White House Proposal Will Make Airlines Pay for Delays, Cancellations

Airlines may have to pay back passengers if they aren’t able to prevent some delays and cancellations under a new White House proposal that would require companies to cover expenses when passengers are stranded.

The Transportation Department is looking to create a rule that would define a “controllable cancellation or delay” that airlines would be on the hook to cover. The rule would then require airlines to provide timely customer service, while also covering rebooking fees, meals, hotels, transportation or any other costs that flyers incur during a delay.

In introducing the proposal, President Joe Biden said American taxpayers stepped up with nearly $50 billion in assistance to the airlines during the pandemic, and those companies owed more to the public than just a straight refund if a delay causes serious harm or inconvenience to the customer. He also said that family seating and baggage fees have been unfair to customers.

Several airlines that would be affected by the news traded higher, though it is unlikely that the Transportation Department proposal played a role. The stocks moved on a JPMorgan Chase report that upgraded its rating on American Airlines (AAL), moving its shares almost 4% higher, while affirming the dominance of the “Big Three” carriers.

The other two major carriers, Delta Air Lines (DAL) and United Airlines (UAL), also traded higher on the report. Shares of discount airline Southwest Airlines (LUV), which was downgraded in the same report, were flat as of 3:30 p.m. Eastern Time.

In conjunction with the announcement, the department also said it has upgraded its FlightRights.gov website to show where some airlines are already offering compensation the government is seeking for flyers. Airlines offered these benefits to its customers after two years of discussions with industry officials, the department said.

The Transportation Department’s proposal would be similar to the EU261 rules that the European Union requires airlines to follow.

Over the past year, airports have been snarled by a variety of delays, some weather related, others associated with staffing and supply issues. Transportation Secretary Pete Buttigieg has said airlines can do a better job of preventing delays and preparing to serve customers when there are issues. Airlines have argued there are not enough air traffic controllers to handle the demand.

An April report from the Government Accounting Office that was requested by Congress blamed many flight cancellations on staffing issues by the airlines. Buttigieg urged airline CEOs to stress-test their schedules before last year’s Independence Day holiday to ensure they would have enough staff to properly operate. 

After Southwest’s December debacle estimated to cost more than $800 million, Buttigieg said not all of the cancellations could be blamed on weather, and the Transportation Department would “mount an extraordinary effort" to ensure the airline fairly compensated the customers who were harmed.