Aviation: Comparison of Airline 'Customer Service Commitment' With Contracts of Carriage and Federal Law

Published by the Government Accountability Office on 1999-09-10.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

United States General Accounting Office                                                             Resources, Community, and
Washington, DC 20548                                                                            Economic Development Division


          September lo,1999

          The Honorable Ron Wyden
          United States Senate

          Subject: Aviation: Comnarison of Airline “Customer Service Commitment” With Contracts
                   of Carriage and Federal Law

          Dear Senator Wyden:

          Airlines transport their passengers in accordance with various terms and conditions as well
          as federal statutes and regulations. These terms and conditions are referred to as conditions
          of contracts or more commonly as contracts of carriage. A contract of carriage is the
          agreement between the passenger and the airline that encompasses all contractual rights,
          liabilities, and duties of the two parties. For example, contracts of carriage include such
          provisions as airline liability limits for lost baggage and passenger entitlements when flights
          are delayed or canceled. Any term or condition of this contract is legally binding on the
          airline and the passenger and may be enforced in state court.* Federal regulations’ require
          that airlines retain a copy of their contracts of carriage at each of their ticket offices for
          review by passengers requesting to do SO.~

          In addition to being able to sue an airline for breach of contract, a passenger could file a
          complaint with the Department of Transportation (DOT) alleging that an airline has violated
          a federal statute or regulation. For example, a passenger could claim that an airline engaged
          in an unfair or deceptive practice. As a result of such a complaint, DOT could bring an
          enforcement action against the airline.

          In June 1999, the Air Transport Association4 (ATA), responding to Congress’s interest in
          ensuring that airlines make every effort to provide passengers with the best service available,
          announced its “Customer Service Commitment.” The Commitment, developed in
          consultation with congressional leaders and DOT, consisted of several general measures
          designed to improve customer service. According to ATA officials, each of its member
          airlines will develop detailed customer service plans on the basis of the ATA proposal by
          September 15,1999, and implement them by December l&1999.

          ‘Americai~ Airlines v. Wolens, 513 U.S. 219 (1995).
          ‘14 C.F.R. 8 253.4.
          ‘The full text of contracts of carriage for the airlines we reviewed varied from 25 to 45 pages and can be obtained from an airline
          upon written request to the airline’s headquarters.
          ‘The Association is a trade organization representing the principal U.S. airlines.

                                                              &L? 736AO/RCED-99-281R                           Customer Service Plans

You requested that we compare the airlines’ existing contracts of carriage with ATA’s
Customer Service Commitment. We performed this comparison for the 10 major U.S.
passenger airlines. We also compared the airlines’ contracts of carriage and the Customer
Service Commitment with the federal statutes and regulations to determine what provisions,
if any, are required by statutes or regulations.

Summary of Comparisons

ATA’s Customer Service Commitment extends the airlines’ commitment beyond the current
contracts of carriage by either adding new provisions or augmenting existing terms. The
Customer Service Commitment includes new provisions concerning reservations; offering the
lowest fare available over the telephone, refunds, and on-time-baggage delivery; meeting
customers’needs during on-aircraft extended delays; and handling customer complaints. For
example, airlines are to allow passengers to hold a reservation for 24 hours or cancel a
reservation within 24 hours without penalty.

Several other measures in the Customer Service Commitment (notifying customers about
known delays, cancellations, and diversions; petitioning DOT for an increase in the minimum
baggageliability limits; disclosing information on various airline policies; and ensuring
customer service for code-share partners?) augment terms provided for in the contracts of
carriage. The remaining measures (accommodating special needs passengers and fairly
handling “bumped” passengers) are currently included in the contracts of carriage.
Enclosure I summari zes our comparison of the measures contained in the Customer Service

The officials at the 10 major airlines that we contacted6 indicated that they were considering
revisions to their contracts of carriage to reflect at least some aspects of their customer
service plans. However, these officials said that the decision about what specific changes to
make would involve a side-by-side comparison of their current contracts of carriage and their
final customer service plan. Because the plans are still being developed, the officials could
not say to what extent the contracts would be revised. One airline official, however, did say
that the minimum baggageliability limit would certainly be changed to reflect the anticipated
regulatory change in the baggage liability minimum.’ Most of these officials believed that any
revisions to their airline’s contracts of carriage would be made by the end of 1999.

Federal statutes and regulations have a significant impact on a number of the measures in the
Customer Service Commitment, such as the following: providing baggage liability, providing
prompt ticket refunds, accommodating special needs passengers, handling bumped
passengers,notifying customers about aircraft changes and aircraft type and configuration,
and ensuring customer service from an airline’s code-sharing partners. Several of these
measures (fairly handling bumped passengers, ensuring customer service from an airline’s
code-sharing partners, providing prompt ticket refunds, accommodating special needs

SCodesh&ng allows an airline to sell seats on another airline’s airplanes, as if they were its own. This enables the airlines that
have partnered to expand their route networks without adding any airplanes.
‘The 10 major passengersirlines, each with more than a billion dollars in annual revenues, are Alaska, American, America West,
Continental, Delta, Northwest, Southwest, Trans World, United, and U.S. Airways.
‘DOT has proposed that the minimum baggageliability be increased from $1,250to $2,500,64 Fed. Reg. 34592,June 28,1999.

2                                                                         GAO/RCED-99-281R Customer Service Plans

passengers, and providing passengers with information on airline policies and aircraft
configuration) reflect what is in the statutes and regulations.

In addition, the Customer Service Commitment seeks to change the current minimum
baggageliability limit regulation. In June of 1999, DOT issued a supplemental notice
proposing to raise the minimum baggage liability limit from $1,250 to $2,500. DOT has yet to
finalize this proposed rule. One of the ATA measures calls for airline officials to petition
DOT to increase its minimum baggage liability limit.

DOT officials said that under federal law, DOT could bring an enforcement action against an
airline that engages in what it considers an unfair and deceptive trade practice,* As examples
of unfair and deceptive trade practices, DOT cited an airline’s~failure to (1) follow through on
promises that would be made in an airline’s customer service plan; (2) provide the lowest
fare available over the telephone to a passenger who requests it; (3) adhere to promised flight
schedules that have been changed as a result of flight cancellations due to economic
considerations; and (4) provide passengers with cash refunds within 20 days of receiving
complete claim information.

Scope and Methodology

We interviewed ATA officials to better understand the context in which the Customer Service
Commitment was developed. We also interviewed officials from the 10 major passenger
airlines to determine if they intended to incorporate their customer service plans into their
contracts of carriage. We did not determine the extent to which existing contracts of carnage
reflect actual airline practices. In addition, we interviewed DOT officials to determine the
Department’s interpretation of the pertinent federal statutes and regulations. However, we
did not review all federal involvement in airline operations such as DOT enforcement
decisions and federal law outside of DOT’s and the Federal Aviation Administration’s statutes
and regulations.

We discussed the information in this report with DOT and ATA officials. They provided
technical corrections, which we incorporated into the report as appropriate.

Our work was performed from July through August 1999 in accordance with generally
accepted government auditing standards.

We are sending copies of this report to the Honorable Rodney E. Slater, Secretary of
Transportation; appropriate congressional committees; and other interested parties. We will
make copies available to others upon request.

‘49 U.S.C. !j 41712.

3                                                     GAO/RCED-99-281R Customer Service Plans

If you have any further questions, please contact me at (202) 512-3650. Major contributors to
this report were David Hooper, Paul Lacey, Richard Scott, and Robert White.

Sincerely yours,

Gerald L. Dillingham
Associate Director,
 Transportation Issues

4                                                     GAO/RCED-99-281R Customer Service Plans
Enclosure I

                          ComDarison of Customer Service Commitment
                           With Contracts of Carriage and Federal Law

Each airline has its own contract of carriage, which sets out the terms and conditions of
the agreement between the passenger and the airline when a passeng& purchases an
airline ticket. Because of the similarity among the contracts, we have summarized them
and indicate major differences in the notes to table 1.1.

Table 1.1: Comparison of Customer Service Commitment With Airlines’ DomesticContracts                  of
Carriage and Pertinent Federal Statutes and Regulations

Customer Service                  Airlines’ domestic contracts        Pertinent federal statutes and
Commitment                        of carriage                         regulations
The lowest fare that a            Service not addressed.”             According to DOT officials, it would
customer is entitled to will be                                       be an unfair and deceptive trade
offered through the telephone                                         practice under 49 U.S.C. 9 41712
reservations system.                                                  for an airline to provide other than
                                                                      the lowest fare available by
                                                                      telephone to a customer if
                                                                      requested to do so.
Customers will be informed        Service not addressed.              According to DOT officials, it would
about delays, cancellations,                                          be an unfair and deceptive trade
and diversions in a timely                                            practice under 49 U.S.C. Q 41712
manner.                                                               for an airline to inform passengers
                                                                      that cancellations were due to
                                                                      weather, mechanical reasons, etc.,
                                                                      when, in fact. the cancellations
                                                                      were bue to &onomic reasons.
Clear and concise policies        The airlines will provide           Service not addressed.
regarding accommodations          amenities (including overnight
for passengers delayed            accommodations) for
overnight will be established     passengers whose flight has
and made available to them.       been diverted to an
                                  unscheduled point. Hotel
                                  accommodations are provided if
                                  the delay exceeds 4 hours
                                  during the period of 10 p.m. to 6
Even/ reasonable effort will be   Service not addressed.              Service not addressed.
made to return checked
baggage to passengers within
24 hours and to contact any
passenger whose unclaimed
shecked luggage contains a
name and address or
telephone number.
Airlines will petition DOT to     Contracts reflect federal           Federal regulations currently set
increase the current minimum      regulation’s minimum liability      the minimum amounts for the
baggage liability.’               limit of $1,250.’                   airlines liability limits at $1,250 for
                                                                      sach passenger.” The airlines are
                                                                      required to provide passengers
                                                                      inrithwritten notice (included on or
                                                                      with a ticket) of such monetary
                                                                      limits on baggage liabili .
Prirlineswill issue credit card   Service not addressed.’             Under federal- regulations: a
refunds within 7 days and                                             zreditor (in this case the airline) has
:ash refunds within 20 days.                                          7 business days to provide a refund
                                                                      ior tickets purchased with a credit
                                                                      :ard. In addition, DOT has taken

5                                                        GAO/RCED-99-281R Customer Service Plans
Enclosure I

htomer Service                 Mines’ domestic contracts            ‘ettinent federal statutes and
:ommitment                     ,f carriage                          egulations
                                                                    nforcement actions against
                                                                    airlinesfor failure to provide
                                                                    efunds for tickets purchased with
                                                                    lash or check within 20 business
                                                                    lays. DOT officials consider any
                                                                    leriod longer than 20 days to be an
                                                                    rnfair and deceptive trade practice
                                                                    inder 49 U.S.C. § 41712.
Mines will disclose policies   >ontracts specify the age that       service not addressed.
md procedures for              m unaccompanied child will be
Lccommodating                  acceptedfor travel and address
maccompanied minors.           he requirements for such travel
                               )n both nonstop and connecting
Mines will disclose policies   Contracts reflect federal            ‘ederal regulations requireairlines
xrd procedures for             ,egulations requiring airlines to    o provide specific services and
accommodating disabled         xovide specific services and         acilities to accommodate
lersons.                       acilities for passengers with        lassengers with disabilities both in
                               disabilities. Contracts include      he airport and on the aircraft.
                               ormer legal liability limit for      iirlines are required to make
                               zssistive devices such as            wailable, on request, information
                               Nheelchairs.                         m facilities and services. Currently,
                                                                    airlines may not limit liability for
                                                                    lssistive devices.h
Wines will make                Service not addressed.               service not addressed.
*easonable efforts to
xovide food, water,
-estroom facilities, and
access to medical
:reatment for passengers
aboard an aircraft that is
grounded for an extended
period of time without
access to the terminal
consistent with passenger
and employee safety and
security concerns. Each
airline will prepare
contingency plans to
address such
Airlines will establish and    Under federal regulations, all       Federal regulations specify policies
disclose to customers the      airlines have established            for handling passengers who are
policies and procedures,       policies (and incorporated such      denied boarding because of
including applicable           policies into the contracts of       overbooking by the airline. Each
requirements such as check-    carnage) for managing their          airline must
in deadlines, for managing     inability to board all passengers    .     request volunteers who will
their inability to board all   with confirmed reservations.               agree not to board an airplane
passengers with confirmed      The provisions in each airline’s           before using any, other
reservations.                  conditions of contract, with               boarding priority;
                               respect to bumped passengers,        .     establish criteria for
                               are virtually identical and mirror         determining which passengers
                               the requirements and                       shall be denied boarding;
                               procedures found in the              .     compensate qualified

 6                                                     GAO/RCED-99-281R Customer Service Plans
Enclosure I

Customer Service                   Airlines’ domestic contracts           Pertinent federal statutes and
Commitment                         of carriage                            regulations
                                                                                be clearly visible and readable
                                                                                to the traveling public,
                                                                                describing the airline’s
                                                                                deliberate overbooking policy;
                                                                           .    furnish passengers with a
                                                                                written statement explaining
                                                                                the terms, conditions, and
                                                                                limitations of compensation for
                                                                                denied boarding.
Each airline will disclose to      Service not addressed.                  Federal regulations require that a
the customer any change of                                                change of aircraft on a single flight
aircraft on a single flight with                                          number be disclosed directly to
the same flight number.                                                   passengers.’
Each airline will disclose its     Some airlines” specifically             Federal regulations require airlines
cancellation policies due to       prohibit “hidden city” ticketing” in   to make copies of the contracts of
passengers’failure to use          their contracts of carriage. All       carriage available at airports and
flight segment coupons.            airlines prohibit “back-to-back”       ticket offices so that passengers
                                   ticketing.’ If the passenger fails     may view the full text of the
                                   to comply with these                   contracts upon request? fvlany
                                   restrictions, the airline has the      contracts of carriage include
                                   right to cancel or confiscate the      airlines’ rules with regard to unused
                                   unused portion of the                  flight segments. in addition,
                                   passenger’s ticket.P                   according to DOT officials,
                                                                          misrepresentations regarding
                                                                          airline policies would be prohibited
                                                                          as unfair and deceotive oractices
                                                                          under 49 U.S.C. 9 4171i.
Rules, restrictions, and an        Service not addressed.                 According to DOT officials,
annual report on frequent flyer                                           misrepresentations regarding
program redemptions.                                                      airline policies would be prohibited
                                                                          as unfair and deceotive oractices
                                                                          under 49 U.S.C. § 4171i.
Information regarding aircraft     Service not addressed.                 For international fliahts, each tariff
configuration, including seat                                             must include the tybe of aircraft
size and pitch.                                                           and the seating configuration for
                                                                          each class of passenger service,
                                                                          including the number of seats
                                                                          abreast, the seat pitch, and the
                                                                          number of lounge seats.” In
                                                                          addition, according to DOT officials,
                                                                          misrepresentations regarding
                                                                          airline policies would be prohibited
                                                                          as unfair and deceptive practices
                                                                          under 49 U.S.C. 9 41712.
Each airline will ensure that      Airlines limit their responsibility    Service not addressed.
domestic code-share partners       to transportation over their own
make a commitment to               lines.’ When an airline issues a
provide comparable                 ticket, checks baggage, or
consumer plans. and policies.      makes other arrangements for
                                   transportation over the lines of
                                   another carrier, it will act only as
                                   an agent for the other and will
                                   not assume responsibility for
                                   the acts or omissions of the
                                   other carrier.

7                                                           GAO/RCED-99-281R Customer Service Plans
    Enclosure I

    Customer Service                      Airlines’ domestic contracts              Pertinent federal statutes and
    Commitment                            of carriage                               regulations
    Each airline will                     Service not addressed.                    Federal regulations require that a
    . assign a customer                                                             carrier respond to a disability
       service representative to                                                    complaint within 30 days of its
       handle passenger                                                             receipt.”
       complaints and ensure a
       response to written                                                          According to DOT officials, it would
       complaints within 60                                                         be an unfair and deceptive practice
       days;                                                                        under 49 U.S.C. 9 41712 for an
    .  develop and implement a                                                      airline to engage in a practice of
       customer service plan                                                        providing false or deceptive
       within 6 months:                                                             responses to complaints.
    .   publish and make the
            customer service plans
            available on the Internet,
            at airports, at ticket
            offices, and with travel
            agents; and
    .       respond fully to
            Congress’s request for
            the periodic review of
            compliance with the
            Customer Service


    DOT = Department of Transportation

    “All airlines (except Southwest and U.S. Airways) state that if, after purchasing a ticket, the fare decreases, the passenger
    will be reimbursed the difference upon request.
    ‘Neither American Airlines nor Southwest Airlines includes provisions for overnight accommodations for passengers with
    flights that are diverted to unscheduled points.
    ’The $1,250 amount in the DOT rule is a minimum limit that sets the floor for an airfine’s liability.
    The Airline Transportation Association filed a petition with DOT on August 27, 1999, supporting the Department in raising
    the current domestic baggage minimum liability limit. Docket OST-1996-1340-38.
    “The current liability limitation is found in 14 C.F.R. Part 254; however, DOT has proposed increasing the airlines’liability
    limit from $1,250 to $2,500. (See 64 Fed. Reg. 34592 (1999))
    ‘The airlines specify the circumstances in which refunds are permitted but do not address the promptness with which the
     passenger will receive the refund.
    ‘12C.F.R.,Part226.12(c)and 14C.F.R. Part374.
    h DOT recently lifted the $2,500 liability limit for mobility aids making liability unlimited (64 Fed. Reg. 41781, Aug. 2, 1999).
    This regulation became effective Sept. 1, 1999 (14 C.F.R. Q 382.43).
    ’4 C.F.R. Q 250.2b.
    The federal regulations require compensation only for those passengers who comply with the terms in the carriers
     contract of carriage regarding ticketing, reconfirmation, and check-in times. Compensation is also not required if
     comparable transportation permits the passenger to arrive within 1 hour of the original arrival time. (See 14 C.F.R. §
     “If the carrier arranges for comparable transportation that arrives within 2 hours of the original arrival time (4 hours on an
     international flight), the maximum compensation is $200; otherwise, the maximum compensation is $400. (See 14 C.F.R.
     5 250.5.)
     ‘14 C.F.R. Part 258.5(b) and (c).
     “Delta, Trans World, American, Continental, and U.S. Airways specifically prohibit hidden city ticketing in the contracts of
     “Hidden city ticketing occurs when a passenger purchases a ticket with a stopover/connecting flight at a specific
     destination, intending only to begin or end his travel at this destination and not continue or use the remaining segments of
     the purchased flight.
     “Back-to-back.ticketfng occurs when a passenger purchases two roundtrip tickets, intending to use only one segment of
     each ticket to circumvent minimum stay requirements.
     ‘In addition to specifically addressing “back-to-back” ticketing, all airlines assert a general right to dishonor any or all
     portions of the ticket if a passenger fails to occupy space that has been reserved.
     ‘14 C.F.R. 5 253.5.

        8                                                             GAOIRCED-99-281R Customer Service Plans
Enclosure I

‘A tariff is a public document that sets forth rates and charges with respect to international services and governing rules
and regulations and practices relating to those services.
“14 C.F.R. § 221.38.
’Southwest Airlines does not have a provision in its contracts of carriage concerning responsibility/liability for a
passenger’s travel with another carrier. Southwest also does not currently code-share with any other airline.
‘14 C.F.R. § 382.65.


                                                               GAO/RCED-99-281R Customer Service Plans
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