Airline Rules Target Lost Baggage, Delays

By TIMOTHY W. MARTIN and JOSH MITCHELL

The Obama administration said Wednesday it would require airlines to refund baggage fees for lost luggage and pay more for involuntarily bumping passengers on over-booked flights, among other steps it said would protect passengers.

The plan, revamped from a version introduced last summer, drew applause from passenger-rights advocates and travel agencies but prompted criticism from both domestic and foreign airlines, which said it could lead to higher ticket fares and more cancellations.

Scheduled to take effect in August, the passenger-rights plan stemmed from high-profile incidents that included passengers stranded on aircraft for many hours but also from a proliferation of new fees, including for meals and baggage. "Passengers have a right to be treated fairly," Transportation Secretary Ray LaHood said in a statement.

The Obama administration said Wednesday it would start requiring airlines to refund baggage fees when luggage is lost. Scott McCartney gives us his take on the new rule.

"Certainly, we've never seen a DOT that wants to regulate airlines as much as this one," said Darryl Jenkins, a consultant at the American Aviation Institution, an independent think tank for commercial aviation based in Washington, D.C.

The Air Transport Association, the U.S. carriers' main trade group, believes airlines are making service improvements with mishandled luggage and oversold flights, "as the DOT statistics demonstrate," ATA President Nicholas Calio said in a statement. But, he added, "market forces—not additional regulations— are already providing customer benefits."

The most contentious new measure would levy fines on foreign airlines for keeping passengers stuck on the tarmac at U.S. airports for more than four hours. That compared with the three-hour limit applied to domestic carriers last year, a move the industry said led to more pre-emptive cancellations to avoid fines of up to $27,500 a passenger.

The International Air Transport Association, the industry's global trade body, said the new rule would lead to increased cancellations, higher ticket prices and passenger inconveniences.

The IATA said it presented "clear evidence" to the Transportation Department demonstrating the consequences, and was now "disappointed" with the decision.

U.S. policy will impose more requirements on airlines when they are operating outside the U.S., which could conflict with overseas regulations.

The new rules weren't as stringent as some advocates had hoped. Kate Hanni, the founder of FlyersRights, a nonprofit based in Napa, Calif., pushed for bags to be considered lost after an hour and for the baggage-fee refunds.

But the new rules don't specify a time frame. "If you look at the legal definition of lost, that could mean up to 90 days," Ms. Hanni said.

Airlines are already required to compensate passengers for lost or damaged belongings. But the new rules require a refund of baggage fees for lost bags.Airlines also will be required to show on their websites potential ticket surcharges, which include fees for baggage, meals, seat upgrades and cancellations. Carriers argued the fees give passengers more flexibility in determining the price of their trip, but some U.S. airlines are using the surcharges to offset rising jet-fuel prices.

Write to Timothy W. Martin at timothy.martin@wsj.com and Josh Mitchell at joshua.mitchell@dowjones.com