Order 2012-7-1

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

On the Third day of July, 2012

Bahamasair Holdings Limited Docket OST 2012-0002

Violations of 49 U.S.C. § 41712 and Served July 3, 2012

 14 CFR 221.107(d) and Part 374

CONSENT ORDER

This consent order concerns violations by Bahamasair Holdings Limited (Bahamasair) of 

the Department-enforced laws relating to refund requests involving airline tickets and 

providing notice of liability limits on flights covered by the Montreal Convention 

(Convention). It directs Bahamasair to cease and desist from future similar violations and 

assesses the carrier a compromise civil penalty of $70,000. 

Refund Requests Involving Airline Tickets

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

§§ 1601-1693r, 12 CFR Part 226, and 14 CFR Part 374, which implements Regulation Z, 

establish that, with respect to refund requests involving airline tickets purchased with a 

credit card, a creditor–here Bahamasair–must transmit a credit statement for a passenger 

refund to the credit card issuer within seven (7) business days of receipt of full 

documentation for the refund requested. Pursuant to 14 CFR 221.107(d), air carriers and 

foreign air carriers must provide passengers with conspicuous written notice, on or with 

the ticket, or other similar document, of the salient features of any terms that, among 

other things, restrict refunds of the price of the transportation or impose monetary 

penalties on customers. A carrier’s failure in either regard violates the applicable rule 

and constitutes an unfair and deceptive practice and unfair method of competition in 

violation of 49 U.S.C. § 41712. 
 

Based on a consumer complaint alleging a significant delay in processing a refund by 

Bahamasair, the Office of Aviation Enforcement and Proceedings (Enforcement Office) 

conducted an investigation of Bahamasair’s refund practices and found that in a 

significant number of cases, Bahamasair failed to forward a credit to the credit card 

company within seven business days after receiving a complete refund application. 

Additionally, the Enforcement Office found that Bahamasair charged a processing fee for 

refunds without providing consumers with conspicuous written notice of those fees on or 

with the tickets, as required. 

Notice of Baggage Liability Limits

Article 24 of the Montreal Convention (Convention) authorizes the International Civil 

Aviation Organization (ICAO) to adjust for inflation the carrier liability limit under the 

Convention for inter alia loss, damage, or delay of baggage. Accordingly, on June 30, 

2009, ICAO notified State Parties that, effective December 30, 2009, the baggage 

liability limit in Article 22 would increase from 1,000 to 1,131 Special Drawing Rights 

(SDR). On November 9, 2009, the Enforcement Office published a notice alerting U.S. 

and foreign air carriers to revise their contracts of carriage, tariffs, required notices, and 

practices to reflect the increase. The notice also warned carriers that the Enforcement 

Office would consider failure to do so by the effective date to be an unfair or deceptive 

business practice in violation of 49 U.S.C. § 41712. 

Notwithstanding this notice, Bahamasair failed to revise its contract of carriage to reflect 

the increased baggage liability limit. Rather, the carrier continued to state that the 

minimum liability limit for lost, damaged, and delayed baggage was 1,000 SDR for a 

lengthy period of time.

 Mitigation

In mitigation, Bahamasair points out that it is a small airline when compared to other 

foreign and U.S. airlines that have been subject to comparable enforcement investigations

and states that it has very limited budgetary and human resources. Nevertheless, 

Bahamasair states that it takes its obligations to comply with U.S. laws very seriously. 

The carrier notes that it has responded cooperatively and promptly during the course of 

the Enforcement Office’s investigation of these matters and all concerns raised by the 

Department have been addressed. Furthermore, Bahamasair has reaffirmed its 

commitment to comply with U.S. laws in the future.

With respect to the timely processing of credit card refunds, Bahamasair notes that it 

responded decisively to the Enforcement Office’s investigation by implementing new 

procedures to ensure future compliance with 14 CFR Part 374. Concerning Bahamasair’s 

alleged failure to provide conspicuous written notice of ticket refund fees, Bahamasair 

points out that the tickets in question stated that they were non-refundable, but 

Bahamasair’s practice has been to honor refund requests in certain cases subject to refund 

penalty fees. 
 

With regard to Bahamasair’s failure to revise its contract of carriage to reflect the 

increased baggage liability limit, upon learning of this oversight, Bahamasair states that it 

promptly corrected the error. Bahamasair states that it is unaware of any complaints from 

passengers for receiving compensation in an amount less than 1,131 SDR for lost, 

damaged, or delayed baggage. Moreover, the carrier asserts that there is no evidence that 

any passenger unilaterally adjusted downward the amount of his or her claim based on 

the erroneous information in Bahamasair’s contract of carriage. The carrier points out 

that some passengers were compensated more than 1,000 SDR, indicating that 

Bahamasair did not apply the outdated, lower limit as a matter of course.

Decision

The Enforcement Office has carefully considered the information provided by 

Bahamasair but continues to believe that enforcement action is warranted. The 

Enforcement Office and Bahamasair have reached a settlement of this matter in order to 

avoid litigation. Without admitting or denying the violations described above, 

Bahamasair consents to the issuance of this order to cease and desist from future 

violations of Regulation Z, 14 CFR Parts 374 and 221.107(d), and 49 U.S.C. § 41712 and 

to the assessment of $70,000 in compromise of potential civil penalties otherwise due and 

payable pursuant to 49 U.S.C. § 46301.

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

violations described herein and serves the public interest. It represents a strong deterrent 

against future noncompliance by Bahamasair and other carriers and ticket agents. 

This order is issued under the authority contained in 49 CFR 1.57a and 14 CFR 385.15.

ACCORDINGLY,

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

order as being in the public interest;

2. We find that Bahamasair Holdings Limited violated 14 CFR Part 374 by failing to 

process on a timely basis refunds of money paid by credit card to the carrier for 

certain air transportation, as required by the Consumer Credit Protection Act and 

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

§§ 1601-1693r and 12 CFR Part 226;

3. We find that Bahamasair Holdings Limited violated 14 CFR 221.107(d) by failing to 

provide consumers conspicuous written notice on or with the tickets of its applicable 

refund penalties and fees;

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

above, Bahamasair Holdings Limited engaged in unfair and deceptive practices and 

unfair methods of competition in violation of 49 U.S.C. § 41712;
 

5. We find that Bahamasair Holdings Limited engaged in an unfair and deceptive 

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

failing to accurately inform consumers of the liability limits under the Montreal 

Convention for lost, damaged, and delayed baggage;

6. We order Bahamasair Holdings Limited and all other entities owned or controlled by, 

or under common ownership and control with Bahamasair Holdings Limited, its 

successors and assignees, to cease and desist from further similar violations of 

Regulation Z, 14 CFR Parts 374 and 221.107(d), and 49 U.S.C. § 41712. Failure to 

comply with this cease and desist provision shall subject Bahamasair Holdings 

Limited, and its successors and assignees to further enforcement action;

7. We assess Bahamasair Holdings Limited $70,000 in compromise of civil penalties 

that might otherwise be assessed for the violations described in ordering paragraphs 2 

through 5, above. Of this total amount, $15,000 shall be due and payable within 30 

days of the date of issuance of this order, $10,000 shall be due and payable within 60 

days of the date of issuance of this order, and $10,000 shall be due and payable within 

90 days of the date of issuance of this order. The remaining $35,000 shall be due and 

payable immediately if Bahamasair Holdings Limited violates this order’s cease and 

desist or payment provisions during the twelve (12) months following the service date 

of this order; and

8. We order Bahamasair Holding Limited to pay the penalty through Pay.gov to the 

account of the U.S. Treasury. Payments shall be made in accordance with the 

instructions contained in the Attachment to this order. Failure to pay the penalty as 

ordered shall subject Bahamasair Holding Limited to the assessment of interest, 

penalty, and collection charges under the Debt Collection Act and to further 

enforcement action for failing to comply with this order.

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

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

motion.

BY:

ROSALIND A. KNAPP

Deputy General Counsel 

 

(SEAL)

An electronic version of this document is available at 

www.regulations.gov