Periodic Revisions to Denied Boarding Compensation and Domestic Baggage Liability Limits

SUPPLEMENTARY INFORMATION:

I. Revision of Carriers' Liability Limits for Denied Boarding Compensation

The Department's oversales rule, 14 CFR part 250, requires that the DBC liability limit amounts be periodically adjusted to reflect changes in the Consumer Price Index for All Urban Consumers (CPI-U). Specifically, 14 CFR 250.5(e) provides for the review of denied boarding compensation every two years through a specific formula to calculate the revised DBC liability limit amounts. The formula is below:

Current DBC limit in § 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 liability limit in § 250.5(a)(3) shall be twice the revised limit for § 250.5(a)(2), the DBC liability limit in § 250.5(b)(2) shall be the same as the revised limit for § 250.5(a)(2), and the DBC liability limit in § 250.5(b)(3) shall be twice the revised limit in § 250.5(a)(2).

In a final rule issued on January 13, 2021, the Department reviewed the DBC liability limits and adjusted them to the current amounts of $775/$1,550, using the CPI-U for July 2020. For this review, we are using the CPI-U for July 2024, which was issued by the Bureau of Labor Statistics on August 14, 2024. In this review, we apply the formula using the CPI-U from August 2011 (the basis month required by the formula) and July 2024. The results of this calculation require that the DBC liability limit amounts be raised. Specifically, the appropriate inflation adjustment for the amount provided in § 250.5(a)(2) is $775 × 314.540/226.545 [$775 × 1.3884], which yields $1,076. The base amount of $775 in the formula was the denied boarding compensation liability limit amount in § 250.5(a)(2), as adjusted by the 2020 final rule; 314.540 was the CPI-U for July 2024, and 226.545 was the CPI-U for August 2011. Section 250.5(e) requires us to round the adjustment to the nearest $25, which is $1,075 in this case. Section 250.5(a)(3) and (b)(3) provide that for passengers who are not rerouted to reach their destination within two hours of the planned arrival time of their original domestic flight (four hours for international transportation), the DBC liability limit amount is twice the amount provided by § 250.5(a)(2) and (b)(2); therefore, under the formula adjustment, this amount is twice $1,075, or $2,150.

II. Revision of Domestic Baggage Liability Limit

The baggage liability limit that air carriers may apply to domestic air service is established by 14 CFR part 254. This limit applies to a carrier's liabilities towards any provable direct or consequential damages resulting from the disappearance of, damage to, or delay in delivery of a passenger's baggage that was in a carrier's custody during domestic air transportation. Like the requirements regarding the provision of DBC to passengers in appropriate circumstances, this requirement has never limited the maximum amount of compensation a carrier may provide a passenger in connection with mishandled baggage. It merely provides a regulatory minimum liability limit that carriers may set. Section 254.6 requires review every two years of the limit of liability prescribed in part 254 and revision of the limit of liability, if necessary, to reflect changes in the CPI-U as of July of each review year through a specific formula. The formula is below:

$2,500 × (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 2020 review of the domestic baggage liability limit required that the amount be raised from $3,500 to the current amount of $3,800. The current review requires another inflation adjustment. Applying the formula using the consumer price index for December 1999 (the basis month required by the formula) and July 2024, the appropriate inflation adjustment is $2,500 × 314.540/168.30 [$2,500 × 1.8689], which yields $4,672.25. 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 in 1999, 314.540 was the CPI-U for July 2024, and 168.30 was the CPI-U for December 1999. Section 254.6 requires rounding the adjustment to the nearest $100, which is $4,700.

III. Regulatory Analyses and Notices

Good Cause for Issuing Rule Without Prior Notice and Comment

The Administrative Procedure Act (APA) provides that when an agency, for good cause, finds that notice of a proposed rule and public procedure thereon are impractical, unnecessary, or contrary to the public interest, the agency may issue a final rule without providing notice and an opportunity for public comment (5 U.S.C. 553(b)(B)). The Department has determined that there is good cause to issue this final rule without notice and an opportunity for public comment because such notice and comment would be unnecessary.

Under 5 U.S.C. 553(b)(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. These adjustments are a ministerial inflation update of applicable amounts based on the terms and formulas set by 14 CFR 250.5 and 14 CFR 254.6. Those formulas were subject to notice and comment in the rulemaking proceedings during which they were added to the baggage liability and oversales rules. Accordingly, because this update is purely an application of the formula, we find that there is good cause to publish a final rule without first providing notice and an opportunity for comment.

Effective Date

This final rule will become effective with respect to transportation taking place on or after January 22, 2025. For any carrier that imposes liability limits on its denied boarding compensation and mishandled domestic baggage compensation, the limits must be updated to these new amounts for transportation taking place on or after the effective date (as opposed to tickets sold on or after the effective date). All notices to passengers required by part 250 and part 254 as they pertain to the new DBC liability limits and domestic baggage liability limit must be updated by the effective date of this final rule.

Executive Order 12866

This final rule has been evaluated following existing policies and procedures and is considered not significant under Executive Order 12866, as amended by Executive Order 14094 (“Modernizing Regulatory Review”), 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. This regulation conforms with the policies and procedures of DOT's administrative rule on rulemakings. 49 CFR part 5.

Denied Boarding Compensation Liability Limits

The rule provides for an inflation adjustment to the DBC liability limit amounts that air carriers and foreign air carriers must pay passengers who are involuntarily denied boarding. The inflation adjustment is required by regulation and does not involve any exercise of discretion or interpretation. Because the Department does not have the flexibility to alter the inflation adjustment, it did not consider regulatory alternatives. The rule increases transfers from carriers to passengers to the extent that it increases compensation; any increase, however, would be minimal. In 2023, 24,756 passengers—29 passengers per 1,000,000 enplaned passengers—were involuntarily denied boarding on scheduled domestic and outbound international flights. Many of those passengers qualified for compensation amounts below the DBC liability limit, and their compensation would not have been affected by the increase in the limits.

Domestic Baggage Liability

The rule 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. The adjustment is required by current regulation, with no opportunity for interpretation. The rule increases transfers from carriers to passengers to the extent that it increases mishandled baggage compensation. This increase would be limited, however, because the majority of mishandled baggage cases do not result in claims that meet the liability limit. Based on information provided by carriers during an inflation adjustment review to the domestic baggage limit in 2013, slightly more than half of one percent of mishandled bags qualify for the current limit.

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 baggage liability amounts affect flight segments operated with large aircraft, i.e., more than 60 seats. Therefore, this provision of the rule does not impact small air carriers or foreign air carriers. The revisions of the DBC amounts affect flight segments operated with aircraft designed to have passenger capacity of 30 or more. As a result, many operations of small entities, such as air taxis and many commuter air carriers, are not covered by this provision of the rule. Moreover, any additional costs for small entities associated with this provision will be minimal and, in the case of baggage liability, may be covered by insurance. Accordingly, I hereby certify that this action will not have a significant economic impact on a substantial number of small entities.

Paperwork Reduction Act

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

National Environmental Policy Act

The Department has analyzed the environmental impacts of this proposed action pursuant to the National Environmental Policy Act of 1969 (42 U.S.C. 4321, et seq.), and has determined that it is categorically excluded pursuant to DOT Order 5610.1C, Procedures for Considering Environmental Impacts (44 FR 56420, Oct. 1, 1979) available at https://www.transportation.gov/office-policy/transportation-policy/procedures-considering-environmental-impacts-dot-order-56101c. Categorical exclusions are actions identified in an agency's NEPA implementing procedures that do not normally have a significant impact on the environment, and therefore do not require either an environmental assessment (EA) or environmental impact statement (EIS). See 40 CFR 1508.1(d). In analyzing the applicability of a categorical exclusion, the agency must also consider whether extraordinary circumstances are present that would warrant the preparation of an EA or EIS. Id. Paragraph 4.c.6.i of DOT Order 5610.1C provides that “[a]ctions relating to consumer protection, including regulations” are categorically excluded. The purpose of this rulemaking is to adjust the amounts for denied boarding compensation and the minimum domestic baggage liability limit. The Department does not anticipate any environmental impacts, and there are no extraordinary circumstances present in connection with this rulemaking.

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

1. The authority citation for 14 CFR part 250 continues to read as follows:

Authority: 49 U.S.C. 329 and chapters 41102, 41301, 41708, 41709, and 41712.

2. Section 250.5 is amended as follows:

a. In paragraphs (a)(2) and (b)(2) by removing “$775” and adding “$1,075” in its place, and

b. In paragraphs (a)(3) and (b)(3) by removing “$1,550” and inserting “$2,150” in its place.

3. Section 250.9 is amended by revising paragraph (b) to read as follows:

4. The authority citation for 14 CFR part 254 continues to read as follows:

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

5. Section 254.4 is amended by removing “$3,800” and adding “$4,700” in its place.

6. Section 254.5 is amended in paragraph (b) by removing “$3,800” and adding “$4,700” in its place.

[FR Doc. 2024-23588 Filed 10-23-24; 8:45 am]

BILLING CODE 4910-9X-P