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[Federal Register: April 7, 2010 (Volume 75, Number 66)]
[Notices]               
[Page 17823-17825]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07ap10-123]                         

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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

 
Notice--Interpretation of 49 CFR 158.45

    The Department received a request for a legal interpretation from 
the Interim Trustee of an air carrier in a Chapter 11

[[Page 17824]]

liquidation proceeding, regarding an airport's obligation to refund 
passenger facility charges (PFCs) for certain tickets purchased by 
consumers with credit cards. These tickets were never used due to the 
airline's cessation of operations prior to the flight dates. On March 
30, 2010, the Department sent the Interim Trustee the response re-
printed below, which supersedes informal communications that the 
Department and the FAA have provided in prior instances.
    In the majority of airline customer refund requests, the Department 
has made clear that no refund of a PFC is due where no refund of the 
ticket is due, as is usually the case for non-refundable tickets. See 
14 CFR 158.45(a); 72 FR 28837 at 28843. However, a distinction must be 
made in an airline's liquidation where the tickets in question were 
purchased by credit card, the defunct airline has not operated the 
relevant flights, and the defunct airline is no longer operating (and 
no delivery of the airline transportation service is therefore 
possible). In such an instance, pursuant to applicable regulations of 
the Federal Reserve System, enforced by the Department for airline 
ticket sales, a refund is due and owing to the customer, including the 
PFC. See Federal Truth in Lending Act/Regulation Z requirements (12 CFR 
226.13(e); 14 CFR 374.3(b)). Because the Interim Trustee's letter 
requested an interpretation only with respect to tickets purchased with 
credit cards, the Department's letter addresses only that situation. We 
defer to the Bankruptcy Court on which party may properly claim 
repayment of the PFCs from the airports (Aloha's bankruptcy estate or 
the credit card processor that has refunded such amounts to the ticket 
purchasers), or how such collection should be effected. If any 
questions arise, please feel free to contact Ronald Jackson, DOT 
Assistant General Counsel for Operations, at 202-366-9151.

    Issued on March 31, 2010.
Ronald Jackson,
Assistant General Counsel for Operations.
Dane S. Field
Interim Trustee
Estate of Aloha Airlines
P.O. Box 4198
Honolulu, HI 96812-4198

Re: Passenger Facility Charge Refunds

    Dear Mr. Field: This responds to your March 9, 2009 letter to the 
U.S. Department of Transportation's (DOT) General Counsel submitted in 
your capacity as Interim Trustee for Aloha Airlines, which ceased 
operations on March 31, 2008. Thank you for your patience as we have 
reviewed this matter.
    Specifically, you request ``assistance in providing guidance to the 
airports that refund of [Passenger Facility Charges (PFCs)] by airports 
is appropriate when refunds for unusable tickets have been refunded to 
ticket purchasers as a part of a full ticket refund initiated by the 
airline ticket purchasers.'' Your letter refers in particular to 
situations in which the customer held a ticket for an Aloha flight 
scheduled for March 31, 2008 or later, contacted his/her credit card 
processor to request a refund given Aloha's cessation of operations, 
and received the refund--including a refund of the PFC associated with 
the ticket. Now Aloha's bankruptcy estate seeks to obtain from the 
relevant airports the amount of PFCs refunded to these customers, but 
not all of the airports have refunded the amounts to Aloha's estate. As 
a matter of aviation law (as opposed to bankruptcy law), we believe a 
refund of the PFCs by the relevant airports is appropriate where an 
airline fails to provide the purchased flight due to liquidation in 
bankruptcy.\1\ However, out of deference to the Bankruptcy Court 
presiding over Aloha's estate, we offer no opinion on which party may 
properly claim repayment of the PFCs from the airports (Aloha's 
bankruptcy estate or the credit card processor that has refunded such 
amounts to the ticket purchasers), or how such collection should be 
effected.
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    \1\ Our conclusion is based solely on an analysis of 12 CFR 
Section 226 and 49 U.S.C. Section 40117(g)(4), as implemented by the 
relevant PFC regulations (as set forth below).
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    In support of Aloha's position, you cite 14 CFR Section 
158.45(a)(3)(i), which states that, ``Any change in itinerary initiated 
by a passenger that requires an adjustment to the amount paid by the 
passenger is subject to collection or refund of the PFC as 
appropriate.'' Section 158.45(a)(3)(ii), on the other hand, states that 
a passenger's ``failure to travel on a nonrefundable or expired ticket 
is not a change in itinerary'' requiring a PFC refund. (Italics added.) 
Arguing against the application of the latter provision, you state that 
it was Aloha that ceased operations, and thus the passenger did not 
``fail'' to travel. As you explain, ``The ticket purchasers requested 
refund of non-expired tickets on which it is not possible to travel, 
due to the actions of others, and not the ticket purchaser's 
inaction.'' Furthermore, you note that the tickets were ``basically 
usable or refundable until one year after issuance.''
    It is important to note that the prohibition of refunds in Section 
158.45(a)(3)(ii) covers only ``a nonrefundable or expired ticket.'' 
Section 158.45(a)(3)(ii) further provides that, ``[i]f the ticket 
purchaser is not permitted any fare refund on the unused ticket, the 
ticket purchaser is not permitted a refund of any PFC associated with 
that ticket.'' In the matter before us, DOT understands that the ticket 
purchasers were given a refund of the full fare, including PFCs, by the 
credit card processor. Such refunds would be required from a credit 
card processor by 12 CFR Sections 226.13(a)(3) and (e)(1), both of 
which are applicable to credit card processors working with air 
carriers under 14 CFR Section 374.3(b), in the event of a ``billing 
error.'' The regulations define ``billing error'' as including ``a 
reflection on or with a periodic statement of an extension of credit 
for property or services * * * not delivered to the consumer or the 
consumer's designee as agreed,'' 12 CFR Sec.  226.13(a)(3) (italics 
added), in which case--at least as an initial matter pending further 
investigation--the credit card processor must ``[c]orrect the billing 
error and credit the consumer's account with any disputed amount and 
related finance or other charges, as applicable.'' 12 CFR Sec.  
226.13(e)(1). Barring a reversal of the refund following an 
investigation, it is then up to the credit card processor and the 
merchant to work out the matter between themselves, and in the case of 
a bankruptcy, subject to the terms of any bankruptcy stay or other 
bankruptcy requirements.
    If full fare refunds to the ticket purchasers by the credit card 
processors were indeed required by 12 CFR Sections 226.13(a)(3) and 
(e)(1), then the tickets at issue could not be considered 
``nonrefundable'' under Section 158.45(a)(3)(ii). Therefore, the 
prohibition of PFC refunds in 158.45(a)(3)(ii) is inapplicable, and a 
refund of the PFCs would be appropriate. Moreover, if the Bankruptcy 
Court should also find as a factual matter that the tickets under their 
terms were refundable by Aloha as of the bankruptcy filing date, then 
that would provide a further basis for a refund.
    You indicate that Aloha requests that the airports submit the 
refunds to the Aloha bankruptcy estate. We do not offer an opinion on 
that particular issue. As stated above, we defer to the Bankruptcy 
Court on the appropriate treatment of the PFC revenues. We do note that 
under 49 U.S.C. Section 40117(g) and 14 CFR Section 158.49(b), an air 
carrier or its agent holds collected

[[Page 17825]]

PFC revenues in ``trust'' for the beneficial interest of the eligible 
agency imposing the fee, and neither the carrier nor its agent holds 
legal or equitable interest in the revenues (with exceptions not 
relevant here). This is not to set forth a DOT position that Aloha may 
not collect the refundable PFC revenues; rather, as stated above, out 
of deference to the Bankruptcy Court and because we are not privy to 
Aloha's arrangements with the credit card processors or the flow of 
funds in this matter, we defer to the Bankruptcy Court on all such 
matters, including which party may properly claim repayment of the 
PFCs, how such collection should be effected, and whether the airports 
have some other claim to the revenues in these circumstances based on 
an accounting error or otherwise. But should refund be appropriate, any 
solution must ensure that the flow of funds among Aloha, the credit 
card processors, and the airports complies with 14 CFR Sections 158.45 
and 158.49.
    We appreciate the importance of your work on Aloha's behalf, and we 
hope that you find this letter helpful. As a courtesy, we are copying 
the Bankruptcy Court Judge and airports that may be affected by this 
letter. To be clear, however, this letter is not intended as a DOT 
position in the bankruptcy proceeding, or any type of final agency 
action; rather, we are merely providing guidance on the interpretation 
of the PFC regulations, in response to your request. If you have any 
further questions, please do not hesitate to contact me at (202) 366-
4710.

 Sincerely,

Ronald Jackson,

Assistant General Counsel for Operations

cc: United States Bankruptcy Court, District of Hawaii Airport Managers 
or PFC Contacts for the following airports:

     Sacramento International Airport (SMF)
     San Francisco International Airport (SFO)
     John Wayne-Orange County Airport (SNA)
     Oakland International Airport (OAK)
     Denver International Airport (DEN)
     Los Angeles International Airport (LAX)
     Chicago O'Hare International Airport (ORD)
     San Diego International Airport (SAN)

[FR Doc. 2010-7887 Filed 4-6-10; 8:45 am]
BILLING CODE 4910-9X-P
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