quantity of Time 

Portion of Component 1 Adoption of Contingency Plan 

ComDonantoftrlD 

in transit to airport 

waiting/queuing at 

counter/security 

passing through security 

walking In airport 

waiting at gate area 

waiting/queuing to board 

transferring from/to plane 

in mode (on the plane) 

still 1 -2 hours 

in mode (on the plane) 

moving 

In transit from airport 

Condition Of Experience That Could Change 

Cpijifprt^lff9 

X 

Uncom/ ^ 

X X 

V;tfi«daAi 

X i j 

Does Adoption of Contingency 

Plan Impact Quality of Experience 

or Quantity of Time 

tthffttnqvmiC 

of time 

no 

no 

no 

no 

no 

no 

no 

MBH 

no 

no 

change In 

gyantltyof 

time 

no 

no 

no 

no 

no 

no 

no 

no 

no 

no 

The value of the benefit of knowing that a plan exists which ensures food, water and clean 

lavatories after two hours of on-tarmac delay and that deplaning will be allowed after three hours 

is calculated using a premium of .01 times the DOT-specified value of time for air travelers 

(which is about 3% of the premium used to estimate the value of the greater comfort from access 

to food, water and clean lavatory facilities).'*^ This benefit applies only to passengers waiting on 

the tarmac for more than one hour, and is applied to the time spent on the tarmac between one 

hour and three hours, at which time passengers will be allowed to deplane."*^ For passengers 

waiting on the tarmac after two hours and who have not deplaned (see below for greater detail 

regarding deplaning), the premium (.34) for adequate food, water and lavatory facilities is also 

applied. Passenger wait times are calculated in 15 to 30 minute increments. For example, for 

those passengers who would otherwise be expected to experience a tannac delay of three hours. 

No data was found to estimate the value of decreased anxiety during extended wait periods. A recent review of 

literature 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). Based on this, a premium of .01 was chosen. 

^^ A sensitivity analysis included in Section 4.3 presents total benefits with this premium estimated for the entire 

time passengers would have otherwise been delayed on the tarmac. 

H I R I Decision Economics Page • 32 
the time spent waiting between the first and second hours would have a .01 premium applied (.01 

X value of time of $28.60 x number of passengers). 

B. Implementation of a tarmac delay time limit after which adequate food, water, and lavatory 

facilities and medical attention are ensured 

The Final Rule requires that cartiers provide adequate food, water, clean lavatory facilities, and 

access to medical attention to passengers wiaiting on a tarmac for more than two hours, and that 

after three hours passengers are allowed to deplane. Quantified costs to carriers of this provision 

include the cost of providing food and water. Cartier policies include servicing toilets in 

lavatories as needed, additional costs for this task are assumed to be minimal. 

Impact on passengers: 

• Decrease in time spent waiting on tarmac above time specified for provision of 

amenities (two hours). 

• Changes quality of time experience, but not quantity.'*'* 

• Applies to all passengers on flights experiencing a tarmac delay of greater than two 

hours who have not deplaned. 

'^ It is assumed that carriers can deliver amenities without increasing the flight delay because there is significant 

incentive to do so. 

H X l I Decision Economics Page • 33 
Table 10: Segments of Trip Tliat Could Experience Change in Quality or Quantity of Time: 

Provision of Adequate Food, Water, and Lavatory Facilities and to Medical Attention. 

Segments of Trip that could Experience Change in Quality or Quantity of Time 

Portion of Component 1 

Provision of Adequate Food, Water, and Ljivatory Facilities and Access to ll/ledleal Attention 

Condition Of Experience That Could Change 

Does Provision of Basic 

Amenities Impact Quality of 

Experience or Quantity of 

Time 

Component of trip Comfort* 

able 

Uncomfortable cssaia Uncertain 

sliiftin 

quality 9f 

ma 

change in 

qfffifititYof 

time 

In transit to airport no no 

waiting/queuing at 

counter/security no no 

passing through security no no 

walking In airport no no 

waiting at gate area no no 

waiting/queuing to board no no 

transferring from/to plane no 

In mode (on the plane) 

still im 

YES 

in mode (on the plane) 

moving 

no 

no 

no 

In transit from airport no no 

The value of the benefit is calculated as the sum of the hours spent by all passengers waiting on 

the tarmac for more than two hours x a premium for greater comfort, assumed to be .34 x the 

DOT-specified value of time for air travelers (see previous section regarding the value of time).'*^ 

This premium represents the difference in the value of time between an average of LOS rating AC to LOS rating D, the next level of change in comfort and quality from applicable research (see 

Section 2.1.1). 

C. Implementation of a tarmac delay time limit after which passengers will be allowed to 

deplane 

The Final Rule will require allowing passenger deplaning after three hours on-tarmac. The costs 

to cartiers include the cost of fuel to taxi back to the gate capital or rental costs for buses and 

mobile stairs, and applicable fees. The costs to carriers depend on how passengers are deplaned. 

The benefits to passengers primarily derive from the greater comfort of waiting in the terminal 

instead of on the plane on the tarmac. Some passengers will still experience an increased delay 

45 Alternative 1 assumes that DOT sets a time limit of four hours for tarmac delays before passengers must be 

allowed to deplane, so this calculation uses the time spent by delayed passengers waiting on the tarmac for more 

than two but less than four hours. 

HZRI Decision Economics Page • 34 
based on flight cancellations triggered by the deplanement. Different scenarios of cartier actions 

upon reaching deplaning time limits are outlined below: 

1. Some planes taxi back to gate: 

a. Costs - primarily fuel 

b. Benefits to passengers - changes portions of time spent waiting on the tarmac 

and in the terminal 

c. Benefits to "meeters-and-greeters" - those persons meeting artiving 

passengers who are now taxied to the gate sooner will experience a decrease 

in overall time waiting. 

Table 11: Segments of Trip Tliat Could Experience Change In Quality or Quantity of Time: 

Opportunity to Deplane at Gate 

Segments of Trip that could Experience Change In Quality or Quantity of Time 

Portion of Component 1 

Due to Opportunity to Deplane at Gate After Specified Time 

fififflBPPfinltflftrlP 

In transit to airport 

waiting/queuing at 

counter/security 

passing through 

security 

walking In airport 

waiting at gate area 

waiting/queuing to 

board 

transferring from/to 

plane 

in mode (on the plane) 

still 

In mode (on the plane) 

moving 

In transit from airport 

Condition Of Experfenee IHat Could Change 

£S>nift?rftfW^ mffgislat 

able uaf<mto 

Does the Due to Opportunity to 

Deplane at Gate Impact Quality of 

Experience or Quantity of Time 

of time 

no 

no 

no 

no 

no 

no 

no 

no 

no 

no 

iSlfnasJa 

time 

no 

no 

no 

no 

Yes 

no 

YES 

YES 

no 

no 

HDR I Decision Economics Page • 35 
2. Some passengers deplaned with mobile stairs and buses: 

a. Costs - primarily lease or rental fee for stairs and mobile buses 

b. Benefits to passengers ~ changes portion of time spent waiting on the tarmac 

and in the terminal 

c. Benefits to "meeters-and-greeters" - those persons meeting artiving 

passengers who are now taxied to the gate sooner will experience a decrease 

in overall time waiting. 

The value of the benefit is calculated as the amount of time greater than three hours that would 

have been spent on the tarmac by passengers x a premium for greater comfort (based on time in 

the terminal rather than on the tannac), assumed to be .68 x the DOT-specified value of time for 

air travelers (reflecting a difference in the value of time from LOS from the average LOS rating 

A-C and LOS rating E-see Section 2.1.1).'*^ 

In addition, some flights (whether deplaned at the gate or via stairs) will be cancelled to 

accommodate passengers deplaning after waiting on tarmac beyond specified time limits. Costs 

to cartiers reflect average estimates of cancellations (for details see begirming of Section 2.2 and 

Appendix A). 

Some passengers would experience a "disbenefit" or negative impact because the cancellation 

will increase overall travel time. The increase in travel time is valued using DOT estimates for 

air travelers. 

The impact of additional cancellations on passengers varies. For passengers who boarded a flight 

before it is cancelled, the majority will wait longer for another flight the same day while others 

will retum to the airport the following day. 

• Passengers who remain at the airport will increase time spent: 

• waiting at airport, 

• waiting in lines, 

• walking in airport (to get to new gate), and 

• boarding. 

"** Alternative 1 assumes that DOT sets a time limit of four hours for tarmac delays before passengers must be 

allowed to deplane, so this calculation uses the amount of time beyond four hours that would have been spent on the 

tarmac. 

Y L R I Decision Economics ' Page • 36 
• Passengers who leave and retum will experience increases in: 

waiting time at airport, 

waiting in lines, 

walking in airport (to get to new gate), 

boarding, 

travel from and to airport, and 

transiting airport security. 

Table 12: Segments of Trip That Could Experience Change in Quality or ( 

Cancelled Flights (after passengers boarded) 

Quantity of Time: 

Segment* of Trip that could Experience Change In Quality or Quantity of Time 

Portion of Component 1 

Cancelled Flighta (after paasengera boarded) 

gQnip«ytffm9ftrlp 

in transit to airport 

waiting/queuing at 

counter/security 

passing through security 

walking In airport 

waiting at gate area' 

waiting/queuing to board 

transferring from/to plane 

in mode (on the plane) still 

In mode (on the plane) 

moving 

in transit from airport 

Condition Of Experience That Could Change 

Ctffnfoimiti 

Uneomkfft- Certain Uncertain 

Does The Increaae In 

Cancelled Flights Impact 

Quality of Experience or 

Quantity of Time 

1 

no YESno YES 

no 

no 

no 

no 

no 

no 

no 

no 

YES 

YES 

YES 

YES 

YES 

YES 

no 

no 

Similarly, for passengers who do not board a flight before it is cancelled, most will remain at the 

airport while others will retum to the airport the following day. 

H I R I Decision Economics Page • 37 
Passengers who remain at the airport will increase time spent: 

• waiting at airport, 

• waiting in lines, and 

• walking in airport (to get to new gate). 

Passengers who leave and retum to the airport will increases time spent: 

• waiting at airport, 

• waiting in line, 

• walking in airport (to get to new gate), 

• travel time from and to the airport, and 

• transiting airport security. 

Table 13: Segments of Trip That Could Experience Change in Quality or Quantity of Time: 

Cancelled Flights (before passengers boarded) 

Segments of Trip that could Experience Change In Quality or Quantity of Time 

Ponion of Component 1 

Cancelled Flights (before passengers boarded) 

£amP9n9i?tfiLtt!ft 

In transit to airport 

waiting/queuing at 

counter/security 

passing through security 

walking In airport 

waiting at gate area 

waiting/queuing to board 

transferring from/to plane 

In mode (on the plane) still 

In mode (on the plane) 

moving 

In transit from airport 

Condition Of Experience That Could Change 

Comfortable Uneomtanam 

p^f«/n 

• 

fJns^rl ^ 

Does The Increase In 

Cancelled Flights Impact 

Quality of Experience or 

Quantity of Time 

9hmi(f 

auaViYot 

timf 

^aageJa 

qqarmLSi 

ana 

no ' YES 

1 

no 

no 

no 

no 

no 

no 

no 

no 

no 

YES 

YES 

YES 

YES 

no 

no 

no 

no 

no 

H K l Decision Economics Page • 38 
2.2.3 Cost and Benefit Calculations for Component 1 

To calculate estimated costs and benefits of Component 1 (the development and implementation 

of contingency plans for long on-board delays) estimates of the likely number of flights that 

would exceed each of the time limits (or triggers), both for artiving and departing flights were 

needed. The distribution of flights by the length of time spent taxiing out and taxiing in for 2007 

and 2008 was used as the baseline, i.e., what would be expected to occur in the absence of the 

Final Rule. In recent years, cartiers and airports have made efforts to improve groimd 

coordination and better manage flight delays, including on-board delays (see Section 1.1.3). 

Including data from years before 2007 would not reflect this curtent situation, so only data from 

2007 and 2008 were used to estimate future taxiing delays. 

2.2.3.1 Taxiing Data 

Data on taxi-in and taxi-out times are available in the BTS Airline On-Time Performance 

(AOTP) Database, but only for cartiers with at least 1% of domestic passenger revenue 

(frequently identified as "reporting cartiers," as they are required to report these on-time 

performance data to BTS). The AOTP database includes data on flight number, carrier, 

scheduled arrival and departure times, along with taxi-in and out and arrival delay data for each 

flight. Data are available by month, and all data for 2007 and 2008 were available for analysis. 

Only data for reporting cartiers not already compliant under the Final Rule were used. 

Component 1 of the Final Rule also applies to cartiers that are not required to report on-time 

performance data to BTS. Taxiing delay data for these cartiers are not available in the AOTP, but 

general flight data is available in the Airline Carrier Statistics (T-lOO) Database. Two steps were 

required to estimate taxi-out and taxi-in delays for these carriers. First, cartiers that will be 

covered by the Final Rule were identified as those that operate service with at least one plane 

that seats 30 or more passengers (or carriers that operate service with at least one plane that seats 

60 or more under one of the altematives evaluated in this RIA). 

The T-lOO database provides data on the number of flights and seats for each carrier and origin 

and destination combination in the United States. These data were used to identify carriers that 

would be covered by the Final Rule and cartiers that would qualify as small carriers for the 

Regulatory Flexibility Analysis (see Chapter 4). Once the total number of flights was calculated, 

the distribution of flights by taxi delay time was calculated using the distribution of flights by 

taxi delay time among reporting cartiers not already compliant with the Final Rule.'*^ 

Thus, estimates of flights for reporting cartiers that are not compliant with the Final Rule and for 

non-reporting cartiers were summed by taxi-out and taxi-in delay category to artive at an 

estimate of the total number of flights likely to be affected by each time trigger (for basic 

amenities and deplaning). 

Data on passengers are not available in the AOTP, but are available on the T-lOO database. 

Passengers were estimated by carrier using the T-lOO database. Table 14 summarizes flights and 

passengers per taxi delay group, for cartiers covered by mle and not already compliant. 

^'' All non-reporting carriers were assumed to be non-compliant with the Rule. This assumption may overestimate 

both the costs and benefits somewhat. 

H I R I Decision Economics Page • 39 
Table 14: Average of 2007 and 2008 Flights and Passengers per Taxi Delay Time Group, for Carriers 

Covered By Rule But Not Already Compliant for Contingency Plans 

Flights and Passengj 

Arrivals . 

0axlt«|.•--.-^. ^ 

Up to 1/4 hours 

1/4 and 1/2 hours 

1/2 and 3/4 hours 

3/4 and 1 hours 

1 -114 hours 

VA -r/z hours 

1.5 and 2 hours 

2 and 2.5 hours 

2.5 and 3 hours* 

3 and 3.5* hours 

3.5 and 4 hours 

4 and 4.5 hours 

4.5 and 5 hours 

5 and 6 hours 

More than 6 hours 

Departures > ^ •>. 

(taxi out) ,, : 

Up to 1/4 hours 

1/4 and 1/2 hours 

1/2 and 3/4 hours 

3/4 and 1 hours 

1 -1 % hours 

11/4 -11/2 hours 

1.5 and 2 hours 

2 and 2.5 hours 

2.5 and 3 hours* 

3 and 3.5* hours 

3.5 and 4 hours 

4 and 4.5 hours 

4.5 and 5 hours 

5 and 6 hours 

More than 6 hours 

H-»'f^Tt)ottic»^'ii6i'ii^ 

l : 'iireeHour Trlg^'fi^^? ' 

•;' |teplanlng(Flna|Eftuft^)f/> 

ri^isi^gers 

309,583,268 

18,414,418 

2,215,131 

477,573 

153,870 

53,289 

35,826 

12,888 

2,921 

1,947 

239 

295 

0 

168 

203 

Three Hour T 

Deplaning (F 

^ passengers 

166,397,035 

139,537,841 

23,204,937 

5,948,002 

2,246,710 

1,023,316 

828,564 

269,388 

86,689 

64,326 

24,667 

14,378 

6,528 

2,682 

860 

J ^ ' 

-^I^Hfi^^iti .*• 

3,873,311 

177,417 

21,302 

4,446 

1,466 

509 

332 

127 

27 

18 

4 

3 

0 

2 

2 

rigger for 

nal Rule) 

Flights 

2,404,297 

1,638,730 

277,711 

76,709 

29,968 

13,900 

11,415 

3,729 

1,284 

911 

289 

167 

65 

30 

8 

f^-tii , ' ^ 

* . "fiqm Hour Trigger for s^' -

; 0<N>|wnlng(Altematlve1) : 

' 

Pmuimm 

297,802,233 

14,004,257 

1,709,386 

375,803 

121,262 

42,613 

28,201 

9,840 

2,921 

1,453 

239 

295 

0 

51 

0 

Four Hour 1 

Deplaning (Al 

Passengers 

153,946,546 

124,543,513 

21,276,296 

5,616,607 

2,137,348 

964,309 

755,045 

243,873 

81,174 

58,910 

22,249 

12,832 

6,448 

2,066 

538 

Flights : 

3,689,525 

172,488 

20,584 

4,279 

1,404 

482 

316 

122 

27 

18 

4 

3 

0 

1 

0 

rigger for 

nrnatlve I ) 

Flights 

1,519,616 

1,184,474 

199,943 

52,830 

20,183 

9,165 

7,202 

2,311 

770 

576 

183 

104 

49 

14 

5 

» i 

'. TWw>.Hdur Trigger for Food, 

. W^fOTf Clean Lavatories and 

'A«49i^tp iUedlcal Assistance 

, Ujjn.^::, , 

pmmms^irs 

299,454,218 

14,179,729 

1,655,773 

355,102 

123,032 

47,907 

34,394 

12,991 

2,653 

2,185 

172 

222 

0 

168 

203 

Flights 

4,114,498 

187,706 

21,613 

4,401 

1,536 

577 

419 

165 

34 

28 

6 

3 

0 

2 

2 

TWO Hour Trigger for Food, 

Water, Clean Lavatories and 

Access to Medlcat Assistance 

Passengers 

164,046,690 

121,202,566 

20,581,194 

5,818,369 

2,285,223 

1,038,270 

832,985 

274,282 

93,163 

64,428 

23,791 

12,423 

6,152 

3,777 

1,322 

Flights 

2,350,413 

1,569,045 

271,584 

80,254 

32,078 

14,803 

12,060 

3,962 

1,389 

942 

310 

165 

69 

49 

14 

Note: Passengers per flight vary by delay time period depending on the actual flights and carriers that reported on-board delays in 2007 and 2008 

for each category. Data for non-reporting carriers is not available by on-board delay time, so the distribution of delayed flights is assimied to be 

similar to that for reporting carriers. Non-reporting small carriers had an average of 26 passengers per flight. 

The table presents data for carriers not already compliant with the rule. Note that some carriers are compliant with the requirement to provide 

food and water after two hours but not compliant with the requirement that passengers be allowed to deplane after three hours , 

i x R \ Decision Economics Page • 40 
2.2.3.2 Costs 

Costs to cartiers are calculated by summing the following and are presented in Table 15 below: 

• The cost to develop a contingency plan. The number of affected cartiers (those 

providing service with at least one plane seating 30 or more passengers) was 

multiplied by an estimate of the average cost to develop and post the plan on the 

website. This cost is incurred during the first year only. 

• The cost to provide adequate food, water, and lavatory facilities and medical 

attention. The number of passengers on flights delayed on tarmac by more than two 

hours for both artivals and departures that are not already covered by an existing 

contingency plan is multiplied by the per-person cost to provide adequate food and 

water. ^ This cost is incurted every year. 

• The cost to deplane passengers. The number of passengers on flights delayed on 

tarmac more than three hours for arrivals and departiues not already covered by an 

existing contingency plan is multiplied by the percent of flights taximg back to the 

gate (instead of using buses and mobile stairs) and the average taxi time and fuel bum 

per minute by plane size as distributed by plane size overall for all planes. Added to 

this figure is the sum of the number of passengers on these flights multiplied by the 

fee to deplane per passenger. Similarly, costs per passenger are calculated for 

passengers deplaned on the tarmac and transferred to the terminal by bus. These costs 

are incurted every year. 

• The cost of increased cancellations. The number of flights delayed on the tarmac 

more than three hours for departures only is multiplied by the percent of additional 

cancellations caused by deplaning requirements multiplied by the average cost to 

carriers. This cost is incurred every year. Table 15 summarizes costs to carriers. 

48 No data was found for incremental costs of additional lavatory cleanings, but it was assumed that such costs 

would be negligible. Medical personnel are available at airports and the cost for access to such personnel is assumed 

to be negligible. 

H ] R I Decision Economics Page • 41 
Table 15: Total Costs to carriers of Component 1 

<^Wciifegoiy Prl6». j^'HIittbinliftUlirill able Passedj^i^^^^c^^ 

wf- of Componemi^ 

Food & Drinks $3.71 493,094 $1,829,379 

Deplaning $1.37 113,441 $155,414 

Reboarding $1.37 110,219 $151,000 

Total $2,135,793 

SM'&im&i^Moat Category Price Number of Flights 

Variable Aircraft Costs of 

Component 1 

Fuel Cost - Deplaning $88.24 1,481 $130,683 

Fuel Cost - Reboarding $88.24 1,440 $127,066 

Cancellations $14,818.00 41 $607.538 

Total $865,245 

Contingency plan website implementation 

Price 

$22.500 

Number of 

Carriers 

Fixed Costs of Component 

1 

76 $1,710,000 

Total $1,710,000 

,,-aii;:jg.M.^tHig::g,?;g;. £..,., 

i!|C^|ii f Component 1 to Carriers $4,711,038 

Note: Details may not sum to totals due to rounding. 

Costs to passengers of this component are calculated as follows and are presented in Table 16 

below: 

• The cost of increased cancellations. The number of passengers on flights that would 

have been delayed on the tarmac more than three hours for departures only is 

multiplied by the proportion of flights that are now additional cancellations multiplied 

by the additional average wait time per passenger. This cost is incurted every year. 

Table 16 summarizes costs to passengers. 

Table 16: Total Costs to passengers of Component 1 

Cost Category, 

Deplaning 

Reboarding 

Cancellation 

Likelihood of 

activity 

occurring 

100.0% 

97.2% 

2.8% 

Number of 

Passengers 

113,441 

110.219 

3.176 

Time spent 

per activity 

(hour) 

0.1 

0.1 

5.9 

Value of 

Time 

(per hour) 

$29.53 

$29.53 

$29.53 

l-^;^^lKii^«ts of Component 1 to Passengers ll M 

Total Costs to 

Passengers 

(passengera x time 

X value of time) 

$334,991 

$325,477 

$553,405 

51,213,874 

Note: Details may not sum to totals due to rounding. 

I x R I Decision Economics Page • 42 
2.2.3.3 Benefits 

Benefits to cartiers are calculated as follows: 

• BeneHts from flights arriving at gate sooner caused by the disembarking 

requirement. The number of flights delayed on the tarmac by more than three hours 

for arrivals only is multiplied by the time saved by not being on tarmac multiplied by 

average crew costs (cockpit and attendants per plane times their wages). This benefit 

occurs every year. 

Benefits to passengers are calculated as follows: 

• Comfort from knowing there is a contingency plan. The number of passengers on 

flights delayed on the tarmac by more than one hour is multiplied by the amount of 

delay time from the first to the third hour (at which point passengers are allowed to 

deplane) multiplied by the premium for this knowledge (.01). (See Section 2.1.1 for 

details on premimns for value of time calculations). This benefit occurs every year. 

• Benefit from provision of adequate food, water, and lavatory facilities and 

medical attention. The nimiber of passengers on flights delayed on the tarmac more 

than two hours for both arrivals and departures multiplied by the time spent with 

amenities (time from hour two to deplaning or take-off at hour three multiplied by a 

premium for the increased comfort during this portion of the trip (.34). (See Section 

2.1.1 for details; Table 17 sununarizes the benefits to passengers from adequate food, 

water and access to lavatories and medical assistance.) 

• Waiting at gate instead of on tarmac (deplaning). The number of passengers on 

flights delayed on the tarmac by more than three hours for both arrivals and 

departures minus the number of cancelled flights is multiplied by time spent at the 

gate multiplied by the premium for greater comfort on this portion of the trip (.68). 

This benefit occurs every year. Table 17 summarizes the benefits to passengers from 

deplaning. 

H IR I Decision Economics PaQ 6 • 4 3 
Table 17: Benefits to Passengers from 

Arrivals 

(taxi in) 

Between 3 -

ZVz hours 

Between 31/2 -

4 hours 

Between 4 -

AVz hours 

Between AYz -

5 hours 

Between 5 -6 

hours 

More than 6 

hours 

Departures 

(taxi out) 

Between 3 -

3V2 hours 

Between SVz -

4 hours 

Between 4 -

41/2 hours 

Between 41/2 -

5 hours 

Between 5 - 6 

hours 

More than 6 

hours 

Flights * 

18 

4 

3 

0 

2 

2 

Flights * 

911 

289 

167 

65 

30 

8 

Passengers 

1,947 

239 

295 

0 

168 

203 

Passengers 

64,326 

24,667 

14,378 

6,528 

2,682 

860 

Deplaning, Annually 

Base 

Passenger 

Value of 

Time 

(perhr)" 

$29.53 

$29.53 

$29.53 

$29.53 

$29.53 

$29.53 

Base 

Passenger 

Value of 

Time 

(perhr)" 

$29.53 

$29.53 

$29.53 

$29.53 

$29.53 

$29.53 

Value of 

Time 

Premium 

0.68 

0.68 

0.68 

0.68 

0.68 

0.68 

Value Of 

Time 

Premium 

0.68 

0.68 

0.68 

0.68 

0.68 

0.68 

Benefit per 

Passenger 

(per minute) 

$0,335 

$0,335 

$0,335 

$0,335 

$0,335 

$0,335 

Benefit per 

Passenger 

(par minute) 

$0,335 

$0,335 

$0,335 

$0,335 

$0,335 

$0,335 

Time to 

which 

premium 

is 

applied 

(hrs)*" 

0.25 

0.75 

1.25 

2.00 

3.00 

4.00 

Time to 

which 

premium 

is 

applied 

(hrs) " * 

0.25 

0.75 

1.25 

2.00 

3.00 

4.00 

Benefit ($) 

$9,784 

$3,603 

$7,412 

$0-

$10,130 

$16,321 

Benefit (9) 

$323,238 

$371,855 

$361,247 

$262,426 

$161,725 

$69,144 1 

[•='':;.*'. . . , ^tf-r-^' i '^-^J'. . :••'-" 7' ' '':\ ..: \ ' f ' W & Sl,596,885 l 

pTdeiyii»*^i«^ ; • - ^<^Jis'-nU...t; .-v^;r>^-^J^.*;.« 1 

* Based on estimate of flights (and passengers) not compliant with a three hour trigger for deplaning. 

** This is a risk-adjusted value. This figure represents the median value calculated by the risk analysis program (using 

Monte Cario simulations) when computing the outcomes of the model across the entire probability distribution and 

Incorporates the effect of the high and low estimates for this variable, as per the DOT guidelines. 

*** Estimated as the mid-point of the time block, expect for those flights with a taxi delay of greater than 6 hours (for 

which an average delay of seven hours Is used). 

**** In some years, but not all, there are some delays in these intervals. 

Note: Details may not sum to totals due to rounding. 

Benefits to "meeters-and-greeters" are calculated as follows: 

• The number of flights delayed by more than three hours for arrivals is multiplied by 

the percent of passengers with a meeter/greeter multipUed by the amount of time 

saved by taxiing to the terminal multiplied by value of time for greeters. The value of 

H!iR I Decision Economics Page • 44 
time for meeters and greeters used is that recommended by DOT for local personal 

travel ($10.60). This benefit occurs every year. 

2.2.4 Adjustments to Component 1 Covered by Alternatives 1, 2 and 3 

Since the Office of Management and Budget (OMB) states that regulatory analyses should 

consider altematives to the Final Rule or regulation being evaluated, five altematives are being 

evaluated."^^ Altemative 1 to the Final Rule includes having the DOT determine tarmac delay 

time limits of two hours for adequate food, water, and lavatory facilities and access to medical 

assistance, and four hours allowing passengers to deplane. Altemative 1 to the Final Rule is the 

option presented as the proposed rule with the NPRM in which carriers set the time liniits, 

determined likely to converge to two hours for adequate food, water, and lavatory facilities and 

access to medical assistance, and five hours before allowing passengers to deplane. 

This component applies to all cartiers operating service with at least one aircraft with 30 or more 

seats. Altemative 3 to the Final Rule changes covered cartiers to those that operate service with 

at least one aircraft with more than 60 seats. 

2.3 Component 2: Provide Information for Filing Complaints and 

Respond to Consumer Problems 

The second component of the Final Rule is designed to make filing complaints easier and to 

increase satisfaction related to initial cartier responses to complaints. It applies to cartiers that 

operate service with any aircraft with 30 or more passenger seats. By requiring cartiers to present 

complaint filing information more prominently, the Final Rule is expected to reduce barriers to 

filing a complaint, saving time and increasing satisfaction. While part of the overall level of 

satisfaction hinges on a response from the cartier targeted to the nature of the complaint, this 

analysis does not include a quantitative analysis of increased satisfaction based on lack of 

information about likely cartier responses. This analysis focuses solely on 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. Table 18 

summarizes the requirements and likely costs and benefits of Component 2. 

49 See Section 2.4.3 for the fourth alternative and Section 2.5.2 for the fifth altemative. 

t T R I Decision Economics Page • 45 
Table 18: Summary of Component 2 Requirements, Costs and Benefits 

,^g;<ag<fldl>iifpitliB!i Pll E^fflim^ssi ^ CosBt 

IIIII^Hgg^A^i^l^M^m^ •~'X>>-f. 

Benefits 

1. Designate employee to monitor delay 

and have input on decisions 

regarding cancellations.'" 

2. Give information on how to file a 

complaint: 

• On website 

• On e-tickets 

• At gate and counter (upon 

request) 

3. Send "substantive" response to each 

complaint within 60 days (change 

from ANRPM requirement of 30 

days) 

Carriers: 

• Website costs to post 

information on how to file 

complaints 

• Develop reformatted e-tickets to 

include Information on how to 

file complaints 

• Additional staffing time to target 

responses 

Passengers: 

• Value from time saved to 

seek complaint filing 

Information 

To calculate benefits, we estimate time spent filing complaints, time saved because information 

is more accessible (on e-tickets, websites, etc.) and the value of time to place a price on filing a 

complaint. This includes the price (value of time spent) incurted to locate the appropriate office 

or agency to call or send a letter or email to, completing a letter or email and sending the letter or 

email.^' It is assumed that no time is saved in the writing process of the complaint. The value of 

time saved is calculated using the FAA recommended value of time for air travelers (see Table 4 

in Section 2.1.1). Other studies have valued the "cost" of complaining and estimated the change 

in the number of complaints based on a decrease in price; the estimate of this rate of change, the 

elasticity of demand for filing a complaint, is derived from these sources.^^ 

Benefits 

The benefits equal the economic value of increased access to information on how to file a 

complaint. These benefits-the area A + B in the graph below—are calculated based on the 

followmg (Figure 6 below): 

Qo: Initial demand for complaint filings 

Qi: New demand level as a result of Final Rule 

Co: Initial unit generalized cost ($/complaint) 

C]: New unit generalized cost ($/complaint) following Final Rule 

^ Since no additional staffing is required for these taslcs, incremental staffing costs are assumed to be zero. 

" 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. 

^^ David Morris, "The Cost of Complaining and the Efficiency of Consumer Complaints Agencies," Journal of 

Consumer Studies and Home Economics, 1980. ' 

H ZR Decision Economics Page • 46 
Figure 6: Change in Consumer Surplus from Reduced Time of Filing Complaints as a Function of 

Unit Generalized Cost 

Generalized Unit Cost 

of Filing Complaint 

D 

Complaint Filing 

• Demand 

The generalized unit cost of filing complaints (Co), shown on the vertical axis above is 

determined using the value of time for a passenger to prepare and file a complaint as well as 

material costs, such as stamps, envelopes, etc. These costs are normalized to the same unit, 

dollars per complaint, and aggregated for a total cost to the passenger per complaint. Then, the 

change in generalized unit cost of complaining based on a decrease in the amount of time to find 

information on filing a complaint is calculated. The time saved provides a new lower total cost to 

the passenger (C/j. Using an estimate of the elasticity of demand with respect to cost of 

complaining (i.e., the rate by which the number of complaints will increase based on a one unit 

decrease in cost) leads to a new quantity of complaints, allows for an estimate of the value of 

time saved complaining, including additional complaints generated. Table 19 summarizes the 

benefits to this component. 

H I R I Decision Economics Page • 47 
Table 19: Total Annual Benefits of 

@iaii»|rtaln| CtHegor^.-

Flight Problems 

Over-Sales 

Res/Tktq/Boardinq 

Fares 

Refunds 

Baggage 

Customer Service 

Disability 

Advertising 

Discrimination 

Animals 

Other 

Vm"" ,., """ .;•.• 

. %«haag«i#. 

' :lilDilt]trt^)^lltfit^; 

3.21% 

3.21% 

3.21% 

3.21% 

3.21% 

3.21% 

3.21% 

3.21% 

3.21% 

3.21% 

3.21% 

3.21% 

Component 

^|Maii»tty> 

1.0741 

1.0741 

1.0741 

1.0741 

1.0741 

1.0741 

1.0741 

1.0741 

1.0741 

1.0741 

1.0741 

1.0741 

2 

233,356 

24,858 

69,464 

19,352 

43,722 

124,028 

73,856 

26,108 

1,983 

5.261 

397 

19,246 

-

Change in 

generaiiaed eo$f 

. ofcompUrthitii 

$0,228 

$0,228 

$0,228 

$0,228 

$0,228 

$0,228 

$0,228 

$0,228 

$0,228 

$0,228 

$0,228 

$0,228 

^«^^^ ; 

$185,607 

$19,771 

$55,250 

$15,392 

$34,776 

$98,650 

$58,744 

$20,766 

$1,577 

$4,185 

$315 

$15,308 

$910,340 

Note: Details may not sum to totals due to rounding. 

Costs 

The costs to carriers for this component are less complex than for Component 1, though not 

necessarily easy to estimate. Most cartier costs will be one-time capital costs to update websites 

and revise e-tickets to include information on how to file complaints. Additional staffing costs 

are assumed to develop a range of response templates to ensure that a "substantial" response is 

sent. It is assmned that cartiers will not need to draft unique letters for the substantive response. 

Cost to carriers is calculated as the number of affected cartiers multiplied by the cost to update 

websites and reformat e-tickets in the first year only, plus the number of new complaints 

associated with the lower cost of complaining (after the Final Rule is implemented) multiplied by 

the additional cost to send a more targeted response to each complaint, calculated for each year. 

Table 20 summarizes the costs of this component. 

Table 20: Total Costs of Component 2 

Unit Cost Units Total Cd«t 

Complaint plan implementation - reporting carriers $41,371 14 $579,194 

Complaint plan implementation - non reporting $4,261 42 $178,953 

Responding to complaints $1.85 668,560 $1,236,836 

mmm:fSK/Mffii 

2.4 Component 3: Chronically Delayed Flights to be Declared Unfair 

and Deceptive Practices and an Unfair l\/lethod of Competition 

The third component of the Final Rule defines chronically delayed flights and declares them to 

be Unfair and Deceptive Practices. This component applies to cartiers required to report on-time 

performance data to DOT - specifically, those that account for at least 1% of domestic scheduled 

H I R I Decision Economics Page • 4 8 
passenger service. The table below summarizes Component 3, including the definition of a 

"chronically delayed flight," and expected costs and benefits. 

Table 21: Summary of Component 3 Requirements, Costs and Benefits 

ii^rinKfb;^ 

Chronically delayed flights will be those that are: 

• Operated at least 10 times per month, 

and 

• Arrived at least 30 minutes late at least 

50% of time. 

If chronically delayed for four or more 

consecutive months, deemed an unfair and 

deceptive practice 

Substitute flights within 30 minutes are 

considered to be the same flight 

Carriers: 

• Cost to adjust 

schedules 

• Opportunity costs for 

crew due to additional 

block time on flight 

schedule 

Benefits 

Passengers: 

• Value of Increased 

reliability to passengers 

As noted above, cartiers are assumed to adjust schedules for some portion of flights with notable 

delays. While actual flight arrival time and total trip time do not change, shifts in the scheduled 

artival time relate to consumer understanding of whether a flight is on time. Thus, passengers 

who artive at a time that would be considered "late" before the Final Rule may now arrive on 

time according to a new schedule. Those who would have been considered "on-time" under the 

old schedule are now early. Changing the published schedule is the least costly carrier response. 

Such "padding" of schedules already occurs. Some may argue that the schedule may be 

misleading as to the ideal trip time for that flight; such adjusted schedules have benefits for 

passengers in that they facilitate better trip plaiming 53 

The impact on passengers includes^'^: 

• Change in quality of experience from increased reliability of flight artival. During the 

last portion of the trip, those who would have been late before the Final Rule and the 

presumed resulting change in the printed flight schedule will no longer be late; 

therefore, they no longer feel the discomfort from worty about being late. 

Other passengers, who would have artived just on time, are now early. 

55 

^^ See for instance, "Your Flight has Been Delayed Again," Joint Economic Committee, US Congress, May 2008. 

'"* No cost or benefit has been estimated for passengers who arrive just on time, i.e., before flight arrival time was 

rescheduled. 

^' Some increased portion of passengers will arrive earlier based on the revised schedule and may have to wait 

longer to be met. A case can be made that these passengers spend time they expected to be on the plane in more 

comfortable circumstances inside the terminal, but a case can also be made that early arriving passengers, instead of 

feeling greater comfort, will be annoyed at perceived "wasted" time. Since it is not clear which would be the 

predominant sensibility, this analysis does not attempt to monetize this impact. 

H IR [ Decision Economics Page • 49 
2.4.1 Arrival Delay 

Data on flight artival delays were needed for Components 3 and 4 - relating to the designation of 

flights as chronically delayed and for posting delay data for online ticket purchases. Flight delay 

data were calculated from the AOTP. Since only "reporting cartiers" are required to comply with 

these components, there was no need to make estimates for other carriers from the T-lOO 

database. The AOTP database includes scheduled departure time, scheduled arrival time, actual 

flight time, and delayed arrival time for each flight by imique cartier code and flight number, 

among other data. 

For this Component, the declaration of chronically delayed flights, data were collected on each 

imique flight number and cartier code. Flights that were late by either the Rule's definition (30 

minutes at least 50% of the time) for four consecutive quarters were flagged^^. Under the Rule, 

these flights would be declared chronically delayed and their schedules would be deemed unfair 

and deceptive. Once these flights were identified, it was assumed that carriers would adjust the 

flight schedule by the minimum time necessary so the flight would no longer meet the criteria. 

2.4.2 Summary of Cost and Benefit Calculation for Component 3 

Costs to cartiers are calculated by first estimating the portion of flights that would be classified 

as chronically delayed based on data from 2007 and 2008 (averaged) flight events (see Section 3 

for greater detail on estimation of flight delays). The amount of time needed to be added to the 

flight schedule for flights in at least one of the three consecutive quarters to be late less than 50% 

off the time was calculated - in all cases schedule extensions of 15 minutes or less were required. 

The number of flights identified as chronically delayed was then multiplied by one 15-minute 

flight block and then by average crew costs for 15 minutes across all flights. 

Benefits to passengers were calculated by multiplying the number of affected passengers by the 

reliability measure described in Section 2.1.2. The standard deviation between new and old 

arrival times was calculated and multiplied by a portion of the value of time.^^ This benefit is 

calculated every year. 

2.4.3 Adjustment to Component 3 Covered by Alternative 4 

The OMB requires that regulatory analyses consider altematives to a Final Rule or regulation. 

Five altematives to this Final Rule are being evaluated.^^ DOT also previously considered 

another altemative that defined a chronically delayed flight as one that arrives at least 30 minutes 

late at least 60% of the time. This RIA incorporates these requirements as Altemative 4. 

'* For Alternative 4, those flights delayed 30 minutes at least 60% of the time for three consecutive quarters were 

flagged. 

^^ This methodology follows that used to measure the value of travel time reliability as in David Brownstone and 

Kenneth Small, "Valuing Time and Reliability: Assessing the Evidence from Road Pricing Demonstrations," 

Transportation Research Part A, 39, 2005. 

'* See Section 2.2.2 for Alternatives 1, 2 and 3 and Section 2.5.2 for Altemative 5. 

H I R I Decision Economics Page • 50 
2.5 Component 4: Carriers to Publish Delay Data on Websites 

The fourth component of the Final Rule requires certain cartiers to publish delay data online 

before tickets are purchased. This requirement applies to flights from cartiers required to report 

on-time performance data to DOT - specifically those that account for at least 1% of domestic 

scheduled passenger service. Reporting carriers would be required to post delay data on their 

websites before point of final purchase. 

For this component, all flights from reporting carriers that do not already post delay data on their 

websites were initially examined.^^ Flights that were late more than 50% of the time in any 

single quarter were pulled for further analysis. (It was assumed that flights that experienced 

delays more than 50% of the time for only one or two months were less likely to be die focus of 

management efforts to reduce delays or to wartant an extension of their posted schedule.) Since 

only 34.5% of tickets for reporting cartiers are purchased on cartier websites (Appendix A), it 

was assumed that no more than 34.5% of flights that were late more than 50% of the time would 

be impacted by prospective passengers that now had access to historical delay information. 

Using data from the Canadian hospital study (showing a 40% decline in wait time with published 

results - Appendix A) as a proxy for the impact of posting flight delay times, the impacted flights 

were assumed to have a 40% decrease in average delay time. Flights with the shortest overall 

delays were assumed to change, because they would be the least difficult and least expensive to 

adjust to avoid delays. Table 22 summarizes Component 4 and its expected costs and benefits. 

Table 22: Summary of Component 4 

dtNHi^«n# Onlifi^tVi»>»lit^fuM^ tlf M 

:" , ; ;_.jc-afl9i«jBi»^it*|iai^^ W 

Carriers are required to publish online the 

following specified data for each listed flight 

from previous month: 

• % of arrivals on-time 

• % of arrivals more than 30 minutes 

late 

• Highlighted if flight late more than 

50% of the time 

• % of cancellations if more than 5%. 

Two options for data presentation: 

a) With Initial listing with prices or 

b) All data via hyperlink - link on page 

with initial listing. 

Requirements, Costs and Benefits 

l|«iti Delay Data on WebBltes 

1 Coats 

Carriers: 

• Website development for data 

posting 

• Management of data links (minimal 

cost) 

• Opportunity costs for crew If 

additional block time is placed on 

some flight schedules to reduce 

level of delay * 

Bsnallta 

Passengers: 

• Value of Increased reliability to 

passengers 

It is assumed that as cartiers publish delay data, some travelers will choose flights that are less 

likely to be delayed. This, in tum, will lead competing cartiers with flights of similar origin and 

destination to adjust flight management and schedules to result in fewer delays. This cartier 

adjustment will work in concert with schedule adjustments related to Component 3, which 

applies to chronically delayed flights. An estimated portion of delayed flights that do not meet 

the precise definition as "chronically delayed" will be adjusted to decrease the overall percentage 

of late artivals. It is assumed that this schedule adjustment will occur quarterly. Data on the 

number of tickets purchased on cartier websites was found for six reporting carriers and 

estimated for the others. The result was an aggregate estimate of 34.5% of tickets for reporting 

59 Continental, United and US Airways post delay data on their websites. 

H R I Decision Economics Page • 51 
cartiers that do not curtently post delay data on cartier websites. This accounts for nearly 27% of 

all ticket purchases.^" Thus, it is assumed that 34.5% of passengers on these cartiers review 

posted delay data and will make travel decisions based upon that data once the Final Rule is 

implemented. 

There are no data to show the impact of reviewing delay data on airline ticket purchase 

behaviors.^' Data was found from another service area that affects many consumers - from a 

Canadian study that evaluates the impact of pubUshed wait times at hospitals.^^ While demand 

for these services (airline tickets and hospital services) is primarily a function of other, unrelated 

factors - price and schedule for airlines, location, reputation, and refertal for hospitals - the 

supply for both is limited to a few competitors. Wait times for access to a hospital and delay to 

reach a flight destination can impact consumer choices. The Canadian study showed that 

publishing wait times for hospital procedures led to significant reduction in wait times in nearly 

all cases. 

For this analysis, the average change in hospital wait times was used as a proxy to estimate a 

potential decrease in flight delays for flights not already adjusted due to designation as 

chronically delayed.^^ It is assumed that passengers who purchase tickets online will change their 

purchases when wait times are made available and in response, carriers will make changes to 

decrease delay times similar to that seen for declines in hospital waits. Given the large number of 

delayed flights and the significant impact on wait times found in the Canadian hospital research, 

a conservative assumptioii is made that only flights delayed more than 50% of the time in a 

quarter will generate enough changes in consumer behavior to wartant carrier action. 

Impact on passengers: 

• Increase in quality of experience from increased reliability of flight artival. In the last 

portion of a trip, passengers who would have been late before the Final Rule will not 

be late as often and will no longer feel the same level of discomfort from worty about 

being late. 

Passengers who would have artived on time now artive early 64 

^ Data was found for the percentage of tickets purchased on the airline's website for Delta, Northwest, America 

West, Alaska, AirTran, and JetBlue (Dan Reed, "Airlines Try to Make Internet Work for Them," USA Today, 

October 31, 2005). Weight averages (using 2007 passengers) were used to calculated estimates for other reporting 

carriers. 

*' Although delay data is published on the BTS website, no evidence was found that it was accessed regularly by 

consumers and thus an incremental impact from the posting of delay data could not be estimated. 

*^ See HDR, "Wait Times," prepared for Health Canada Health Policy Research Division, March 31, 2008, and "The 

Wait Time Strategy Review of Activities: Update #10," Ontario Ministry of Health and Long-Term Care, December 

19, 2007. 

^' See "The Wait Time Strategy Review of Activities: Update #10," Ontario Ministry of Health and Long-Term 

Care, December 19, 2007, for details, and Appendix A for details on HDR calculations of average change in wait 

times applied to carriers. 

^* As in Component 3, more passengers will arrive early because of revised schedules and may wait longer to be 

met. A case can be made that these passengers are spending time they expected to be on the plane in more 

comfortable circumstances, yet the case can also be made that early arriving passengers, instead of feeling greater 

K R I Decision Economics Page • 52 
Flights and passengers on cartiers that already post some delay data on their websites (see Table 

23 below) are assumed not to be affected by this component of the Rule. 

Table 23: Reporting Carriers and Posting of Delay Data 

•. .^.• ...-'.::..: ".Z:.: ',:. k-<-,..-"- : 

AirTran 

Alaska 

American and American Eagle 

Continental 

Delta, incl. Comair, ASA 

ExpressJet 

Frontier 

Hawaiian 

JetBlue 

Mesa Airlines 

Northwest 

Pinnacle* 

Skywest** 

Southwest 

United 

US Ainways 

• -i /.'tSarrler Pofli^i«isyJ3a» WliVV^ftfe 

no 

no 

no 

Yes 

no 

no 

no 

no 

no 

no 

no 

... 

... 

no 

Yes 

Yes 

Pinnacle is a feeder airline (operating Northwest Airlink for Northwest Airiines and Delta Connection for Delta Air 

Lines). 

** Skywest is a feeder airline (operating under contract as United Express on behalf of United Airiines, as Delta 

Connection on behalf of Delta Air Lines, and as Midwest Connect on behalf of Midwest Airiines) 

2.5.1 Summary of Cost and Benefit Calculation for Component 4 

Costs and benefits are based upon the number of flights that will have a decrease in average 

delay times. Section 4 describes in detail the method used to identify likely impacted flights 

using data related to the portion of reporting carrier tickets purchased on carrier websites and an 

expected decrease in delay time based on findings from the Canadian hospital study, which is the 

best available proxy to evaluate the likely effect of this component. 

Costs to cartiers are calculated by multiplying the number of impacted cartiers by the cost of 

updating website to include delay data (as a one-time programming cost), plus the annual 

opportunity costs of flight crew time for flights for which posted schedules are extended. Flight 

crew costs are calculated by totaling all changes in affected flights' schedules in 15 minute block 

time increments and multiplying by the average crew costs (cockpit and attendants per plane x 

wages and overhead). The cost of flight crew increases is included because flight crews are paid 

based on scheduled flying time and not actual flying time when time is less than expected. 

Improvements in average delays are based on either an increase in posted schedule time (of 0% 

comfort, may feel annoyed at the perceived "wasted" time. It is not clear which would be the predominant 

sensibility, so this analysis does not attempt to monetize this impact. 

I x R I Decision Economics Page • 53 
to 75% of the flights, with 25% the most likely) or improved flight schedule management. This 

cost occiu's every year. Table 24 presents the total cost of this component. 

Table 24: Total Costs of Component 4 

• '!,';fivy.".".vnM!!M!'.!W!wsJ!!v."i".' •--•;sv'v-'j'^wi?-i,i.',iiii, • •n:.i'!fi!)i,)'\ 

a-i.';::r:<J-:--ill/v?-

' ^~.-^^'^-'::-< U- -^.'hlifi^. llumliiirofwoli* 

eonJ|iAtiiiit 

Website & software to publish data 

;s-gs^n-.:t:' 

$444,000 14 

Total Costs 

$6,216,000 

Cost of adjusting schedules 

Jl I II HUM I I I 1 !• . 11 If Miy IJ llll^llJlll. M ^MIUHH I 

$1,579,829 

T-WX " "n;^;'^'"'*?''! " 

$1,579,829 

T«»t#,= 

* For those carriers that are owned by the same company, software development is assumed to be required 

just once, for the company as a whole. 

Benefits to passengers are calculated in a manner similar to that used for Component 3. The 

number of affected passengers is multiplied by a reliability premium on the value of passenger 

time and the standard deviation between new and old artival times. A ramp-up is incorporated 

into the model using the assumption that not all online ticket purchasers will maximize use of 

this data immediately. Benefits are ramped-up over two years of implementation, with one third 

of benefits realized in the fkst year and two-thirds in the second year. By the third year after 

implementation of the Rule, full benefits will be realized. This benefit is calculated every year. 

Table 25 presents total benefits of component 4. 

Table 25: Total Benefits of Component 4 

^Oafep»te» 

Change of 15 

minutes 

0.041237 

Value of 

Time 

$29.53 

Passengers 

Affected 

50% 

Number ^/ ^ 

Pasaenge|t|: -ililTOi^m 

460,427 70% 

Ramp-Up 

(1st year) 

0.330 

Total 

BanafKS 

$66,795 

Change of 15 to 

30 minutes 

0.077271 $29.53 50% 10,001,263 70% 0.330 $2,718,782 

iM^M!iS^MMi $2,785,577 

mmifmm 

2.5,2 Adjustments to Component 4 Covered by Alternative 5 

OMB requires regulatory analyses to consider altematives to a Final Rule or regulation. Five 

altematives are evaluated for this Rule.^^ Altemative 5 impacts online travel agencies, including 

traditional travel agencies that offer an online booking engine, by requiring delay data to be 

posted for domestic flights of reporting carriers. 

An estimate of the percentage of all tickets purchased online (40%) was used to identify flights 

that will be impacted. Costs to travel agencies that provide an oiiline booking engine are 

calculated as the number of online travel agencies multiplied by an estimated cost to reprogram 

software and interfaces.^^ This cost is incurted once and during the first year. Global Distribution 

^^ See Section 2.2.4 for Alternatives 1, 2 and 3 and Section 2.4.3for the fourth altemative. 

** K. O'Toole, "IT Trends Survey 2003," Airline Business Magazine, August 2003, as reported in Nelson Granados, 

Alok Gupta and Robert J. Kauffman, "IT-Enabled Transparent Electronic Markets: The Case of the Air Travel 

Industry," Information Systems and E-Business Maruigement, vol. 5, no 1, January 2007. 

*^ In the absence of information to the contrary, it is assumed that once the appropriate systems are in place, 

maintenance costs will be negligible. 

H I R I Decision Economics Page • 54 
Systems (GDSs) and Online Travel Companies (OTCs) will also incur this cost once and during 

the first year. Table 26 summarizes costs to Altemative 4. 

Table 26: Total Costs Associated with Alternative 4 

Costs 

Costs per 

category** 

Number of non 

compliant 

businesses* Total Costs 

Website & software to publish data (travel agents) $35,000 2,637 $92,295,000 

Maintenance of GDS Systems $100 14 $1,400 

Modifications to GDS Systems $848,215 $6,785,720 

Cost of adjusting schedules 

^i^^*^^i^^^^<)<'W*ir*!"*T?'*^^^*!!^'?!^T?<?^*^R'f!9'T!!!!T^^ 

$1,658,050 n/a $1,658,050 

•V fe^--- --A r ^<Kfey40,170 

*lt Is assumed that 17% of all travel agencies have an online presence. 

**Presented as risk adjusted cost, this figure represent the risk-adjusted value calculated by the statistical program used when 

calculating the range of final outcomes of the model and Incorporate the effect of the high and low estimates. 

2.6 Component 5: Carriers to Adopt Customer Service Plans and 

Self-Audit Compliance 

The fifth component of the Final Rule requires cartiers to adopt a customer service plan similar 

to that proposed by ATA and to self-audit adherence to that plan. This requirement applies to any 

certificated or commuter air carrier that operates domestic scheduled passenger service. Carriers 

that already self-audit compliance (Alaska, Contineiital, Southwest, and Northwest) are assumed 

to be unaffected by this component, 

68 

It is assumed that adoption of this component will improve the level of service provided. 

Improvements in service should mirtor likely changes in complaints to airlines (collected by 

BTS in categories similar to those outlined in the ATA Customer Service Plan). A review of data 

from carriers that already self-audit compliance with customer service plans showed a greater 

reduction in the two years after adoption of self-auditing than for carriers that did not audit in the 

same time frame.^^ 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. 

*^ Information on carriers which conduct self-audits provided by the Department. 

^' For carriers implementing self audits of adherence to customer service plans, complaints decline in the two 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 see a 10% decline in complaints, or half the difference in 

historical complaint rates between previously self-auditing carriers and other carriers. See Appendix A for more 

details. 

HZR I Decision Economics Page • 55 
Table 27: Summary of Component 5 Requirements, Costs and Benefits 

SfSIISK:'? Carriers to Adopt Customer Service Plans and Self-Auc^Compiiance 

f ^ Component requirements Costs Benefits 

Carriers must 

1. Develop a customer service plan (to follow 

ATA's) 

2. Self-audit adherence to plan 

3. Make audit available to DOT for two years 

Carriers: Passengers: 

Cost to develop plan, audit 

adherence to it and store 

copies for 2 years 

• Improved customer 

service 

To date, no good estimate has been foimd of the value to customers of this expected decline in 

complaints. This value could be calculated via a research survey to determine what customers 

would be willing to pay to avoid a range of situations that generate complaints to cartiers, 

including those targeted by proposed customer service plans. Since such data has not been found, 

this analysis currently does not monetize the benefits for this analysis.^° The result is that this 

RIA underestimates the true NPV of this component. Costs to carriers are calculated by 

multiplying the number of carriers that do not self-audit customer service plans by the cost to 

conduct aimual self audits and are presented in Table 28 below. 

Table 28: Costs of Component 5 

Customer service plan implementation 

Costs per 

category 

$35,000 

Number of noncompliant 

businesses* 

10 

Total Costs 

$350,000 

Customer service plan implementation - non reporting $3,850 42 $161,700 

Cost of Self-Auditing Customer Service Plan* $56,800 14 $795,200 

Cost of SelMudjting CustiOTierSerykse PJan - non reporting $6,248 42 $262,416 

* For those carriers that are owned by the same company, software development Is assumed to be required 

just once, for the company as a whole. 

^^ A possible alternate methodology to measure the value of a. decline in complaints was explored but not included 

in the main analysis. Under this approach, the projected decline in complaints is assumed to equate to an equal 

number of trips under improved conditions. A premium on the value of time, such as the 0.01 premium used for the 

certainty of knowing that a condngency plan exists, would be applied to each complaint avoided through the 

proposed regulation and multiplied by the value of time for air passengers using an average trip length. This 

approach requires several assumptions that may be misleading, including: 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. As such, this method was not employed for this RIA and the 

benefits of this component are not monetized. 

H I R I Decision Economics Page • 56 
3 UPDATES TO THE REGULATORY EVALUATION 

This chapter discusses changes made to the Final RIA (as compared to the Initial RIA) to reflect: 

public comments concerning the methodology underlying the Initial RIA; substantive revisions 

to the Final Rules; revisions made to the RIA model and data elements; and further research and 

analysis. While nearly 200 comments were received diu:ing the comment period on the 

Department's Proposed Rule, much fewer directly addressed assumptions, data or the 

methodology used in the RIA. Comments were received from individuals and entities, 

industry/trade associations, advocacy groups, local and Members of Congress. The preamble to 

this final mle provides the primary fomm for substantive responses to these comments. This 

section only discusses comments to the extent they implicate RIA-related estimates, 

assumptions, or methodologies. 

Some commenters argued that the RIA needs to include the cost of litigation - estimated by one 

airline trade association to be $110 million (non-discounted) over ten years for both a) 

incorporation the contingency plan into the cartiers' contract of cartiage, and b) incorporating the 

customer service plan into the carriers' contract of cartiage. The Department believes that such 

litigations costs would be a regular function of doing business. Nevertheless, the Department has 

decided not to require that cartiers incorporate their contingency plans nor their customer service 

plans into their contract of carriage at this time. 

A trade association commented that the RIA does not take into accoimt the fact that its members 

already have contingency plans, leading to the argument that no additional benefits would accrue 

from Component 1. The analysis already incorporates the fact that some cartiers have public 

contingency plans with time limits before providing food, water and access to clean lavatories 

and/or to providing passengers the opportimity to deplane. Thus, the RIA has not changed how it 

estimates how cartiers will be impacted. 

A trade association argued that the cost to provide contact information on an e-ticket is 

underestimated and would total an estimated that $5 million annually due to lost from revenue 

selling advertizing space on the e-tickets. The Department considered this comment but 

determined that the contact information can be provided without loss of advertizing revenue. 

Some commenters argued that there is no consumer demand for posting on time performance, 

and that consumers base piu-chase decisions on price only. Under such circumstances, there 

would be no benefit to Component 4. While research confirms that price is the most important 

factor in choosing between ticket options, historic timeliness is also a factor for many 

passengers. Thus, the calculation of benefits is kept for Component 4. 

Several commenters noted that historic delay data is available on the BTS website for interested 

passengers and therefore Component 4 is uimecessary. Although this data is available on the 

BTS website, that information is not readily available to the consumer at the moment of 

purchase. Accessing that information at that web location would require additional steps, which 

would take consumers away from the point of purchase. Some consumers might lose a 

reservation, get lots, or be unable to access the information. In addition, the above all presumes 

HJR I Decision Economics Page • 57 
that customers are aware of the information and how to access it, which the Department believes 

is not the case. Therefore, this component is retained and the methodology is unchanged. 

One commenter interpreted an appendix table to mean that the benefits to those meeters and 

greeters who wait for their passengers for shorter periods was calculated based on a commute to 

the airport. The benefits to meeters and greeters is calculated on the decreased amoimt of time 

spent waiting on the airport, derived from the decreased tarmac delay for arriving flights. 

One commenter provided an overall estimate for passengers who book online through a cartier at 

30%. Since this estimate did not include documentation and did not differ significantly from the 

estimates used in the RIA which were based upon publicly reported data for multiple cartiers, the 

previous estimate for passengers purchasing tickets online was kept. 

A cartier trade association argued that the cost to cartiers to comply with publishing delay data 

on websites (component 4) in the RIA was significantly underestimated. The commenter 

estimated these one-time costs at $400,000 per cartier. That estimate replaces the previous cost 

estimate. 

One commenter argued that the RIA ought to include the cost to passengers who do not want to 

read through additional information (on contingency plans, complaint contact information, or 

delay data) but must read through additional information and provided an estimate for such costs. 

Yet none of the requirements require a passenger to read or opt out of reading any information. 

All information can be provide on tickets and websites so as to be easily fotmd while not 

requiring any additional time from passengers not interested in accessing the information. 

Therefore, such costs were not estimated. 

Several commenters argued that establishment of contingencies plans with specified time limits 

for tarmac delays before deplaning passengers will lead to changes overall trip time for some 

passengers, lost time for crew during taxi-backs, and an increase in cancellations. It was argued 

that in order to avoid potential litigation or fines, cartiers would be more likely to retum to the 

gate and cancel some flights. The Department acknowledges the concem regarding cancellations 

and potential increases in delays if a flight must retum to the gate and thus loses its place in line 

to depart, and in response notes that that the Rule expressly includes exceptions to requiring the 

cartiers to allow deplaning in situations in which air traffic control advises the pilot-in-command 

that rettuning to the gate or another disembarkation point elsewhere in order to deplane 

passengers would significantly dismpt airport operation and in situations when deplaning would 

present a safety issue. Therefore, the RIA retains the assumption of no incremental increase in 

trip times. 

More than one commenter argued that a requirement allowing passengers to deplane after an 

extended on-tarmac delay would significantly increase delays and cancellations. The RIA only 

seeks to measure the incremental increase in costs - i.e. the delays or cancellations that otherwise 

would not have occurred but for die Rule. The RIA assumes that cartiers will coordinate with 

airports and ground control and notes the exceptions for safety and air traffic control. Therefore, 

the RIA does not change its estimate of cancellations for the Rule, but does conduct a sensitivity 

test on the impact of larger cancellation rates on overall results. 

H n I Decision Economics Page • 58 
A commenter argued that benefits to meeters and greeters should be removed. The RIA is only 

calculating benefits to meeters and greeters for arriving passengers who now deplane early due to 

the requirements of the contingency plans. 

On commenter argues that the benefits for provision of food, water, etc are not incremental 

benefits to the Rule; that 'they already exist,' While food and water already 'exist' they are not 

required to be served to passengers. The Rule ensures the provision of food and water, and 

guaranteed access to them is still considered a benefit. 

A few commenters argued that premiums on the value of time should increase as length of delay 

increases, essentially increasing with each unit of time (such as 15 minutes or half an hour). 

Adequate data that could be applied m increasing half hoiu: increments was not foimd, and using 

the curtent premiums would have required setting an arbitrary time at which that premium was 

fully realized. A sensitivity analysis is conducted on a significant increase on premiums on the 

value of time overall, but no analysis of a gradual escalation of premiums is included. 

At least one commenter argued that use of the statistics from Canadian hospitals posting wait 

times is not an appropriate proxy to use for estimating the impact of posting flight delay data on 

passenger ticket purchases; statistics from BTS should be used instead. Since very few customers 

appear to be aware of the data (and therefore, do not review while making purchases) there was 

no robust estimate to use as a proxy for estimating the impact of posting flight delay data on 

carrier websites. Therefore, the previous proxy was retained. 

Further research and consideration of the calculations of passenger costs and benefits led to two 

other changes. First, the Initial Regulatory Impact Analysis incorporated the value of knowing 

that a contingency plan exists (with a time premium of 0,01) to all time passengers would have 

otherwise spent on the tarmac, not the portion of that time between hours one and three of the 

on-tarmac delay. The baseline for the Final Regulatory Impact Analysis applies this premium 

only to the time between hours one and three that those passengers spend waiting on the tannac 

and conducts a sensitivity analysis including the premium allied to the entire time after one hour. 

Second, while the cost/value of the food and water provided to passengers nets out in the net 

present value calculation, those estimates are properly included in the separate presentation of 

costs and benefits. 

K H l Decision Economiiss Pag e • 59 
RESULTS AND DISCUSSION 

The goal of this analysis- is to estimate incremental benefits and costs of adopting the DOT Final 

Rule to secure airline passenger protections. The difference between benefits and costs 

quantified over the plaiming horizon lifecycle and discounted to die present represents the 

primary indicator of regulatory value for money. This follows OMB Circular A-4, which 

stipulates that this difference~the net present value (NPV)~is to be regarded as a 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 mlemakings, subject to statutory 

requirements. An NPV 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. An 

NPV of less than zero means that measured costs exceed measured benefits. The existence and 

magnitude and implications for NPV of unutneasured costs and benefits may be assessed in a 

threshold analysis. 

This section describes the comparative analysis of estimated costs and benefits for each 

regulatory altemative. This section also discusses the risk and sensitivity analysis of NPV 

findings in relation to key variables. The Final Rule and the five altematives are assessed from 

both quantitative and non-quantitative (qualitative) grounds. The next section describes the 

outcomes of the quantitative analysis. The section following that discusses the qualitative 

analysis. 

4.1 Net Results 

The Final Rule and Altematives 

Monetized outcomes were estimated for all impacts that met two conditions: (1) volume 

estimates were available or could be estimated; and (2) values of unit changes in outcomes could 

be determined or estimated using analogous experience, available statistics, or with acceptable 

shadow pricing techniques. (Specific costs and benefits are detailed in Chapter 2 and Appendix 

A.) 

The time frame to estimate monetized impacts is set at 20 years. Carriers will be expected to be 

compliant by the end of the first year. 

The estimated benefits by altemative are also assessed. Where econoinic impacts were calculated 

to be negative, they are added to the estimated expenditures to calculate estimated total social 

costs. 

The expected present value of costs over a 20-year period using a 7% discount rate is $100.6 

million for carriers and passengers; while the expected present value of benefits is $169.7 

million. NPV of the Final Rule for 20 years at a 7% discoimt rate is $69.1 million. The NPVs for 

the altematives range from -$17 to $74 million at a 7% discoimt rate. 

The net present value of altematives 1 and 2 are extremely close, while and the net present value 

of the Rule and altematives 3 and 4 are also very similar. Given the multiple avenues through 

which uncertainty in specific inputs can affect comparative net benefits among altematives, the 

HZRTDBcision Economics Paoe • 60 
Department has chosen the option for the Rule which it believes maximizes both quantifiable and 

unquantifiable net benefits to society, without placing an undue burden on the industry. 

Table 29: Summary of Costs and Benefits for Final Rule and Alternatives 

2|t_^Ye»r iifsoycle Analysis: 

i«neflt9(mHHon8> Final Rule Altl Att2. Alts Ait4 Am 

20 Year PV 7% discounting $169.7 $152.7 $149.1 $144.0 $168.2 $168.6 

20 Year PV 3% discounting $249.2 $224.5 $219.2 $211.9 $247.0 $247.5 

Final Rute Aifcli Alt4^ iMm 

20 Year PV 7% discounting $100.6 $79.3 $75.4 $80.4 $100.6 $185.8 

20 Year PV 3% discounting 

;;NiEP#ifiMBiiiioiffli)-f.:.: 

$141.3 $110.3 $104.7 $111.9 $141.3 $230.3 

Final Rule Altl Alt 2 Ait 3 Alf4 Alts 

20 Year PV 7% discounting $69.1 $73.4 $73.7 $63.7 $67.6 ($17.2) 

20 Year PV 3% discounting $107.9 $114.2 $114.5 $100.0 $105.7 $17.2 

The following table. Table 30, presents aimual costs and benefits - not discounted - separately for 

cartiers and passengers, for each component of the Rule, Table 31 shows the same results for 

each altemative for the components of that altemative which differ from the Rule (each 

altemative differs only on one component, and only that component's different costs and benefits 

are presented). 

(Note: These tables are not discounted and therefore do not total to the values presented in Table 

29, which are discounted to include the money value of time. These tables are presented 

undiscounted for the reader to see the annual costs and benefits per year and the growth over 

time.) 

i x R I Decision Economics Page • 61 
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Provisional Calculation of Benefits for Component 5 

As noted in Section 2.6, no good estimate has been found to date of the value to customers of 

generally improved customer service expected to result from implementation and self-auditing of 

adherence to a customer service plan. A possible methodology to measure this was explored and 

estimated but not included in the main analysis. The provisional approach assumes each 

projected complaint avoided is equal to a single improved person trip. A premium on the value 

of time could be applied to each avoided complaint and multiplied by the value of time for air 

passengers for the average trip length,^' 

If the premium on the value of time of .01 (the same used for the certainty of knowing that a 

contingency plan exists) is applied to an average trip (approximately 2 hours), an estimated 

$20,344 per year in benefits would occur.^^ The 20 year present value of these benefits at 7% is 

$2.2 million, approximately 1.3 percent of benefits for the total Final Rule,^^ 

Table 32: Provisional Estimates of Expected Benefits of Component 5, Implementing and SelfAuditing Customer Service Plan 

PV 10-year period at 3% discount rate 

20 Year Expected 

Benefits 

(SM) 

$2.2 

Component 5 Provisionat 

Benefits as a % of Total 

Benefits for Entire Rule 

1.3% 

PV 10-year period at 7% discount rate $3.0 1.2% 

4.2 Risk Analysis 

Economic forecasts traditionally take the form of a single "expected outcome" supplemented by 

altemative scenarios. The limitation of a forecast with a single expected outcome is that while it 

may provide the single best statistical estimate, it offers no information about the range of 

possible outcomes and associated probabilities. 

A common approach is to create "high case" and "low case" scenarios to bracket the central 

estimate. This scenario approach can exacerbate the problem of dealing with uncertainty because 

it gives no indication of likelihood associated with the altemative outcomes. The commonly 

reported "high case" may assume that most underlying assumptions deviate in the same direction 

from their expected value, and likewise for the "low case." In reality, the likelihood that all 

underlying factors shift in the same direction simultaneously may be very remote, 

A more comprehensive uncertainty analysis provides a better picture of the uncertainties inherent 

in an analysis than the scenario approach or sensitivity analysis by avoiding the lack of 

' ' There are several assumptions required with this approach that may be erroneous, including: that each expected 

complaint avoided 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.; that complaints are equally distributed for all trip lengths; and others. 

This premium is based upon (yet lower than) the lowest value of time premium due to various levels of comfort 

in other modes of transport found in a recent literature review. See Section 2.1.1 for more detail. 

^^ Only estimates of complaints from 2007 were used in this calculation, so as not to reflect the unusual nature of the 

2008 air travel industry. 

72 

HZR I Decision Econoiiii(» Page • 75 
perspective in "high" and "low" cases by measuring the probability or "odds" that an outcome 

will actually materialize. This is accomplished by attaching ranges (probability distributions) to 

the forecasts of each input variable. The approach allows all inputs to be varied simultaneously 

within their distributions, thus avoiding the problems inherent in conventional sensitivity 

analysis. 

This analytical risk approach was taken for this RIA, Using Monte Carlo simulation techniques, 

each variable and forecasting coefficient was allowed to vary simultaneously according to its 

associated probability distribution. Final probability distributions represent a combination of 

frequentist and subjective probability information drawn from statistical data and analyst 

experience. The outcome of each iteration is aggregated to determine the percentage of the time 

any particular outcome is exceeded. 

Cost and Beneflts Estimates Probability Based Ranges 

Applying uncertainty to benefit and cost estimates provides a range of probability-based 

outcomes for the expected benefits and costs of the Rule, The various low, medium, and high 

estimates of data with variable inputs are detailed in the Appendix A, along with source 

information. Figure 7 below shows the probability distribution of the NPV of monetized benefits 

for the Final Rule using 7% and 3% real discount rates, over a 20-year period of analysis. 

Figures 8 and 9 show the probability distributions of costs and benefits over 20 years separately, 

using 7% and 3% real discount rates. Figure 10 shows the 20-year probability distribution of the 

NPV for the Final Rule and the considered altematives. The ranges are driven by the uncertainty 

surrounding the estimation assumptions. Therefore, the figures illustrate the spectmm of 

potential outcomes given the RIA model input. 

For example, the results of the uncertainty analysis indicate that, using a 7% discount rate, there 

is an 80% probability that the 20 year NPV of the Final Rule will be between $21.8 and $123.4 

million. 

Table 33: Summary Results of Risk Analysis 

20-Year Period 

Median NPV 

t$M> 

iC'e Probability of 

NOT Exceeding 

90% PralgbliMi 

Final Rule at 7% discount rate $66.2 $21.8 

Final Rule at 3% discount rate $101.8 $37.9 $193.2 

The median NPV varies slightly from the expected NPV in Table 29. 

Using a 7% discount rate, the 20 year cost of implementation will be between $74.5 and $109.4 

million for carriers and passengers (see Figure 8) and monetized benefits will be between $123.6 

and $223.22 million (see Figure 9). 

(O^ l Decision Economics Page • 76 
Figure 7: Net Present Value, Using 3% and 7% Discount Rates, Probability Distribution for the 

Rule 

Projected NPV in 

Millions of US$ 

HZR I Decision Economics Page • 77 
Figure 8: Present Value of Costs Using a 3% and 7% Discount Rate, Probability Distribution for the 

Rule 

CD 

1 

(1) 

O 

c 

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fv 

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100% -

90% -

80% •• 

70% -

60% -^ 

50% -

40% -

30% -

20% -

10% -

0% 

$0 $120 PfoJectBd Costs in 

* Millions of US$ 

H H l Decision Economics Page • 78 
Figure 9: Present Value of Benefits Using a 3% and 7% Discount Rate, Probability Distribution for 

the Rule 

100% 

90% 

80% 

70% 

•o 

§ 60% 

X 

= 50% 

o 

>^ 

1 40% 

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Q. 

30% 

20% 

10% 

0% 

$0 

$182.04 

"•*"Total Benefits Discoiiinted at 7% 

Total Benefits DIscoiinted at 3% 

$50 $100 $150 $200 $250 $300 $; Projected Benefits in 

MiiiionsofUSS 

As Figure 10 illustrates below, the NPV of the Final Rule and all considered altematives (except 

Altemative 5) differ only slightly. The NPV for the Final Rule and Altematives 1-4 are nearly 

identical. The NPV for Altemative 5 (requiring travel agencies to publish delay data) has the 

lowest NPV at -$16.98 million due to the additional costs imposed on this industry and 

uncertainty regarding the incremental benefits of including travel agencies. 

H I R I Decision Economics Page • 79 
Figure 10: Present Value of Net Benefits Using a 7% Discount Rate, Probability Distribution for the 

Final Rule and Alternatives 

100% 

it-icn Projected NPV In 

*^° " Millions of US$ 

4.3 Sensitivity Analysis 

In addition to the uncertainty analyses conducted to estimate probability ranges of outcomes, 

sensitivity analyses were conducted to isolate the impact of several key variables, 

OMB Circular A-4 provides the following guidance with respect to the conduct of sensitivity 

analyses: 

Use a numerical sensitivity analysis to examine how the results of your analysis vary with plausible 

changes in assumptions, choices of input data, and altemative analytical approaches. Sensitivity analysis is 

especially valuable when the information is lacking to carry out a formal probabilistic simulation. 

Sensitivity analysis can be used to find "switch points" -- critical parameter values at which estimated net 

benefits change sign or the low cost altemative switches. Sensitivity analysis usually proceeds by changing 

one variable or assumption at a time, but it can also be done by varying a combination of variables 

simultaneously to leam more about the robustness of your results to widespread changes. 

Given the OMB guidance, sensitivities tested include the following: 

• Increase in the cost of compliance with all components of the Final Rule by an additional 

100% 

• Increase in the rate of cancellations as a result of the Rule by 100% 

• Increase in the rate of cancellations as a result of the Rule by 200% 

H ZR [ Decision Economics Page • 80 
• Reduction of the estimated value of travel time premiums for access to food, water and 

clean lavatories, for deplaning and certainty by 50% 

• Reduction of the estimated value of travel time for meeters and greeters by 50% 

• Adding the value of travel time premiums for knowing that a contingency plan exists as a 

benefit to all passengers, not just those on the tarmac for more than an hour 

The results of the sensitivity analysis on key cost assumptions show that doubling all estimated 

carrier cost inputs generates a negative NPV for the Final Rule (-$9.5 million) and Altematives 

3, 4, and 5. Doubling the estimate of the expected increase in rate of flight cancellations 

increases costs but has a more moderate impact on the NPV for the Final Rule and all 

altematives; the NPV for the Final Rule changes from $69.1 to $54.7 milHon. Tripling the 

expected incremental increase in the rate of flight cancelations leads to an NPV of $47 million. 

Table 34: Sensitivity Analysis Results, Costs 

illliM: Monetized Costs and BensTlts For Final Rule and Alternatives Under 

lilfejpnsltlvity Tests (millions) -Cost Assumptions 

Base Case -

Rule 

Sensitivity Test -Impact from Change In 

100% Increase in the 

Costs of Compliance 

to Carriers 

100% Increase in 

the Rate of Flight 

Cancellations 

200% Increase in 

Rate of Flight 

Cancellations 

Present Value of Costs 

Final Rule $100.6 $179.2 $115.0 $122.7 

Alt l $79.3 $148.7 $81.7 $83.1 

Alt 2 $75.4 $143.3 $75.7 $75.9 

Alts $80.4 $151.3 $89.1 $96.9 

Alt 4 $100.6 $179.2 $115.0 $122.7 

Alts $185.8 $264.3 $200.1 $207-9 

Present Value of Benefits (no changes) 

Final Rule $169.7 $169.7 $169.7 $169.7 

Altl $152.7 $152.7 $152.7 $152.7 

Ait 2 $149.1 $149.1 $149.1 $149.1 

Ait 3 $144.0 $144.0 $144.0 $144.0 

Ait 4 $168.2 $168.2 $168.2 $168.2 

Aits $168.6 $168.6 $168.6 $168.6 

Net Present Value 

Final Rule $69.1 ($9.5) $54.7 $47.0 

Alt1 $73.4 $4.0 $71.0 $69.6 

Alt 2 $73.7 $5.8 $73.4 $73.2 

Alts $63.7 ($7.3) $54.9 $47.2 

Alt 4 $67.6 ($10.9) $53.2 $45.5 

Alts ($17.2) ($95.7) ($31.6) ($39.3) 

Baseline for Sensitivity Analysis is: 20 year timeframe, 7% Discount Rate. 

HZR I Decision Economics Page • 81 
The results of the sensitivity analysis on key benefit assumptions reveals moderate to small 

impact in overall net present value. Halving the premiums on the values of time reduces the net 

present value of the Rule from $69,1 million to $47,5 million (at 7% discoimt rate); the various 

altematives also see declines in NPV of similar proportions. Reducing the premium for meeters 

and greeters produces changes in benefits that are small, just under $0,1 million. Adding the 

premium on time due to the comfort of knowing that a contingency plan exists to the entire time 

that passengers would have been delayed on the tarmac for more than an hour (instead only the 

time between one and three hours) increases benefits for the Final Rule from $169.7 million to 

$170.9 million, and net present value from $69.1 million to $70.3 million. 

Table 35: Sensitivity Analysis Results. Benefits 

Comparison of Present Value of Monetized Costs and^fiHrttii 

Sensittvity Tests (million;^ 

al Rule and Alternatives UncfllWil'^'" 

iumptlons 

Base Case • 

Rule 

Sensitivity Test - Impact from Change In: 

50% Reduction In All 

Estimated Value Of 

Travel Time Premiums 

50% Reduction In 

Premium for Meeters 

and Greeters 

Premium for Knowing 

a Plan Existing 

Applied for all 

Passengers On 

Tarmac 1 hour + 

Present Value of Costs (no changes) 

Final Rule $100.6 $100.6 $100.6 $100.6 

Altl $79.3 $79.3 $79.3 $79.3 

Alt 2 $75.4 $75.4 $75.4 $75.4 

Aits $80.4 $80.4 $80.4 $80.4 

Ait 4 $100.6 $100.6 $100,6 $100.6 

Aits $185.8 $185.8 $185.8 $185.8 

Present Value of Benefits 

Final Rule $169.7 $148.1 $169.7 $170.9 

Aiti $152.7 $139.6 $152.7 $153.0 

Ait 2 $149.1 $137.6 $149.1 $149.4 

Aits $144.0 $132.9 $144.1 $144.3 

Alt 4 $168.2 $147.6 $168.3 $168.5 

Alts $168.6 $148.0 $168.6 $168.9 

Net Present Value 

Final Rule $69.1 $47.5 $69.1 $70.3 

Ait1 $73.4 $60.4 $73.5 $73.8 

Alt 2 $73.7 $62.2 $73.7 $74.0 

Alts $63.7 $52.6 $63.7 $63.9 

Alt 4 $67.6 $47.0 $67.7 $67.9 

Alts ($17.2) ($37.8) ($17.2) ($16.9) 

Baseline for Sensitivity Analysis is: 20 year timeframe, 7% Discount Rate. 

H H . I Decision Economics Page • 82 
4.4 Quaiitative and Non-monetized Benefits 

Qualitative benefits of the Final Rule that could not be measured or monetized are discussed 

below. There are likely important qualitative benefits for passengers as well as the carriers. Most 

of these benefits are possible likely side effects to the Rule. These benefits may include: 

Under Component 1 (Contingency Plans) 

Improved Management Of Flight Delays. There is a possibility that the existence of 

contingency plans for long on-board delays and their publication on carrier websites 

could lead to heightened sensitivity to additional delay costs among carrier management. 

This could lead to improved management of delayed flights, diversion schedules, and 

other flight management issues as carriers have additional incentive to avoid long onboard delays. 

Reduced Stress Among Delayed Passengers And Crew. A possible decrease in 

passenger anxiety with improved comfort and convenience brought by contingency plans 

may lead to reduced stress among delayed passengers and crew. This may decrease minor 

conflicts and occasional altercations that arise when people are under stress for extended 

periods in close quarters. The result will be a more pleasant experience for passengers 

and crew that may not be fully taken into account in the measurements employed in this 

RIA. 

Decreased Anxiety With Regard To Flying. Knowing that contingency plans exist may 

bring relief during long on-board delays 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 lead to an increase in overall demand for air travel. 

Improved Customer Good Will Towards Carriers. As extended on-tarmac delays 

without food, water and access to clean lavatories or without the ability to deplane after 

three hours essentially disappear, overall customer 'good will towards carriers should 

improve. Improved good will may lead to a slight increase in demand. 

Improved Overall Carrier Operations. Carriers may be able to improve general 

operations based on analysis of data now required to be stored on substantive delays and 

carrier responses. This recalls the business management maxim, "What you can measure, 

you can manage." If carriers measure substantive delays, carrier responses, and audit 

customer service plans, the result will establish benchmarks for improvements. From 

these benchmarks, carriers can improve service, leading to more unquantified passenger 

benefits. 

Under Component 2 (Customer Complaints) 

Decreased Anger Toward Carriers During Resolution of Complaints. Passengers 

who file complaints may experience greater reassurance and less agitation while awaiting 

resolution of a complaint based on Component 2 of the Rule. The value of this comfort is 

not quantifiable because no benchmark time of waiting for a response is available. The 

Final Rule stipulates that passengers receive a substantive response to complaints (though 

not yet a resolution to the complaint), which may bring a sense of reassurance while 

I x R I Decision Economics Page • 83 
waiting. Passengers may feel that their complaints are legitimate when carriers respond to 

them specifically instead of just noting that a communication has been received. 

Decreased Legal and Administrative Fees from Better Responses to Consumer 

Complaints. It is possible that a more substantive response to customer complaints may 

decrease future costs to carriers. Customers who receive a targeted response to a 

complaint may be less likely to file suit or contact the carrier multiple times to track 

resolution of their complaint. 

Under Component 3 (Chronically Delayed Flights) 

Improved Customer Good Will Towards Carriers. As fewer flights will be regularly 

arriving substantially after their scheduled arrival time, passengers will perceive an 

improvement the level of service provided by carriers. In tum, customer good will 

towards carriers should improve; improved good will may lead to a slight increase in 

demand. 

Improved Management Of Flights and Schedules. The threat of having a flight labeled 

chronically delayed may lead some carriers to seek other avenues of improving on-time 

performance in addition to extending schedules. Such efforts could lead to improved 

management of flights that are frequently delayed. 

Under Component 4 (Posting Delay Data) 

Improved Management Of Flights and Schedules. The posting of on-time performance 

data for flights could lead carriers to better management of flights schedules as 

, passengers begin to avoid certain flights with poor historical performance. 

Under Component 5 (Incorporating and Auditing Customer Service Plans) 

Value of Improved Customer Service Based on Self-Auditing of Adherence to 

Customer Service Plans. 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 ort an improvement in 

services from carriers to passengers, including better baggage handling, fewer ticketing 

errors, less discrimination and other problems for passengers. Carriers are providing 

service in a better manner to consumers, but the value of this change is difficult to 

estimate. There are sufficient examples of carriers 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 monetize that impact. 

Improved Customer Good Will Towards Carriers. As the level of service provided by 

carriers improves and complaints decline, overall customer good will towards carriers 

should improve. Improved good will may lead to a slight increase in demand. 

H I R I Decision Economics Page • 84 
FINAL SiVIALL BUSINESS IMPACT ANALYSIS 

As directed by the Regulatory Flexibility Act of 1980, as amended by the Small Business 

Regulatory Enforcement Fairness Act of 1996 (SBREFA), as well as Executive Order 13272, the 

Department is required to consider the potential impact of its regulations on small entities, 

including small businesses, small nonprofit organizations and small govemmental jurisdictions. 

This process helps determine whether to certify a mle for regulatory flexibility purposes for 

entities that are more likely to be adversely impacted by new standards. This RIA is intended to 

support appropriate regulatory altematives that minimize the economic burden for small 

businesses. 

Reason for Agency Action 

The DOT is proposing a mle to Enhance Airline Passenger Protections, Given the increasing 

rates of complaints filed against carriers, repeated instances of long on-board delays, and the 

significant rate of delayed arrivals over several years, DOT is considering regulations to limit onboard tarmac delays, to guarantee passenger access to basic amenities, and certain provisions to 

improve on-time arrival performance and improve customer service. 

Number and Types of Small Entities to Which the Final Rule Will Apply 

This Final Rule will impact small carriers. For regulatory evaluations, small carriers are those 

that operate service with planes with 60 or fewer seats,^"^ Component 1 (the Development and 

Implementation of a Contingency Plan), Component 2 (Responding to Consuiher Complaints), 

and Component 5 (Adoption and Self- Audit of Customer Service Plans) of this Final Rule apply 

to the domestic flights of carriers with regularly scheduled passenger flights that operate service 

with any aircraft with 30 or more seats. Only small carriers that collect at least 1% of all 

domestic passenger revenue must comply with Components 3 (Chronically Delayed Flights and 

Unfair and Deceptive Practice) and 4 (Posting Delay Data), 

Eleven small carriers certified by DOT that would be impacted by the Final Rule have been 

identified via BTS. These carriers are listed in the table below. Carriers that only operate aircraft 

with 30 or fewer seats, primarily commuter carriers, are exempt from this Final Rule. 

74 See 14 CI ^ Chapter 11. Note that the Small Business Administration definition of small carriers is not used. 

H I R I Decision Economics Page • 85 
Table 36: Small Carriers with Planes Only between 30 and 60 Seats 

Air Transport International 

Ameristar Air Cargo 

Cape Air 

Chautauqua Airlines Inc. 

Colgan Air 

Comnfiutair Aka Champlain Enterprises, Inc. 

Era Aviation 

ExpressJet Airlines Inc. 

Island Air Hawaii 

Piedmont Airlines 

Trans States Airlines 

These 11 carriers are affected by Components 1 and 2, ExpressJet is the only small air carrier 

collecting at least 1% of domestic passenger revenue and therefore subject to other rale 

components. 

Impacts on Small Entities 

Small carriers that will be subject to this Final Rule are identified via estimation of aircraft size 

as reported in the BTS T-lOO database. Since these carriers are not required to report delay data 

to the BTS, there are no small-carrier-specific data to estimate likely flights by small certified 

carriers that would be subject to Component 1 of the Rule. To estimate the likely number of 

small carrier flights that would be impacted by the Rule, a conservative assumption was made 

that distribution of delay times across small certified carriers mirrors that across reporting 

carriers. If small carriers are less likely to have long on-tarmac delays than large carriers, this 

assumption may overstate the number of small carrier flights that would be affected, and thus the 

actual costs to small carriers. 

Costs similar to those for large carriers were also attributed to small carriers except for the fuel 

costs to taxi-back an aircraft. Average fuel bum rates for smaller aircraft were used to calculate 

small carrier costs. This RIA does not calculate a cost for each aircraft owned by each carrier. 

Rather, averages for small carrier aircraft are used. 

Overall costs for small carriers were calculated similar to those for larger carriers. The following 

table presents the total costs for each component, and for the entire Rule. 

Table 37: Total 

Small Carriers 

Costs (in millions) for each Component 

Component 

1 

$30.3 

Component 

2 

$3.4 

Component 

3 

$0.6 

Component 

4 

$7.0 

Component 

5 

$7.6 

Total 

$48.9 

In Table 38, costs are attributed per carrier based on the percentage of total departures 

performed, ExpressJet, which accounts for 36% of all departures performed of this group, has the 

highest aimual costs. 

H I R I Decision Economics Page • 86 
Table 38: Annualized Costs per 

im^^-n^^--:-

Air Transport international 

(Domestic) 

Ameristar Air Cargo (Domestic) 

Cape Air (Domestic) 

Chautauqua Airiines inc. (Domestic) 

Colgan Air (Domestic) 

Commutair Aka Champiain 

Enterprises, Inc. (Domestic) 

Era Aviation (Domestic) 

ExpressJet Airlines Inc. 

(Domestic) 

island Air Hawaii (Domestic) 

Piedmont Airliries (Domestic) 

Trans States Airlines (Domestic) 

Firm, Ten Years 

Component 

1 

$13,496 

$2,578 

$269,435 

$516,814 

$265,464 

$81,868 

$51,427 

$1,028,724 

$60,299 

$319,730 

$250,270 

Component 

2 

$1,514 

$289 

$30,234 

$57,992 

$29,788 

$9,187 

$5,771 

$115,434 

$6,766 

$35,877 

$28,083 

Oomponent 

• - " 3 

$0 

$0 

$0 

$0 

$0 

$0 

$0 

$20,371 

$0 

$0 

$0 

Component 

4 

$0 

$0 

$0 

$0 

$0 

$0 

$0 

$237,659 

$0 

$0 

$0 

Component 

5 

$3,385 

$647 

$67,581 

$129,630 

$66,585 

$20,535 

$12,899 

$258,030 

$15,124 

$80,196 

$62,774 

* Only ExpressJet will be required to comply with components 3,4, and 5. 

These annualized costs per carrier are compared against available aimual receipts figures, shown 

below. 

Table 39: Receipts for Small Carriers 

:'•••••'tt"•'"-•'-"•! ; •" " •/^^-•.liH i 

Air Transport international * 

Ameristar Air Cargo* 

Cape Air 

Chautauqua Airiines inc. 

Colgan Air 

Commutair Aka Champiain Enterprises, Inc. 

Era Aviation 

ExpressJet Airiines inc. 

island Air Hawaii 

Piedmont Airlines 

Trans States Airiines 

Total Annual Receipts per 

firm 

$330,991,460 

$17,903,960 

n/a" 

n/a 

$389,313,000 

n/a 

n/a 

$3,173,806,090 

n/a 

n/a 

$679,520,990 

* Includes revenue from cargo operations (passenger revenues separate from cargo not reported). 

Source: BTS Schedule P-II and P-12. Only 4 of the 11 small carriers included in this analysis report in the P-11 and P-12 

databases including: Air Transport International, Ameristar Air Cargo, ExpressJet Airlines, and Trans States Airlines. Colgan 

Air's total revenue and total operating income are available in Pinnacle Airlines Corp. 's Form 10-Kfiled with the Securities and 

Exchange Commission. The total operating revenues and expenses for these firms are added to created annual receipts as 

defined by SBA {Code of Federal Regulations, Title 13, Volume 1, Revised as of January 1, 2003, Part 121 - Small Business Size 

Regulations, Subpart A - Size Eligibility Provisions and Standards, Provisions of General Applicability). 

^^ N/A indicates not available: many small carriers are privately owned and are not required to report revenues to the 

SEC. SBA does not collect data on small carriers as defined by USDOT unless they also happen to fit the SBA 

definition for small carriers. 

H J R I Decision Economics Page • 87 
Annualized costs per firm as a percent of total receipts are presented in the tables below. Annual 

costs for each component are 0.09% or less of receipts for small carriers. 

Table 40: Annualized costs as a percent of annual receipts pei 

Small Carriers 

Air Transport International 

Ameristar Air Cargo 

Cape Air 

Chautauqua Airlines inc. 

Colgan Air 

Commutair Aka Champiain Enterprises, Inc. 

Era Aviation 

ExpressJet Airiines Inc. 

island Air Hawaii 

Piedmont Airlines 

Trans States Airlines 

•firm 

0.006% 

0.02% 

n/a 

n/a 

0.09% 

n/a 

n/a 

0.05% 

n/a 

n/a 

0.05% 

Reporting and Recordkeeping 

Component 1 of this Final Rule will require small carriers to develop and post a contingency 

plan for long on-board delays and retain data for two years on delays that a) trigger the plan, or 

b) are four hours or longer, as well as the actions that the carrier took to alleviate discomfort. 

This would result in increased recordkeeping for small carriers. 

Component 2 of this Final Rule would require small carriers to provide information on their 

website and on e-tickets (and at the gate upon request) on how to file a complaint. Small carriers 

would have to prepare a substantive response to complaints, i.e. one that address the nature of the 

complaint (but not necessarily resolve it), within 60 days. This requirement may result in 

increased recordkeeping for small carriers. 

Component 5 of this Final Rule would require small carriers to adopt a customer service and to 

self-audit adherence to the plan. 

Alternatives 

DOT believes that potential costs to small carriers are not significant, and notes that most 

passengers fly with large carriers, DOT considered altematives to exempt small carriers from the 

Rule, Altematives 3 included only carriers that operate service with at least one aircraft of 60 or 

more seats, and thus, no small carriers, Altemative 5 included travel agencies, requiring that 

those with an online ticketing engine to post delay data for reporting carriers. 

H Z R I Decision Economics Page • 88 
Appendix A. Data Sources 

There is a lack of data conceming several of the variables used in this analysis. Therefore, the 

assumptions and estimates in parts of this RIA are calculated in an environment of uncertainty. 

The key assumptions that drive the cost and benefit analyses are described in detail in the 

regulatory evaluation and summarized in the chapters on Costs and Benefits and Data and this 

appendix, , 

Cost of Posting a Contingency Plan Dealing with Flight Delays on an Airliners Website 

Variable Description: This is the cost of posting a contingency plan dealing with flight delays 

on an airline website. 

Source: Estimate provided by subject matter experts among HDR IT staff compared against 

figures provided by reporting carriers to modify computer systems to provide additional 

reporting data to BTS regarding cancellations, diversions and gate retums, as reported in 

Regulatory Evaluation on Revision or Airline Service Quality Performance Reports, US 

Department of Transportation, Docket No OST 2007-28522 for reasonableness. 

Table A-1. Cost of Posting a Contingency Plan Dealing with Flight Delays on an Airline's Website 

|@p|l^gency Plan Dealing with Flight Delays on an Airline's Website 

Regulatory Evaluation on Revision 

of Airline Service Quality 

Performance Reports* 

Lower ICo Limit 

$10,000 

Median 

$22,500* 

Upper iq°bjjmit 

$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. 

Breakout of U.S. Carrier Airframes by Passenger Carrying Capacity 

Variable Description: This is the percent of airframes of U.S. carriers classified as large, 

medium and small. Large aircraft are defined able to transport 200 or more passengers; medium 

between 60 and 200 passengers; and small 60 or fewer passengers. This was calculated for 

airframes operated by U.S, carriers in 2001, the latest year for which data were available. 

Source: Department of Transportation, Bureau of Transportation Statistics, Form 41 Schedule 

B-43. Data for airframes operated by U.S, carriers in 2001, latest year for which data available. 

Table A-2. Breakout of U.S. Carrier Airframes by Passenger Carrying Capacity 

lii^mflli^k^lights and Passenger Departures for Airlines Reporting Taxiing Times 

Aircraft Typ» 

Large (> 200 Passengers) 

Medium (60-200 Passengers) 

Small (< 60) 

Percentage of U.S. Carrier Airframes 

7.2% 

67.3% 

25.4% 

Source: Department of Transportation, Bureau of Transportation Statistics, Form 41 Schedule B-43. 

H I R I Decision Economics Page • 89 
Cost of an Average Airline Meal 

Variable Description: This is the average national cost of an airline meal per passenger in the 

U.S. in 2007. 

Data Sources: Karen Aho, "The Death of the Airline Meal," MSN Money, Feb. 22, 2008, 

Table A-3. Cost of an Average Airline lUleal per Passenger (2009 Dollars) 

tISMftpiii t of an Average Airline Misaf Per Passenger (2009 Dollars) 

Lower 10% Limit Median Upper 10% Limn 

Cost of Average Airline Meal Per Passenger $2.65 $3.71 $4.77 

Source: Karen Aho, "The Death of the Airline Meal," MSN Money 

(httD://articles.monevcentral.msn.com/SavinaandDebt/TravelForLess/TheDeathOfTheAirlineMeal.aspx) 

Updated with the Congressional Budget Office (CBO) 2009 Inflation Forecast, 0.1%. 

Fuel Costs (per minute) of Taxiing by Aircraft Size 

Variable Description: Cost of fuel (per minute) of taxiing by four sizes of aircraft — large, 

medium, small, and very small ~ are provided in the table below. The types of aircraft used as 

proxies for each size category, number of passengers, fuel consumption and fuel consumptions 

costs can be found in the table. Immediately following the table is another with ranges for taxiing 

costs per minute for each aircraft. It should be noted that, as there are many variations of 

different types of aircraft (there are over six widely used models of the 747 alone, for example), 

estimates are based on unweighted averages of each particular type of aircraft. For example, 

averages for the 747 were based on unweighted averages of the different models of 747 

commonly in use. 

With respect to ranges, the lower 10% bound is assumed to be 33% less than the median and the 

upper 10% higher. There are two reasons for this asymmetric assumption. One is that it is 

assumed that aviation fuel prices are at historical highs from which they are more likely to 

decline than increase over the next 20 years. The second reason is that aircraft are assumed to 

become more fuel efficient over time, increasing the probability that fuel prices will fall as 

opposed to rise (all other things being equal). 

Data Sources: The types of aurcraft chosen as proxies for each size category were chosen based 

on how commonly they were owned by U.S, carriers. This was defined as the percentage of U.S. 

carrier airframes they composed, in 2001, the latest year for which airframe data were available. 

The 747, Airbus A320 and Saab-Fairchild 340/B were the most widely used aircraft in terms of 

airframes for each particular class (i.e., large, medium and small aircraft). Airframe utilization by 

U.S. carriers was found in BTS, Form 41 Schedule B-43, Fuel consumption data for 747s and 

A320s were found in University of Westminster, "Evaluating the Tme Cost of Airlines of One 

Minute of Airbome or Ground Delay," May 2004, For the smaller aircraft fuel consumption was 

extrapolated from data for these aircraft based on fully loaded weight of aircraft. For example, as 

the Fairchild F-27 weighed about two-thirds of the weight of an A320, it was estimated that it 

used two-thirds the amount of fuel taxiing that the A3 20 used. 

H X l I Decision Econoniics Page • 90 
Jet fuel prices are as of May 16, 2008, from the Intemational Air Transportation Association 

(www.iata,org/whatwedo/economics/fuel_monitor/index,htm). All other data were from a variety 

of other sources, such as aircraft manufacturer websites. 

Table A-4. Fuel Cost of Taxiing Per IVIinute (2009 Dollars) by Aircraft Type 

n i l p Fuel Cost of Taxiing per Minute (2009 Dollars) 

tfartabni^ 

Large Aircraft Fuel Costs (per Minute) 

Medium Aircraft Fuel Costs (per Minute) 

Small Aircraft Fuel Costs (per Minute) 

Very Small Aircraft Fuel Costs (per Minute) 

Lower 10% Limit 

$26.16 

$6.03 

$4.03 

$1.17 

Median 

$38.74 

$9.04 

$6.05 

$1.75 

Upper 10% Limit 

$42.61 

$9.94 

$6.65 

$1.93 

Source: Calculated from data In U.S. Bureau of Transportation, Form 41 Schedule B-43 (aircraft frames); University of 

Westminster, "Evaluating the True Cost of Airlines of One Minute of Airborne or Ground Delay," May 2004 (fuel consumption): 

International Air Transportation Association (www.iata.org/whatwedo/economlcs/fueLmonitor/index.htm) (fuel costs); Airplane 

manufacturers' websites. 

HZR I Decision Economics Page • 91 
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Average Taxi Time for Aircraft at U.S. Airports 

Variable Description: These estimates represent the average time, in minutes, that an 

aircraft at U,S, airports spends actively taxiing, based on a review of taxi-out times in the 

BTS on-time performance database. In 2007, the most common amount of total taxi time 

(from gate to wheels off) was 10 minutes, so this figure was used for the median. Low 

and high estimates were drawn from the frequency of total taxi in or out time minutes and 

represent the 2"'' and 69* percentiles of total taxi times. The high estimate choice 

incorporates the fact that total taxi time includes time spent waiting on the tarmac. 

Data Sources: The source of the mean was a presentation entitled "Short-Haul 

Transportation to and From New York: The Effect of Airport Congestion on Mode of 

Choice," L&B, Presented at the FAA Forecast Conference, March 11, 2008. Range was 

based on HDR subject matter experts. 

Table A-6. Average Taxi Time for Aircraft at U.S. Airports (IVIinutes) in 2007 

Average Taxi Time for Aircraft at U.S. Airports (IMInutes) In 2007 

Variable Lower 10*^ Limit ' IMedlan 

Average Taxi Time 5 10 

Upper10% Limit 

18 

Source: Bureau of Transportation Statistics On-Time Performance database. 

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 747), crew 

members for some types of aircraft are based on unweighted averages of these versions. 

Data Sources: Variety of airline manufacturer websites. 

Table A-7. Average Cockpit Crews per Type of Aircraft 

^ •''"'.' ; '^il i Average Cockpit Crews per T^ 

:^rtiibfci;;.'f|| 

Average Cockpit Crew for "Large" 

Aircraft (747) 

Average Cockpit Crew for "Medium" 

Aircraft (A320) 

Average Cockpit Crew for "Small" 

Aircraft (Fairchild F-27) 

Average Cockpit Crew for 'Tiny" Aircraft 

(Saab-Fairchild 340/B) 

Lower 10% Limit 

2 

2 

2 

2 

/pe Of Aircraft ^t^l^ B 

Median 

2 

2 

2 

2 

Upper 10% Umit 

2 

2 

2 

2 

Note: 747 Is for 747-400 and 747-8 models; 

Source: Various Aircraft Manufacturer websites. 
Cockpit Crew Costs Per Hour 

Variable Description: Average cockpit crew wages per minute in the United States, 

National average hourly wages in 2006 for airline pilots, copilots and engineers were 

$67,49. In 2002, fringe benefits paid by national airlines in the United States, for all 

airline employees, were 35% of wages. Using this mark-up, labor costs come to $91.11 

per hour. Cockpit crews of all types of aircraft are assumed to have this same cost as data 

further differentiating wages and costs are not available on an airframe basis. The range 

around this figure is assumed to be 25% around the median. It assumes that there is a 

wide variance in wages depending on crew employer, flight routes flown and types of 

aircraft being crewed. 

Data Sources: Standardized Occupational Components for Research and Analysis of 

Trends in Employment System, as maintained by the Texas Workforce Commission; 

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 

Aviation Administration's Office of Aviation Policy and Plans, U.S, Federal Aviation 

Administration, 

Table A-8. Average Cockpit Crew Wages and Fringe Benefits (per hour, 2009 dollars) 

i^Slil i Average Cockpit Crew Wages (per hour, 2008 dollars) 

Lower 10% Limit Median 

Average Cockpit Crew Cost (per hour) $51.38 $68.50 $85.63 

Source: Standardized Occupational Components for Research and Analysis of Trends in Employment System, as 

maintained by the Texas Workforce Commission, estimated from Occupational Employment and Wages (OES) program. 

Bureau of (.abor Statistics. 

Number of Flight Attendants by Aircraft Type 

Variable Description: Average number of non-cockpit crew members. These are 

predominantly, if not entirely, flight attendants. 

Data Sources: Various aircraft manufacturer websites. 
Table A-9. Average Number of Flight Attendants per Aircraft Type 

Average Number of Flight Afiiiaht a per Aircraft TVpft^ y^ \ 

Variable \^ 

Average Flight Attendant Crew for "Large" Aircraft (747) 

Average Flight Attendant Crew for "IVIedium" Aircraft (A320) 

Average Flight Attendant Crew for "Small" Aircraft (Fairchild F-27) 

Average Flight Attendant Crew for "Tiny" Aircraft (Saab-Fairchild 

340/B) 

Lowerl6% 

Limit 

9 

4 

1 

1 

Medterr'^ 

12 

5 

1 

1 

Upper 

10% Limit 

14 

6 

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. 

Flight Attendant Costs per Hour 

Variable Description: Average flight attendant costs in the United States per hour. 

Research prepared by the Association of Flight Attendants (AFA) on hourly wages for 

six airlines with AFA members found that hourly wages ranged from $20,00 per hour to 

$41,65 for union attendants, (The Rule will affect all carriers for Component 1 and only 

the largest carriers - and thus those likely to have the highest wages - for Components 3 

and 4), In 2002, fringe benefits paid by national airlines in the United States,, for all 

airline employees, were 35% of wages. Using this mark-up, median labor costs come to 

$41,61 per attendant per hour. Flight crews for all types of aircraft are assumed to have 

this same cost, as data further differentiating wages and costs are not available on an 

airframe basis. The range aroimd this figure is assumed to be 25% around the median. It 

assumes that there is wide variance in wages depending on crew employer, flight routes 

and types of aircraft being crewed. 

Data Sources: ''Compass Flight Attendant Hourly Wage Comparison w/ AFA 

Represented Carriers," Association of Flight Attendants; Benefits for national airlines 

were calculated based on data from Aviation Specialists Group, Inc, Economic Values 

for FAA Investment and Regulatory Decisions, A Guide, Contract No. DFTA 01-02-

C00200, p. 4-4. This report was prepared for the Federal Aviations Administration's 

Office of Aviation Policy and Plans, U.S. Federal Aviation Administration, 

Table A-10. Average Flight Attendant Crew Wages (per hour, 2009 dollars) 

Average Flight Attendant Crew Wagea (pe|: 

viiitiP; 

Average Flight Attendant Crew Cost 

(per hour) 

Lower 10% Limit 

$27.41 

Medlan^PI,...^,, 

$42.23 

ppper 10% Limit 

$57.06 

Source: Bureau of Labor Statistics, Department of Labor, May 2007 National Occupational Employment and 

Wage Estimates. 
Cost of Deplaning Passengers (per Passenger) 

Variable Description: This is the cost of deplaning passengers on a per passenger basis. 

The cost is what an airport would charge airlines to deplane passengers. This is assumed 

to be $1.37 per passenger (in 2008 dollars). This is the fee that Atlanta Intemational 

Airport charged airlines to deplane passengers. 

Source: Paul Meyer, Operations Department, Atlanta Intemational Airport, 

Percentage of Additional Flights Canceled after a Three-Hour Delay Due to Rule 

Variable Description: This is the increase in percentage of flights that are canceled after 

sitting on the tarmac for three or more hours due to implementation of the Rule, It is 

assumed to be between 0% and 5%, with a median of 2,5%, The high end is from a study 

which found that increases of an hour in the amount of time an airport is closed for 

security reasons leads to an additional 5,9% cancelled flights. The same study also found 

that cancellations are more likely at the beginning of a closure than near the end. Thus, 

5% was chosen as an upper bound for cancellations due to taxiing back to the gate. 

Source: Nicholas Rupp, George Holmes and Jeff DeSimone, "Airline Schedule Recovery 

After Airport Closures: Empirical Evidence since September 11th," Organizagoes em 

Contexto, December 2007, for estimate of increase in cancellation due to additional hour 

of airport closure for security reasons. 

Table A-11. Percentage of Additional Flights Canceled after a Three Hour Delay 

. iii.ii. Liifi.p •>• „ I, wiin.n.fy.Bn. iMi uiu • T•^n5^*'Wj^;5^Bg;;'•^^!M^^?l'-M!ggmBPB^'^^^,'!'.?^!R^m!Ml^^^^ •','j''M^M^^:J^.^':^-•J,'H^,•rl'v•g•M>^^'•y'^^•~'T-'.*M^^^'''^'•^*J' 

i^welliO^ymit »^Sft^^v iNtt.".A' ! If' 

0% 2.5% 5% 

Source: Nicholas Rupp, George Holmes and Jeff DeSimone, "Airline Schedule Recovery After Airport 

Closures: Empirical Evidence since September 11th," Organizagoes em Contexto, December 2007, for 

estimate of increase in cancellation due to additional hour of airport closure for security reasons. 

Average Cost to an Air Carrier of a Flight Cancellation 

Variable Description: This is the cost to airlines, of a flight cancellation. In 1998 this 

value was estimated at $11,600."^^ hi 2008 dollars this figure becomes $14,818, 

Source: Zalman Shavell, "The Effects of Schedule Disruptions on the Economics of 

Airline Operations," The MITRE Corporation, April 14, 2000. 

Average Delay for Passengers from a Flight Cancellation 

Variable Description: This estimates the amount of additional trip delay time to a 

passenger due to the cancellation of their flight. This average delay was 519 minutes in 

2004 and 549 minutes in 2005. Multiplied by the value of time, this variable gives us the 

cost to the passenger of the additional delay. 

^* Zalman Shavell, "The Effects of Schedule Disruptions on the Economics of Airline Operations," The 

MITRE Corporation, April 14, 2000. 
Source: Danyi Wang and Lance Sherry, "Trend Analysis of Airline Passenger Trip 

Delays," prepared for the Transportation Research Board 2007 Annual Meeting. 

Number of Flight and Passenger Departures for Airlines Reporting Taxiing Times 

Variable Description: These are the number of flights and the number of departing 

passengers for all airlines reporting taxiing in and taxiing out times in 2007. There were 

21 such airlines,^^ It should be noted that these airlines account for the vast majority of 

the passenger traffic in the United States, Total departures of all passengers on all air 

carriers (U,S, as well as foreign) were 697 million, therefore the reporting airlines 

accounted for approximately 88% of passenger traffic. 

Source: T-lOO Domestic Segment (U.S. carriers) table of the Air Carrier Statistics (Form 

41 Traffic) - U.S. Carriers Database, BTS, Research and Irmovative Technology 

Administration, U.S, Department of Transportation. http://www.transtats.bts,gov/ 

Table A-12. Number of Flights and Passenger Departures for Airlines Reporting Taxiing 

Times 

Number of Flights and Passenger Departures for Airlines Reporting Taxiing Times 

Number of Flights Number of Passengers 

7,360,984 621,728,440 

Source: Bureau of Transportation Statistics 

Total Passenger Boarding by Airport Size 

Variable Description: This is the number of passengers boarding at U,S, airports. Total 

passengers are defined as both U.S. citizens and non-U.S. citizens boarding on all flights 

(on U.S. and non-U.S. carriers) in calendar year 2006. The definitions of the various 

airport categories (i.e., large hubs, medium hubs, etc.) are those of the Federal Aviation 

Administration, as presented in the 2006 Air Carrier Activity Information System. 

Source: Federal Aviation Administration, 2006 Air Carrier Ac 

Table A-13. Total Passenger Boarding by Airport Classification 

f-'Cis^i^M"" - ^'\- ^''^SU); 

Large Hubs 

Medium Hubs 

Small Hubs 

Non-Hubs 

All Other Classifications 

TOTAL 

f^ii»dial»i«^«di^(l*#-' 

511.1 

145.8 

59.1 

21.6 

0.8 

738.4 

tivity Information System. 

[millions) in 2006 

69.2% 

20.0% 

8.0% 

2.9% 

0.1% 

100% 

Note: Due to rounding percentages sum to 100.2%. 

Source: Calculated from data available in the Federal Aviation Administration's 2006 Air Carrier Activity 

The 21 airlines were: Pinnacle Airlines, AirTran Airways, Alaska Airways, Aloha Airlines, American 

Airlines, American Eagle Airlines, Atlantic Southeast Airlines, Comair Inc., Continental Air Lines Inc., 

Delta Air Airlines, ExpressJet Airlines, Frontier Airlines, Hawaiian Airlines, JetBlue Airlines, Mesa 

Airlines., Northwest Airlines, SkyWest Airlines, Southwest Airlines, United Air and U.S. Airways. 
Information System. 

Total Passenger Boarding by Airport Size 

Variable Description: This is the number of passengers boarding at U.S. airports. Total 

passengers are defined as both U.S. citizens and non- U.S. citizens boarding on all flights 

(on U.S. and non-U.S. carriers) in calendar year 2006. The definitions of the various 

airport categories (i.e., large hubs, medium hubs, etc.) are those of the Federal Aviation 

Administration, as presented in the 2006 Air Carrier Activity Information System. 

Source: Federal Aviation Administration, 2006 Air Carrier Activity Information System. 

Table A-14. Total Passen(per Boarding by Airport Classification 

e^mm't'" • .:*:,r^'Kb: 

Large Hubs 

Medium Hubs 

Small Hubs 

Non-Hubs 

All Other Classifications 

TOTAL 

i.N*ji«ti«et^r<lW^.(Mll^^' 

511.1 

145.8 

59.1 

21.6 

0,8 

738.4 

millions) in 2006 

mt^mim'mmuv£.:"t^ 

69.2% 

20.0% 

8.0% 

2.9% 

0.1% 

100% 

Note: Due to rounding percentages sum to 100.2%. 

Source: Calculated from data available in the Federal Aviation Administration's 2006 Air Carrier Activity 

Information System. 

Forecast Average Growth of Airline Passenger Traffic (per Year) on U.S. Airlines 

Variable Description: This is the estimated aimual growth in au-line passenger traffic 

(defined as paying passengers) transported by U.S. carriers on both domestic and 

intemational trips from and to airports in the U.S. forecast for the future. It is based on 

the annual growth rates (per year) from 1968 through 2006 (inclusively). The choice of 

1968 as the first year was based upon the fact that the database being used did not have 

consistently measured numbers before 1968, The range around the median was based on 

the distribution of the actual data. This range is very large as there have been very large 

fluctuations in passenger traffic over this period. 

Source: US DOT 2007 FAA Aerospace Forecast Fiscal Years 2007 - 2020, available at: 

http://www,faa,gov/data_statistics/aviation/aerospace_forecasts/2007-2020/ 

Table A-15. Forecast Growth of Airline Passenger Traffic(per Year) on U.S. Airlines 

fc,owtbt^t^tJ«»H ^yplMcmM 

1.04% 2.67% 2.96% 

Note: Ranges estimated from actual data distribution 

Traveler Values of Time (Dollars per Hour) 

Variable Description: This is the value, to travelers, of time for personal, business and 

all purposes in dollars per hour. The values, as recommended by DOT, are seen in the 

next table. They are in 2003 dollar terms. 
Source: U.S, Department of Transportation, "Revised Department Guidance: Valuation 

of Travel Time in Economic Analysis," 2003, tables 4 and 5, Also in "Economic Values 

for FAA Investment and Regulatory Decisions: A Guide," FAA Office of Aviation 

Policy and Plans, December 31,2004. 

Table A-16. Department of Transportation Determined Values of Time for Air Passengers 

for use in Travel Time Savin; IS Calculations 

Personal $20.00 

er Hour) 

$23.30 

.iiiPi»'W<^!i 

$30.00 

Business $32.10 $40.10 $48.10 

All Purposes $23.80 $28.60 $35.60 

Source: U.S. Department of Transportation, "Revised Department Guidance: Valuation of Travel Time in 

Economic Analysis," 2003, tables 4 and 5. Also in "Economic Values for FAA Investment and Regulatory 

Decisions: A Guide," FAA Office of Aviation Policy and Plans, December 31, 2004. 

NB: According to DOT guidance, these numbers are not to be adjusted for inflation until done so by the 

Department. 

Value of Time Premiums Forecast Average Growth of Airline Passenger Traffic 

(per Year) on U.S. Airlines 

Variable Description: Several aspects of the Final 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 more 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 and 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 Policy Institute, 2007. 

'^ As specified by The Department of Transportation in the "Revised Guidance," these figures have not 

been updated for inflation. See also "Economic Values for FRAA Investment and Regulatory Decisions: A 

Guide," GRA for the Department of Transportation, December 21,2004. 
Table A-17. Value of Time Premiums for Differing Qualitative Levels of Service 

^crategory,^": .'..*". ^,'>'**\ w''. ' ''::.l-' " ^'vi^?l :»-*;•'ill; i 

Adult transit passenger - seated 

Adult transit passenger - standing 

E0SA<C ! 

35% 

50% 

Note: LOS refers to ievel-of-service and incorporates qualitative factors such as comfort, convenience and reliability for various n 

food, water and clean lavatory facilities. The difference in the value of time between the average for LOS rating A-C and LOS rat 

Source: Level of service estimates of value of travel time from Todd Litman, "Valuing Transit Service Quality Improvements," the 

Risk Range for Value of Time Premiums 

Variable Description: To account for the uncertainty of the exact values of the premiums on the values o: 

Table A-18. Risic Ranges for Value of Time Premiums 

Value of Time Premium for having access of food and water on plane 

Value of Time Premium for greater comfort of waiting in the terminal 

Value of Time Premium for decreased anxiety 

Value of Time for Meeters-and-Greeters (Dollars per Hour) 

Variable Description: This is the value of time for meeters and greeters. The U.S. 

Department of Transportation recommended value of time for local personal travel is 

used. 

Source: U.S. Department of Transportation, "Revised Departmental Guidance Valuation 

of Travel Time in Economic Analysis," 2003, 

Table A-19. Value of Time for lUleeters-and-Greeters (per hour) 

Value of Time for iVIeeters-and-Greeters 

Variable 

Value of Time for Meeters-andGreeters - one half average hourly 

wage (per hour) 

Lower 10°o Limit 

$7.40 

Median 

$10.60 

Upper 10% Limit 

$12.70 

Source: Bureau of Labor Statistics. 

Average Commuting Times to and From Airports 

^' 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 British Columbia, August 2004 and P.B. Goodwin, "Human Effort and the Value of 

Travel Time," Journal of Transport Economics and Policy, January 1976. 
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 Cinciimati 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 tum, was done by estimating the travel times 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 passenger departures from 

each category of airport. The upper and lower 10% boimdary 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 "destination" feature. It is 

assumed that travel times to and from airports were 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 Aviation 

Administration's Air Carrier Activity Information System, 

Table A-20. Average Commuting Time to/from Airports (Minutes) 

Average Commuting Time to/from Airports (Minutes) 

Variable 

Large Hub Airport Commuting Time 

Medium Hub Airport Commuting Time 

Small Hub Airport Commuting Time 

Non-Hub Airport Commuting Times 

Non-Primary Commercial Service Airports 

All Airports 

Lower 10% 

Limit 

8.80 

12.00 

9.80 

6.00 

N/A 

7.80 

Median 

21.01 

19.29 

15.43 

12.27 

N/A 

20.11 

Upper 10% 

Limit 

37.00 

24.00 

22.80 

21.30 

N/A 

39.60 

Note: Travel time required to travel from the airport to the nearest downtown Hilton in the closest downtown 

metropolitan area to airport, if the city did not have a Hilton (few did not) the closest "class" of hotel to this was 

used. 

Source: Estimated from "directions" feature in GoogleMaps.Com. 

Percentage of Air Travelers Met at Airport 

Variable Description: This is the percentage of air travelers estimated to be met at 

airports, by someone. This term was estimated from data obtained through the Travel 

Survey of Residents of Canada. This survey is conducted by the Canadian Government's 

statistical service, Statistics Canada, This office performs fimctions roughly equivalent to 

those performed by the U.S, Census Bureau, 

According to the 2005 Travel Survey of Residents of Canada, in 2004 62.8% of travelers 

traveling over 80 kilometers traveled to visit friends or relatives. It is assumed that this 

same ratio applies to intemational air travelers. Assuming that this group is met at 
airports a median percentage of 10%, a lower bound of 20% and an upper bound of 30%, 

the percentages of total travelers being met at airports can be seen in the table below. 

This assumption was necessary in the absence of specific data and to make the estimation 

exercise manageable. 

Source: Statistics Canada, 2005 Travel Survey of Residents of Canada, cited in Statistics 

Canada, The Daily, "Domestic Travel," Wednesday, June 1, 2005, 

(http://www.statcan.ca/Daily/English/050601/d050601b,htm), 

Table A-21. Percentage of Air Travelers Met al t Airport 

^' Percentage of Air Travelers Met at Airport 

Scenario 

Lower 10% Bound 

Median 

Upper 10% Bound 

Assumed Percentage of 

Air Travelers Traveling 

for Purpose of Visiting 

Friends or Relatives 

62.8% 

62.8% 

62.8% 

Assumed Percentage of Air 

Travelers Traveling Visiting 

Friends or Relatives who 

are met at Airport 

10% 

20% 

30% 

Total 

Percentage of 

Air Travelers 

Met at Airport 

6.3% 

12.6% 

18.8% 

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 Non-Reporting Carriers 

Variable Description: The cost of modifying a website for reporting carriers would be, 

based on subject matter expert opinion, between $10,000 and $60,000 (with $35,000 the 

most likely cost and a 90% probability of the actual number falling within the $10,000 to 

$60,000 range). 

The cost for reporting carriers to modify counters to provide information to customers on 

how to file complaints is estimated at $6,347. At OfficeDepot.com, on May 1, 2008 an 

acrylic engraved wall sign cost $13,99. The national median salary for a building and 

grounds maintenance employee, according to the BLS was, $9,75 in 2006, Inflating this 

to 2008 terms (using national Employment Cost Index from the Bureau of Labor 

Statistics) it becomes $10,26, According to the FAA "Calendar year 2006 Passenger 

Activity Commercial Service Airports in 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 maintenance 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 $272,925 by 43 carriers results in a mean airline cost of 

$6,347. 

It is assumed that since reporting carriers have much larger operations, on average, than 

non-reporting carriers, the implementation costs for non-reporting carriers would be 

proportionally smaller. Websites for some carriers could be updated with a simple link 

that would require less than a day of an experienced computer programmer's time (at a 
median hourly wage in 2008 of $33.47 an hour). The average cost for non-reporting 

carriers is therefore assumed to be lower than for reporting carriers, and is estimated at 

11% of that for reporting carriers, reflecting the portion of passengers on non-reporting 

carrier flights, or $4,261. 

This cost to provide information to customers is also used as a proxy to estimate the costs 

of implementing a customer service plan for reporting carriers and non-reporting carriers 

(at the same ratios as above). 

Source: Estimate for website modification provided by reporting carriers to modify 

computer systems to provide data for additional reporting requirements per Final Rule on 

Airline Service Quality Performance Reports, (as reported in Draft Regulatory Evaluation 

on Revision of Airline Service Quality Performance Reports, U,S. Department of 

Transportation, Docket No, OST 2007-28522, November 2007) used as a proxy; 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 

SpeciHcally 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 targeted 

acknowledgement of the type/ptupose 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, estimated at $1.34, 

when compared to a standard acknowledgement that a commimication was received (for 

example, the difference between sending a letter that the complaint regarding a baggage 

delay is being examined versus sending a standard response simply thanking the 

customer for their letter). This number was estimated by finding the hourly wage of 

"Office and Administrative Support Workers" in the United States (median of $13.08 per 

hour in 2006 dollars), inflating it to 2008 dollars ($13.60) and adding benefits of 35% 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 

Statistics, 2006 Occupational Employment Survey; Benefits for national airlines were 

calculated based on data from Aviation Specialists Group, Inc., Economic Values for 

FAA Investment and Regulatory Decisions, A Guide, Contract No, DFTA 01-02-C00200, 

p, 4-4. This report was prepared for the Federal Aviations Administration's Office of 

Aviation Policy and Plans, U.S. Federal Aviation Administration. 

Elasticity of Demand for Complaining 

Variable Description: This figure (1.0741) estimates the change in number of 

complaints due to a unit change in the cost of complaining. 

Source: David Morris, "The Cost of Complaining and the Efficiency of Consumer 

Complaints Agencies," Joumal of Consumer Studies and Home Economics, 1980. 
Cost of Complaining 

Variable Description: These are the elements that comprise the cost incurred by the 

passenger to file a complaint. In the absence of information breaking down complaints to 

carrier by method used to file, one third of complaints are assumed to be submitted 

online, one third via mail, and one third via phone. Cost components independent of time 

include: for writing a letter, $0,42 for a stamp and $,10 for paper and envelope; for 

making a phone call, $0.15 phone charge; for emailing a complaint, it was assumed that 

the incremental cost for those choosing the method would be $0. The value of a 

consumer's time is assumed at the average hourly wage rate and the amount of time 

required to prepare and file a complaint varies from 10 to 30 minutes. 

Table A-22. Value of Time to Prepare and File a Complaint 

Cost to Consumer to Prepare and Pile a Complaint 

Cost Component 

%of 

Materials Cost complaints 

Materials cost of letter writing: 

stamp $ 0.42 

paper and envelope $ 0.10 

33% 

Equipment cost of calling: 

Phone charge $ 0.15 

33% 

Additional equipment/materials cost of 

going online: 

$ - 33% 

Time Spent 

(variable from 10 to 30 minutes) 

Value of Time for Air $28.60 per hour 

Passengers 

Total 

Lower 10% 

Limit 

(10 MInutea 

Spent) 

$ 0.17 

$ 0.05 

$ -

$9.53 

$ 9.76 

Median 

(20 Minutes 

Spent) 

$ 0.17 

$ 0.05 

$ -

$4.77 

$ 4.99 

Upper 10% 

Limit 

(30 Minutes 

Spent) 

$ 0.17 

$ 0.05 

$ -

$14.30 

$ 14.52 

Source: Bureau of Labor Statistics; subject matter experts. 

Number of Annual Complaints to Covered Carriers 

Variable Description: Measures the average number of complaints to all covered 

carriers. DOT Air Travel Consumer Reports lists complaints received by DOT, but not 

those sent directly to the carriers. The DOT Inspector General found in March 2000 that 

it received a total of 1,352 complaints for the 10 major airlines, but that those carriers 

received 82,587 complaints, or 61 times the number of complaints recorded by DOT, To 

arrive at a total number of complaints for covered carriers, the number of complaints in 

the DOT Air Travel Consumer Reports was multiplied by 61, 
Source: "Final Report on Airline Customer Service Commitment," Office of the 

Inspector General, US Department of Transportation, report AV-2001-020, Febmary 12, 

2001 and "Air Travel Consumer Report, U,S, Department of Transportation. 

Travel Agencies with Online Purchase Engine 

Variable Description: This variable estimates the niunber of travel agencies that provide 

online booking of airline tickets and would thus be required to post delay data. The total 

number of travel agencies was take from the U.S, Census Bureau and multiplied by the 

percentage that have online booking engines, estimated to be 17% by the American 

Society of Travel Agents, 

Source: U,S. Census Bureau and telephone conversation with American Society of 

Travel Agents, June 13,2008. 

Cost to Carriers of Providing Delay Data on Their Websites 

Variable Description: The cost to carriers to provide delay data on their websites is 

estimated at $400,000. Assuming information is fed into their electronic infrastracture 

free of charge, there would only be the fixed cost to set up the website and infrastmcture 

to receive delay data. A carrier trade association reviewed the estimates used in the initial 

RIA and provided altemative cost estimates, which were incorporated. 

Source: Comments of the Air Transport Association of America in the matter of the 

Notice of Proposed Rulemaking Conceming Enhancing Airline Passenger Protections. 

Cost to Travel Agencies of Providing Delay Data on Their Websites 

Variable Description: This is the cost to travel agencies to provide delay data on their 

websites. Assuming information is fed into their electronic infrastmcture free of charge, 

there would only be the fixed cost to set up the website and irifrastmcture to receive delay 

data. This is the same as setting up die website initially (i.e.. Cost of Posting a 

Contingency Plan Dealing with Flight Delays on an Airline Website). 

Source: Estimates provided by reporting carriers to modify computer systems to provide 

data for additional reporting requirements for Final Rule on revision to Airline Service 

Quality Performance reports (as reported in Regulatory Evaluation on Revision of Airline 

Service Quality Performance Reports, U.S. Department of Transportation, Docket No. 

OST 2007-28522, November 2007), used as a proxy. 

Table A-23. Per Establishment Cost to Airlines and Travel Agencies of Providing Delay 

Data on Their Websites, or to Provide Information on Website and E-tickets on How to File 

Complaints 

m-wmimiMn, "••' >-:<,Pmrnix 

$10,000 $35,000 $60,000 

Source: Regulatory Evaluation on Revision of Airline Sen/ice Quality Performance Reports, US 

Department of Transportation, Docket No. OST 2007-28522, November 2007. 
Percent of Flights Purchased Online (used for calculations for Altemative 4 only) 

Variable Description: This variable estimates the overall percentage of tickets 

purchased online (40%) and reflects the portion of consumers who are likely to use 

posted delay data on flights in their purchase decisions. 

Source: K. O'Toole, "IT Trends Survey 2003," Airline Business Magazine, August 

2003, as reported in Nelson Granados, Alok Gupta and Robert J. Kauffman, "IT-Enabled 

Transparent Electronic Markets: The Case of the Air Travel Industry," Information 

Systems and E-Business Management, vol. 5, no 1, January 2007. 

Percent of Reporting Carriers' Tickets Purchased on Their Website 

Variable Description: This variable estimates the percent of reporting carriers' tickets 

purchased on their websites (not including those reporting carriers that already post some 

delay data) and reflects the portion of consumers who are likely to use posted delay data 

on flights in their purchase decisions. Data was found for the percentage of tickets 

purchased on the airline's website for Delta, Northwest, America West, Alaska, AirTran, 

and JetBlue (Dan Reed, "Airlines Try to Make Internet Work for Them," USA Today, 

October 31, 2005). Weighted averages of those figures, by passengers in 2007, were used 

to calculate estimates for other reporting carriers. The resulting overall estimate of tickets 

purchased on carrier websites is 34,5% for all reporting carriers not already posting delay 

data. 

Source: Figures for Delta, Northwest, America West, Alaska, AirTran, and JetBlue from 

Dan Reed, "Airlines Try to Make hitemet Work for Them," USA Today, October 31, 

2005. Estimates for the remaining reporting carriers estimated using weighted averages 

by passengers in 2007 for the carriers listed above. 

Table A-24. Percent of Reporting Carrier 

Sfflljife' ' .' '•/''''''•^'"'•'j'^''#iif'.'?^'*'^'^\ 

s' Tickets Purchased 

A . v * '-^1 \ -.u •^•f.; * '"'is^^^m 

Delta, incl. Comair, ASA 

Northwest 

US Airways 

Alaska 

AirTran 

JetBlue 

on Their Website 

l^^-tT^iai^"''*"'*-? 'LJ"**- * • '-

23% 

23% 

28% 

35% 

58% 

78% 

Likely Decrease in Wait Times Due to Posting Data 

Variable Description: The likely impact on carrier schedules is calculated using the 

decline in hospital wait times in Ontario after hospital wait times were published 

electronically as a proxy. Hospitals and airlines both offer services for which there are 

limited suppliers and waits/delays, while delays/ and waits are important, they are not the 

primary factor affecting purchase. It is assumed that carriers would adjust their schedules 

by increasing the scheduled arrival time for certain flights equal to the product of the 

percent reduction in wait time and percent of consumers purchasing tickets online. 
Source: "The Wait Time Strategy Review Of Activities: January-March 2008; Update 

#11 - April 8, 2008," Ontario Ministry of Health and Longterm Care, 

www.ontariowaittimes.com 

Table A-25. Wait Times and Their Decline After Delay Data Posting ir 1 Ontario 

Adult Walt Times Data: 9 Out of 10 Patients Receive the Treatment Within Target - August/September 2005 

Procedure 

Cancer Surgery 

Angiography 

Angioplasty 

Bypass Surgery 

Cataract Surgery 

Hip Replacement 

Knee Replacement 

iVIRI 

CT 

All procedures 

Days 

Baseline Aug/Sept 

2005 

81 

56 

28 

49 

311 

351 

440 

120 

81 

1517 

Current Feb 08 

66 

24 

14 

52 

120 

224 

257 

109 

37 

903 

Access Target 

84 

-

-

182 

182 

182 

182 

28 

28 

Current vs. Baseline 

Change (Days) 

-15 

-32 • 

-14 

3 

-191 

-127 

-183 

-11 

-44 

614 

Source: "The Wait Time Strategy Review Of Activities: January-iVlarch 2008; Update #11 - April 8, 2008," Ontario Ministry of 1 

Care, www.ontariowaittimes.com 

Percentage of "Meeters-and-Greeters' 

Information 

Not Accessing Real Time Flight Delay 

Variable Description: This variable estimates the percentage of persons going to an 

airport to meet passengers who do not access information delay data and thus are 

unaware that a flight is delayed. This estimate was necessary in the absence of specific 

data and in order to make the estimation exercise manageable. 

Source: Subject matter experts. 

Table A-26. Percentage of "lUleeters-and-Greeters" Not Accessing Real Time Flight Delay 

Information 

Percentage of "Meeters-and-Greeters" Not Accessing Ft^tjr^Ftlih||hltay Ittfdrmatlon 

Lower 10% Limit _ Median ^•bJ-.^/lftajpeiflO^Umit 

5% 25% 50% 

Percent of Tickets Purchased Online (used for calculations for Alternative 4 only) 

Variable Description: This variable estimates the overall percentage of tickets 

purchased online (40%) and reflects the portion of consumers who are likely to use 

posted delay data on flights in their purchase decisions imder Altemative 4. 

Source: K. O'Toole, "IT Trends Survey 2003," Airline Business Magazine, August 

2003, as reported in Nelson Granados, Alok Gupta and Robert J. Kauffman, "IT-Enabled 
First Time Software Reprogramming Costs 

Transparent Electronic Markets: The Case of the Air Travel Industry," Information 

Systems and E-Business Management, vol. 5, no 1, January 2007, 

Cost to Global Distribution Systems (GDSs) and Online Travel Companies (OTCs) 

to Provide Delay Data for Carriers and Travel Agency Booking (used for 

calculations for Alternative 4 only) 

Variable Description: This is the cost to the Global Distribution Systems, or GDSs, 

(Amadeus Galileo, and Sabre) and Online Travel Companies (approximately eight OTCs, 

based on membership of the Interactive Travel Services Association) of providing delay 

data. The GDSs are the booking engines used by travel agencies and most carriers. The 

OTCs are online agencies witih independent airline ticket booking capabilities. The 

assumption was made that costs to reformat the GDSs and OTCs could include accessing 

and incorporating into their software system data from each of the reporting carriers and 

could range from $35,000 to $60,000 per carrier (similar in scope to the median and high 

costs estimated by carriers to provide additional delay data to BTS). Updating the data is 

estimated to cost the same as the annual cost to the carriers to update their websites 

($10,000 to $60,000), 

Commimications to DOT from one of the GDSs indicated an estimate of "roughly 

$830,000 in development costs to change their system to comply with the Rule, a figure 

2% different from the median value estimate independently. 

Source: Median and high estimates provided by reporting carriers to modify computer 

systems to provide data for additional reporting requirements per Final Rule on revision 

to Airline Service Quality Performance reports (as reported in Regulatory Evaluation on 

Revision of Airline Service Quality Performance Reports, U,S, Department of 

Transportation, Docket No, OST 2007-28522, November 2007) used as a proxy for per 

carrier data collection and incorporation costs. 

Table A-27. Per Establishment Cost to Global Distribution Systems and Online Travel 

Companies of Providing Delay Data on Their Websites 

F>er Establishment Cost to Global Distribution Systems and Online Travel Companies of Providing 

Delay Data on Their Websites .. 

HDR Calculation based on US 

DOT Regulatory Evaluation on 

Revision to Airiine Service Quality 

Performance Reports 

Lower10"o Limit 

$630,000 

IMedlan 

$810,000 

Upper 10% Limit 

$1,080,000 

Confidential Communication from 

GDS company 

$830,000 

in Use $630,000 $830,000 $1,080,000 

Costfo Update, Each Year 

Lower 10% Limit IMedlan Upper 10% Limit 

HDR Calculation based on US 

DOT Regulatory Evaluation on 

Revision to Airiine Service Quality 

Performance Reports $10,000 $35,000 $60.000 

Source: Regulatory Evaluation on Revision of Airline Service Quality Performance Reports, US Department 

of Transportation, Docket No. OST 2007-28522, November 2007; Confidential communication to 
Department from a Global Distribution System, July 2008. 

Summary of Annual Costs for Self Auditing Service for Reporting and NonReporting Carriers 

Variable Description: This is the aimual cost to reporting carriers of self-auditing 

additional service (customer complaint) calls stemming from the implementation of the 

new regulations. The mean annual salary of a customer service representative in 2007, 

according to the BLS, was $31,040. The Department of Homeland Security 2006 CostBenefit Analysis Guidebook^° recommends using a mark-up of 32.8% to wages to take 

into account benefits received over and above wages. Applying this multiplier to the 

customer service representative's annual salary yields $41,221, inflated to 2008 dollars to 

be $41,798. 

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 Northwest Airlines customer service plan 

(available at www,nwa,com/plan/conmi5 ,html) describes that this service is extrapolated 

to include 100 calls per center per quarter (500 calls/quarter) to test their customer service 

plan compliance and adjust training/coaching accordingly. Extrapolating further, 2,000 

extemal 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 extemal 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 representative was from the 

Bureau of Labor Statistic's May 2007 National Occupational Employment and Wage 

Estimates; Benefits multiplier from U,S, Departrnent of Homeland Security, 2006 CostBenefit Analysis Guidebook; Data regarding Northwest extemal audit costs a subject 

matter expert. 

80 Page 15. 
Table A-28. Annual Costs to Airlines of Self Auditing Customer Complaint Calls 

Antimi Oos<«( M Atirlbttf ollelf l^c(ttift$]0us)^fh«i^€6i»pt$Nt Ciilfsi^ 

Custonner Service Cost $41,798 

Mystery Calling Contract $15,000 

Total $56,798 

Source: Bureau of Labor Statistics' May 2007 National Occupational Employment and Wage Estimates; 

Benefits multiplier from U.S. Department of Homeland Security, 2006 Cost-Benefit Analysis Guidebook; 

Data regarding Northwest external audit costs from subject matter expert. 

Number of Annual Complaints to Covered Carriers that Do Not Already Self-Audit 

Adherence to Customer Service Plans 

Variable Description: Measures the average number of complaints to all covered 

carriers that are 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 complaints for the 10 major airlines, but that those carriers received 

82,587 complaints, or 61 times the number of complaints recorded by DOT. To arrive at 

a total number of complaints for covered carriers, the number of complaints in DOT Air 

Travel Consumer Reports for covered carriers that are not already self-auditing adherence 

to customer service plans was multiplied by 61. 

Source: "Final Report on Airline Customer Service Commitment," Office of the 

Inspector General, US Department of Transportation, report AV-2001-020, Febmary 12, 

2001 and "Air Travel Consumer Report, U.S. Department of Transportation. 

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, Continental in 2001, 

Northwest in 1999, 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 calculated 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 that will now implement self 

audits as a result of the Final Rule are expected to realize an improvement in complaint 

rates equal to half of difference in comparative complaint rates noted above, i,e,, a 10% 

decrease in complaints. 

Source: Calculations based on data from DOT Air Travel Consumer Report, 1998 

through 2007, Information on self auditing of customer service plans from DOT and 

email communication.