Document ID: DOT-OST-2015-0104-0001
Agency: dot
Document Type: Rule
Title: Denied Boarding Compensation, Domestic Baggage Liability Limits, and Civil Penalty Amounts; Revisions
Posted Date: 2015-05-27T04:00Z

[Federal Register Volume 80, Number 101 (Wednesday, May 27, 2015)]
[Rules and Regulations]
[Pages 30144-30147]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12789]

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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Parts 250, 254 and 383

[Docket DOT-OST-2015-0104]
RIN 2105-AE39

Revisions to Denied Boarding Compensation, Domestic Baggage 
Liability Limits, and Civil Penalty Amounts

AGENCY: Office of the Secretary (OST), Department of Transportation 
(DOT).

ACTION: Final rule.

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SUMMARY: In accordance with existing regulations, this final rule 
raises the maximum denied boarding compensation (DBC) amounts that have 
been in effect since August 2011, raising the maximum DBC amounts from 
the current figures of $650/$1,300 to $675/$1,350. Also, in accordance 
with existing regulations, this final rule raises the minimum liability 
limit air carriers may impose for mishandled baggage in domestic air 
transportation, adjusting the minimum limit of liability from the 
current amount of $3,400 to $3,500. To account for inflation, this rule 
also raises the maximum civil penalties that can be assessed as a 
result of DOT aviation enforcement actions for violations of certain 
economic provisions of Title 49 of the U.S. Code from $2,500 to $2,750.

DATES: This rule is effective on August 25, 2015.

FOR FURTHER INFORMATION CONTACT: Clereece Kroha, Senior Attorney, 
Office of the General Counsel, Department of Transportation, 1200 New 
Jersey Ave. SE., Washington, DC 20590; 202-366-9041, 
clereece.kroha@dot.gov.

SUPPLEMENTARY INFORMATION:

I. Revision of Maximum Denied Boarding Compensation Amounts

    In its rule ``Enhancing Airline Passenger Protections'' (76 FR 
23110, Apr. 25, 2011), the Department raised the limits on denied 
boarding compensation (DBC) due to passengers from the previous amounts 
of $400/$800 to the current amounts of $650/$1,300. The rule also 
requires that these maximum DBC amounts be adjusted to reflect changes 
in the Consumer Price Index for All Urban Consumers (CPI-U). Under 14 
CFR 250.5(e), the review of denied boarding compensation was to take 
place every 2 years, with the first such review occurring in July 2012, 
to coincide with our review of the baggage liability amount. Section 
250.5(e) prescribes the use of a specific formula to calculate the 
revised maximum DBC amounts when making these periodic adjustments. The 
formula is below.

Current DBC limit in section 250.5(a)(2) multiplied by (a/b) rounded to 
the nearest $25

where:
a = July CPI-U of year of current adjustment
b = the CPI-U figure in August 2011 when the inflation adjustment 
provision was added to Part 250

Section 250.5(e) specifies that the DBC limit in section 250.5(a)(3) 
shall be twice the revised limit for section 250.5(a)(2).
    We reviewed the compensation amounts in 2012 and found that 
according to the formula set out in section 250.5(e), no change in the 
DBC amounts was called for. However, the 2014-2015 review indicated 
that an inflation adjustment is required. Applying the formula to 
consumer price index changes occurring between August 2011 (the basis 
month required by the formula) and July 2014,\1\ the appropriate 
inflation adjustment is $650 x 238.250/226.545 [$650 x 1.0517], which 
yields $683.60. (The base amount of $650 in the formula was the maximum 
denied boarding compensation in section 250.5(a)(2) \2\ at the time 
that this biennial indexing provision was added to the rule, 238.250 
was the CPI-U for July 2014, and 226.545 was the CPI-U for August 
2011.) Section 250.5(e) requires us to round the adjustment to the 
nearest $25, or to $675 in this case. Section 250.5(a)(3) provides that 
for passengers who are not rerouted to reach their destination within 
two hours the maximum DBC amount is twice the

[[Page 30145]]

amount provided by section 250.5(a)(2); therefore, under the formula 
adjustment, this amount is twice $675, or $1,350.
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    \1\ The next review of the denied boarding compensation amounts 
will occur after the CPI-U for July 2016 is released.
    \2\ 14 CFR 250.5(a)(2) provides that the maximum amount of DBC 
is $650 for passengers who are denied boarding involuntarily on a 
domestic flight by a carrier who offers alternate transportation 
that is planned to arrive at the passenger's first stopover or final 
destination more than one hour but less than two hours after the 
planned arrival time of the passenger's original flight. 14 CFR 
250.5(a)(3) provides that the maximum amount of DBC is $1,300 for 
passengers who are denied boarding involuntarily on a domestic 
flight by a carrier who offers alternate transportation that is 
planned to arrive at the passenger's first stopover or final 
destination more than two hours after the planned arrival time of 
the passenger's original flight.
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    In this final rule, we are also correcting an editorial error in 
section 250.5(e). When issuing the 2011 final rule prescribing the 
formula for inflation adjustment for DBC limits, we inadvertently 
referred only to section 250.5(a) for involuntary denied boarding on 
domestic flights and omitted section 250.5(b) \3\ for involuntary 
denied boarding on international flights outbound from U.S. airports. 
We intend to apply the periodic inflation adjustment to both sections 
because the inflation adjustment is applicable to ``DBC limits'' 
without distinguishing domestic and international flights as noted by 
the Department in the preamble to the 2011 final rule. We are 
correcting this error by adding another paragraph to this rule, section 
250.5(e)(3), to provide that the DBC inflation adjustment also applies 
to section 250.5(b) regarding passengers involuntarily denied boarding 
on an international flight outbound from a U.S. airport.
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    \3\ 14 CFR 250.5(b)(2) addresses DBC on outbound international 
flights. The provision is identical to section 250.5(a)(2) [see 
footnote 2] except that the threshold for alternate transportation 
at which the DBC limit doubles from $650 to $1,300 is four hours 
rather than two hours.
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II. Revision of Minimum Domestic Baggage Liability Limit

    Part 254 of the Department's rules (14 CFR part 254) establishes 
minimum baggage liability limits that air carriers may apply to 
domestic air service. Section 254.6 of this domestic baggage liability 
limit rule requires the Department to review every two years the 
minimum limit of liability prescribed in Part 254 in light of changes 
in the CPI-U and to revise the limit of liability to reflect changes in 
that index as of July of each review year. Section 254.6 prescribes the 
use of a specific formula to calculate the revised minimum liability 
amount when making these periodic adjustments. The formula is below.

$2500 x (a/b) rounded to the nearest $100

where:
a = July CPI-U of year of current adjustment
b = the CPI-U figure in December 1999 when the inflation adjustment 
provision was added to Part 254.

    The application of the formula during the 2012 review of the 
minimum domestic baggage liability limit raised the amount from $3,300 
to the current amount of $3,400. The 2014-2015 review indicates that 
another inflation adjustment is required. Applying the formula using 
the consumer price index changes occurring between December 1999 (the 
basis month required by the formula) and July 2014,\4\ the appropriate 
inflation adjustment is $2,500 x 238.250/168.30 [$2,500 x 1.4156], 
which yields $3,539.07. (The base amount of $2,500 in the formula was 
the minimum liability limit in Part 254 at the time that this biennial 
indexing provision was added to the rule, 238.250 was the CPI-U for 
July 2014, and 168.30 was the CPI-U for December 1999.). Section 254.6 
requires us to round the adjustment to the nearest $100, or to $3,500 
in this case.
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    \4\ Similar to the DBC adjustment, the next review of the 
domestic baggage liability limit will occur after the CPI-U for July 
2016 is released.
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III. Revision of Maximum Civil Penalties

    The maximum civil penalty amounts for violations of aviation 
economic and consumer rules and statutes administered by the Department 
appear in 14 CFR part 383. The Federal Civil Penalties Inflation 
Adjustment Act of 1990 (Pub. L. 101-410) provides a detailed formula on 
how Federal monetary civil penalties should be adjusted for inflation. 
The Debt Collection Improvement Act of 1996 (Pub. L. 104-134, sec. 
31001) requires each agency to adjust monetary civil penalties within 
its jurisdiction at least once every four years. It also limits the 
initial adjustment to a civil penalty pursuant to the 1996 Act to no 
more than 10 percent of such penalty. The adjustment is based on 
changes to the CPI-U from June of the year when these civil penalties 
were last adjusted to June of the year prior to the current adjustment.
    Notwithstanding the formula provided by the 1990 Act, the civil 
penalty amounts in Part 383 were set by Vision 100--Century of Aviation 
Reauthorization Act (Pub. L. 108-176; 117 Stat. 2490, December 12, 
2003). Subsequently, these civil penalty amounts were reviewed by the 
Department in 2008. In a final rule issued on November 21, 2008, the 
Department adjusted three of the five civil penalties under Part 383: 
Raising the general civil penalty from $25,000 to $27,500; raising the 
general civil penalty for small businesses or individuals from $10,000 
to $11,000; and raising the civil penalty for violations of section 
41719 and rules and orders issued under that section from $5,000 to 
$5,500. According to the formula provided by the 1990 Act, the 
comparison between the CPI-U index for June 2008 and June 2014 results 
in an inflation factor of 1.089. This current review determines that 
none of the three civil penalties that were raised in 2008 are due for 
another increase.
    The current review also determines that only one of the two civil 
penalties that were set by Vision-100 in 2003, and were not raised in 
2008, is due for an increase. The comparison between the CPI-U index 
for June 2003 (the year when these two civil penalties were last set by 
Vision-100) and June 2014 results in an inflation factor of 1.297. As 
such, the current $2,500 maximum civil penalty amount is raised to 
$2,750 for violations of section 41712 or consumer protection rules or 
orders by small businesses and individuals ($2,500 multiplied by the 
inflation factor of 1.297 which results in a raw increase of $742.50, 
rounded to the nearest $1,000 then capped by the 10 percent increase 
limitation for the initial adjustment under the 1990 Act.)

IV. Regulatory Analyses and Notices

    The Administrative Procedure Act (APA) (5 U.S.C. 553) contains a 
``good cause'' exemption which allows agencies to dispense with notice 
and comment if those procedures are impracticable, unnecessary or 
contrary to the public interest. We have determined that under 5 U.S.C. 
553 (b)(3)(B) good cause exists for dispensing with a notice of 
proposed rulemaking and public comment for the inflation adjustments 
herein as the application of this rule does not involve any agency 
discretion. Those adjustments are simply a ministerial inflation update 
based on the terms and formulas set by 14 CFR 250.5, as most recently 
amended in 76 FR 23110 (April 25, 2011), and by 14 CFR 254.6, as most 
recently amended in 73 FR 70591 (November 21, 2008). Those formulas 
were subject to notice and comment in the rulemaking proceedings during 
which they were added to these baggage liability and oversales rules. 
Similarly, the clarification of the applicability of the inflation 
adjustment provision in section 250.5(e) to international 
transportation simply corrects an incomplete internal citation in the 
rule text where the Department's intent as expressed in the preamble to 
the 2011 rule was clear. The adjustment to a certain civil penalty is 
also a ministerial action required by the Federal Civil Penalties 
Inflation Adjustment Act of 1990 as amended by the Debt Collection 
Improvement Act of 1996, and it is based on a statutory formula. 
Accordingly, we find that prior notice and comment are unnecessary, and 
we are issuing these revisions to Parts 250, 254, and 383 as a final 
rule.

[[Page 30146]]

    This final rule will become effective with respect to 
transportation taking place on August 25, 2015. This means that any 
compensation due to passengers in instances of involuntary denied 
boarding, or any compensation due to domestic passengers because of 
loss, delay or damage to baggage, with respect to transportation taking 
place on or after the effective date (as opposed to tickets sold on or 
after the effective date) will be covered by this final rule. All 
notices to passengers required by the rules (Part 250 and Part 254) as 
they pertain to the new maximum DBC amounts and domestic baggage 
liability limit must be updated by the effective date of this final 
rule. The increased maximum civil penalty amount will become applicable 
to all violations that occur on or after the effective date of this 
final rule.

V. Executive Order 12866

    This final rule has been evaluated in accordance with existing 
policies and procedures and is considered not significant under both 
Executive Order 12866 and DOT's Regulatory Policies and Procedures; 
therefore, the rule has not been reviewed by the Office of Management 
and Budget (OMB) under Executive Order 12866.

Denied Boarding Compensation

    The revision of 14 CFR part 250 provides for an inflation 
adjustment to the maximum DBC amounts that air carriers and foreign air 
carriers are required by 14 CFR 250.8 to tender to passengers who are 
involuntarily denied boarding. The provisions are required by current 
regulatory language, and require no exercise of discretion or 
interpretation.
    This rule will pose minor additional costs to airlines only in 
those instances in which carriers oversold a flight, there was not a 
sufficient number of passengers who volunteered to give up their seats, 
and the carriers failed to arrange alternative transportation for 
passengers denied boarding that is scheduled to transport them to the 
next destination within a certain number of hours. The maximum 
potential impact in those instances is $25-$50 per affected passenger, 
depending on the delay in getting the passenger to the next destination 
and whether the flight is a domestic flight or outbound international 
flight. Reports filed each quarter with the Department by U.S. airlines 
that each account for at least one percent of total domestic scheduled-
service passenger revenues show that, in 2013, approximately 0.0092 
percent (.000092) of passengers transported on their scheduled domestic 
and outbound international flights were involuntarily denied boarding. 
The total number of domestic and international outbound scheduled 
passenger enplanements for those carriers in 2013 was 620.5 million. 
This means that approximately 57,000 passengers experienced 
involuntarily denied boarding last year on domestic or international 
outbound scheduled flights operated by these U.S. carriers (.000092 
multiplied by 620.5 million). As the Department does not have a rule 
requiring foreign air carriers to report the number of passengers on 
their U.S.-outbound international flights who were involuntarily denied 
boarding, we do not have statistics on that number. However, the total 
2013 annual enplanements for international outbound flights operated by 
foreign carriers is 41.7 million. Using the same rate of involuntarily 
denied boarding for U.S. carriers (0.0092 percent), the estimated 
number of passengers who were involuntarily denied boarding from 
foreign carrier-operated outbound international flights for 2013 is 
approximately 3,800. Therefore, we expect that the increase in the 
maximum DBC amounts will cost the affected carriers (both U.S. and 
foreign air carriers) no more than $3.04 million a year based on 60,800 
total affected passengers (57,000 plus 3,800) multiplied by the maximum 
increase of $50 per passenger. The actual cost will be significantly 
less than that, since many passengers who are involuntarily denied 
boarding qualify for less than the maximum amount of DBC and their 
compensation will not be affected by this increase in the limits. There 
would be a benefit to passengers for the same amount.

Domestic Baggage Liability

    The revision of 14 CFR 254.4 provides for an inflation adjustment 
to the amount of the minimum limit on baggage liability that air 
carriers may assert in cases of mishandled baggage, as required by 
section 254.6. The provisions are also required by current regulatory 
language, without interpretation.
    This rule will pose minor additional costs to airlines only in 
those instances in which carriers lose, damage or delay baggage and 
where the amount of the passenger's claim in those instances exceeds 
the prior minimum liability limit of $3,400. The maximum potential 
impact in those instances is $100 on each such claim. Reports filed 
each month with the Department by U.S. airlines that each account for 
at least one percent of total domestic scheduled-service passenger 
revenues show that, in 2013, approximately 0.3 percent (.003) of 
domestic passengers of these carriers experienced a mishandled bag. The 
total number of domestic scheduled passenger enplanements for these 
carriers in 2013 was 590.8 million. This means that approximately 1.77 
million domestic scheduled passengers experienced a mishandled bag last 
year (.003 multiplied by 590.8). However, the vast majority of the 
instances of mishandled baggage do not result in a claim in an amount 
that is affected by the liability limit in this rule. Based on the 
information provided to us in 2013 by several carriers, we believe a 
little more than one half percent (0.0058) of the domestic passengers 
who experience a mishandled bag would benefit from an increase in the 
minimum limit on baggage liability, i.e., about 10,266 passengers per 
year. Therefore, we expect that there would be a cost to the airline 
industry of a little over $1 million each year--the number of domestic 
passengers who have a baggage claim that exceeds the prior minimum 
liability limit of $3,400 (10,266 passengers) multiplied by the maximum 
potential impact in those instances ($100). There would also be a 
benefit to passengers for the same amount. Since the rule is limited to 
domestic transportation, it does not affect foreign air carriers.

Civil Penalties

    The increase of the maximum civil penalty will impact entities and 
individuals that are found to be in violation of section 41712 and 
consumer protection rules and orders. There is no direct cost to any 
regulated entity or individual unless the entity or individual is found 
to have committed a violation.

VI. Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612) requires 
an assessment of the impact of proposed and final rules on small 
entities unless the agency certifies that the proposed regulation will 
not have a significant economic impact on a substantial number of small 
entities. An air carrier or a foreign air carrier is a small business 
if it provides air transportation only with small aircraft (i.e., 
aircraft with up to 60 seats/18,000 pound payload capacity). See 14 CFR 
399.73. The revisions of the DBC and baggage liability amounts 
principally affect flight segments operated with large aircraft. As a 
result, many operations of small entities, such as air taxis and many 
commuter air carriers, are not covered by the rule. Moreover, any 
additional costs for small entities associated with the rule would be

[[Page 30147]]

minimal and, in the case of baggage liability, may be covered by 
insurance.
    The revision of the civil penalty amount will raise potential 
penalties for individuals and small businesses with regard to 
violations of section 41712 or consumer protection rules and orders. 
Because the maximum civil penalty amount is only increased by $250 from 
the current amount, the aggregate economic impact of this rulemaking on 
small entities should be minimal and would only be borne by those 
entities found in violation of the regulations.
    Accordingly, I hereby certify that this action will not have a 
significant economic impact on a substantial number of small entities.

VII. Paperwork Reduction Act

    This final rule imposes no new reporting or record keeping 
requirements necessitating clearance by OMB.

List of Subjects

14 CFR Part 250

    Air carriers, Consumer protection, Reporting and recordkeeping 
requirements.

14 CFR Part 254

    Air carriers, Administrative practice and procedure, Consumer 
protection, Transportation.

14 CFR Part 383

    Administrative practice and procedure, Penalties.

    Accordingly, the Department of Transportation amends 14 CFR parts 
250, 254, and 383 as follows:

PART 250--OVERSALES

0
1. The authority citation for part 250 continues to read as follows:

    Authority: 49 U.S.C. 329 and chapters 41102, 41301, 41708, and 
41712.

0
2. Section 250.5 is amended by:
0
a. Removing ``$650'' wherever it appears and adding ``$675'' in its 
place.
0
b. Removing ``$1,300'' wherever it appears and adding ``$1,350'' in its 
place.
0
c. Adding a new paragraph (e)(3) to read as follows:

Sec.  250.5  Amount of denied boarding compensation for passengers 
denied boarding involuntarily.

* * * * *
    (e) * * *
    (3) The Denied Boarding Compensation limit in paragraph (b)(2) 
shall be the same as the revised limit for paragraph (a)(2) of this 
section, and the Denied Boarding Compensation limit in paragraph (b)(3) 
shall be twice the revised limit for paragraph (a)(2) of this section.
* * * * *

Sec.  250.9  [Amended]

0
3. Section 250.9 is amended by removing ``$650'' wherever it appears 
and adding ``$675'' in its place and by removing ``$1,300'' wherever it 
appears and adding ``$1,350'' in its place.

PART 254--DOMESTIC BAGGAGE LIABILITY

0
4. The authority citation for part 254 continues to read as follows:

    Authority: 49 U.S.C. 40113, 41501, 41504, 41510, 41702 and 
41707.

Sec.  254.4  [Amended]

0
5. Section 254.4 is amended by removing ``$3,400'' and adding 
``$3,500'' in its place.

Sec.  254.5  [Amended]

0
6. Section 254.5(b) is amended by removing ``$3,400'' and adding 
``$3,500'' in its place.

PART 383--CIVIL PENALTIES

0
8. The authority citation for part 383 continues to read as follows:

    Authority: Sec. 503, Pub. L. 108-176, 117 Stat. 2490; Pub. L. 
101-410, 104 Stat. 890; Pub. L. 104-134 Sec.  31001.

Sec.  383.2  [Amended]

0
9. Section 383.2(b)(3) is amended by removing ``$2,500'' and adding 
``$2,750'' in its place.

    Issued in Washington, DC, on May 18, 2015 pursuant to authority 
delegated in 49 CFR 1.27(c) and (n).
Kathryn B. Thomson,
General Counsel.
[FR Doc. 2015-12789 Filed 5-26-15; 8:45 am]
BILLING CODE 4910-9X-P