Domestic Baggage Liability

DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Part 254

[Docket No. 49330; Notice 94-14]

RIN 2105-AC07

Domestic Baggage Liability

AGENCY: Office of the Secretary, Department of Transportation.

ACTION: Notice of Proposed Rulemaking (NPRM).

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SUMMARY: The Department is proposing to amend its rule governing the

amount by which certain U.S. air carriers may limit their liability to

passengers for lost, damaged, and delayed baggage. This action is in

response to a petition by Public Citizen and Aviation Consumer Action

Project to increase the minimum liability limit from $1,250 to $1,850

per passenger. The Department is also requesting comment on two

alternate proposals: (1) to raise the minimum limit to $1,850 with a

mechanism that automatically provides for periodic future increases, or

(2) to raise the minimum liability limit to $2,000.

DATES: Comments are requested by November 29, 1994. Late-filed comments

will be considered only to the extent practicable.

ADDRESSES: Comments should be sent, preferably in triplicate, to Docket

Clerk, Docket No. 49330, Department of Transportation, 400 7th Street,

SW, Room 4107, Washington, DC 20590. Comments will be available for

inspection at this address from 9 a.m. to 5:30 p.m., Monday through

Friday. Commenters who wish the receipt of their comments to be

acknowledged should include a stamped, self-addressed postcard with

their comments. The Docket Clerk will date-stamp the postcard and mail

it back to the commenter.

FOR FURTHER INFORMATION CONTACT: Diane Mobley or Joanne Petrie, Office

of Regulation and Enforcement, Office of the General Counsel, U.S.

Department of Transportation, 400 7th Street SW, Room 10424,

Washington, DC 20590. (202) 366-9306.

SUPPLEMENTARY INFORMATION:

Background

Consumer baggage problems in air travel remain a common occurrence.

Reports submitted to the Department by the major airlines indicate that

over 2.2 million mishandled baggage reports were filed by passengers in

1993, although it is unknown how many of those reports resulted in

claims for compensation. When baggage is lost, damaged, or delayed, the

airlines are prohibited by federal regulation (14 CFR Part 254) from

limiting their liability to less than $1,250 per passenger for provable

damages.\1\

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\1\The rule applies to flights on large aircraft (aircraft

designed to carry more than 60 passengers), and to any flight

segment included on the same ticket as a flight segment using large

aircraft.

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The amount of the minimum liability limit was last amended by a

final rule effective April 10, 1984, issued by the Civil Aeronautics

Board (CAB) before its ``sunset'' (ER-1374, 49 FR 5065, February 10,

1984). The $1,250 figure was calculated based upon the percentage

increase in the Consumer Price Index for all Urban Consumers (CPIU)

between the date of the previous amendment and September 1983. When

setting the limit, the CAB attempted to balance the amount necessary to

cover the value of most passengers' baggage while still allowing the

airlines to protect themselves from extraordinary claims.

On December 22, 1993, the Department received a petition for

rulemaking from Public Citizen and Aviation Consumer Action Project to

increase the minimum liability limit in order to account for inflation

since the 1984 amendment. The petitioners suggest that the limit should

be raised to $1,850, calculated by increasing the current $1,250 limit

proportionate with the increase in the CPIU from 1983 until the

approximate time a new final rule would take effect (estimated to be

one year from the date of the petition). A letter in support of the

petition was filed by Mr. Michael Kees, a consumer who recently

suffered a loss in excess of the liability limit, who asserts that a

more realistic limit today would be $2,500.

The Bureau of Labor Statistics reports that in September 1983, the

CPIU was 100.7 (using a 1982-84 = 100 reference base). As of April

1994, the CPIU had increased by 46.4 percent to 147.4. Stated

differently, the purchasing power of a $1,250 maximum baggage claim

award in 1983 had eroded to $854 in April 1994 dollars. To keep up with

the 46.4 percent increase in the CPIU as of April 1994, the minimum

liability limit would have to increase to $1,830. The Department

believes that in addition to the direct monetary effect on consumers,

an unrealistically low minimum liability limit invites the airlines

simply to pay the claims rather than to address the causes of lost,

damaged, and delayed baggage. The Department therefore proposes to

raise the minimum liability limit to $1,850 as suggested in the

petition, and seeks comment on this proposal. Carriers are requested to

submit the following data on domestic baggage claims for calender year

1993 as well: (1) the total number of domestic\2\ baggage claims for

reimbursement and the total amount claimed (i.e., the amount that the

claimants requested); (2) the total amount paid by the carrier in

settling those claims; and (3) the number and total dollar amount of

such claims that exceeded $1,250, and the number and total dollar

amount that exceeded $1,850. This information will help the Department

to assess the economic burden of the proposal on the affected airlines.

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\2\A ``domestic'' claim for this purpose is one that is subject

to Part 254. For example, a claim concerning a problem that occurred

on a domestic segment of an international trip would not be included

since such transportation is governed by the Warsaw Convention

rather than by Part 254.

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In addition to the proposal to increase the minimum baggage

liability limit to $1,850, the Department requests comment on two

alternate proposals: (1) to raise the minimum limit to $1,850 with a

mechanism that automatically provides for periodic future increases, or

(2) to raise the minimum liability limit to $2,000.

The first alternate proposal is an automatic adjustment of the

minimum liability limit every other year, calculated in proportion to

any change in the CPIU. When the minimum liability limit was last

amended in 1984, the CAB considered and rejected a rule that would

automatically adjust the liability limit based on some specified

economic measure. The CAB believed that such an approach might be

unduly confusing for consumers and that it would be administratively

burdensome on carriers to constantly revise tickets and internal

guidance. The Department requests comment on whether, with the

increasing sophistication of and reliance on computers, periodic

adjustment of the minimum liability limit would pose less of a burden

on the industry today. A more frequent adjustment would make the limit

more responsive to changes in the economy. Comment is also requested on

whether there would be a need to provide for additional public comment

before each adjustment rather than simply announcing each new rate by

publication in the Federal Register, and whether there is some other

method that would be preferable to changes in the CPIU for calculating

appropriate future changes in the minimum liability limit. As indicated

above, the CPIU was the basis used by the CAB to calculate the 1984

increase to $1,250. Prior to 1984, the CPIU was considered, along with

actual baggage claim data, to set the minimum liability limit. That

data has not been collected since the deregulation of the airline

industry.

The Department also requests comment on its second alternate

proposal, to increase the minimum baggage liability limit to $2,000.

Under the current system, which includes notice requirements,

passengers are expected to be aware of the minimum limit and not pack

any items of greater value in their luggage unless they desire to

purchase excess valuation or are personally willing to incur the risk.

This is not to say that carriers would automatically pay $2,000 to

passengers claiming lost, damaged, or delayed baggage. We wish to make

clear that, as is the case today, our proposal would set the amount

below which carriers could not limit their potential liability for

provable damages. Thus, carriers could still decline to pay unjustified

claims or pay only for damages actually shown. A $2,000 limitation

would have the advantages of covering most items passengers are likely

to pack in baggage, and being easy for passengers to remember because

it is a round number. A collateral benefit of a $2,000 minimum limit

would be that, in the event of future inflation, the limit would not

become obsolete soon after issuance. It would also allow longer-term

planning than an $1,850 limit, which might reduce administrative costs

to the airlines for training, ticket stock, and computer programming.

The Department recognizes that carriers will require some period of

time to use up existing ticket stock, print new tickets, and implement

other necessary changes under any of the alternatives. The Department

seeks comment on whether 60 days from issuance of a final rule is a

sufficient time for implementation. In the case that excess ticket

stock poses a particular problem for the airlines, the Department

requests comment on whether the use of a sticker or an addendum stuffed

in the ticket envelope would provide adequate notice of the new limit.

The Department also seeks comment on whether a bifurcated

implementation would be feasible (e.g., new minimum dollar limit

effective in 30 days; implementation of revised notice requirement

effective in 60 days, or upon exhaustion of existing ticket stock). In

the case that the automatically adjusting limit is selected, the

Department requests comment on whether a 30-day implementation period

would be sufficient for future adjustments under that proposal. In any

event, in view of the publication of the instant proposal, the

Department encourages carriers to exercise prudence in placing large

orders for ticket stock or ticket jackets.

The notice requirement has been clarified to better explain that

written notice of the liability limit must be provided whenever air

transportation is sold, whether or not the airline actually issues a

ticket to the passenger. This is in response to the recent switch to a

ticketless system by a few carriers. Written notice must still be

provided to the passenger in conjunction with the sale of the travel,

even though there is no traditional ``ticket'' that the notice can be

printed on.

Regulatory Analyses and Notices

The Department has determined that this action is not a significant

regulatory action under Executive Order 12866 or under the Department's

Regulatory Policies and Procedures. A regulatory evaluation that

examines the projected costs and impacts of the proposal has been

placed in the docket. The Department certifies that this rule, if

adopted, would not have a significant economic impact on a substantial

number of small entities. Few airlines are classified as small

entities. However, since the rule could apply to small carriers to the

extent that they interline with large carriers, the Department seeks

comment on whether there are unidentified small entity impacts that

should be considered. If comments provide information that there are

significant small entity impacts, the Department will prepare a

regulatory flexibility analysis at the final rule stage. The Department

does not believe that there would be sufficient federalism implications

to warrant the preparation of a federalism assessment.

List of Subjects in 14 CFR Part 254

Air carriers, Consumer protection, Freight, Reporting and

recordkeeping requirements.

For the reasons set forth in the preamble, the Department proposes

to amend 14 CFR Part 254 as follows:

PART 254--[AMENDED]

1. The authority citation for Part 254 continues to read as

follows:

Authority: Secs. 204, 403, 404, and 411, Pub. L. 85-726, as

amended, 72 Stat. 743, 758, 760, 769; 49 U.S.C. 1324, 1373, 1374,

1381.

2. Section 254.4 would be revised to read as follows:

Sec. 254.4 Carrier liability.

On any flight segment using large aircraft, or on any flight

segment that is included on the same ticket as another flight segment

that uses large aircraft, an air carrier shall not limit its liability

for provable direct or consequential damages resulting from the

disappearance of, damage to, or delay in delivery of a passenger's

personal property, including baggage, in its custody to an amount less

than $1850 for each passenger.

3. Section 254.5 would be revised to read as follows:

Sec. 254.5 Notice requirement.

On any flight segment using large aircraft, or on any flight

segment that is included on the same ticket as another flight segment

that uses large aircraft, an air carrier shall provide to passengers,

by conspicuous written material included on or with its ticket or other

written notice that is issued in conjunction with the sale of the

transportation, either:

(a) Notice of any monetary limitation on its baggage liability to

passengers; or

(b) The following notice: ``Federal rules require any limit on an

airline's baggage liability to be at least $1850 per passenger.''

Alternative Proposal 1

4. Section 254.4 would be revised to read as follows:

Sec. 254.4 Carrier liability.

On any flight segment using large aircraft, or on any flight

segment that is included on the same ticket as another flight segment

that uses large aircraft, an air carrier shall not limit its liability

for provable direct or consequential damages resulting from the

disappearance of, damage to, or delay in delivery of a passenger's

personal property, including baggage, in its custody to an amount less

than the current Federal Minimum Liability Limit per passenger that is

in effect on the date of the flight. The Federal Minimum Liability

Limit will be re-calculated every other year, based on the percentage

change in the Consumer Price Index for All Urban Consumers since the

previous adjustment, and published in an announcement in the Federal

Register.

5. Section 254.5 would be revised to read as follows:

Sec. 254.5 Notice requirement.

On any flight segment using large aircraft, or on any flight

segment that is included on the same ticket as another flight segment

that uses large aircraft, an air carrier shall provide to passengers,

by conspicuous written material included on or with its ticket or other

written notice that is issued in conjunction with the sale of the

transportation, either:

(a) Notice of any monetary limitation on its baggage liability to

passengers; or

(b) The following notice: ``Federal rules currently require any

limit on an airline's baggage liability to be at least [insert the

current Federal Minimum Liability Limit in effect on the date the

notice is provided] per passenger.'' This limit is periodically revised

by the Department of Transportation based on changes in the Consumer

Price Index for All Urban Consumers. Therefore, a different limit may

be in effect on the date of your flight.

Alternative Proposal 2

6. Section 254.4 would be revised to read as follows:

Sec. 254.4 Carrier liability.

On any flight segment using large aircraft, or on any flight

segment that is included on the same ticket as another flight segment

that uses large aircraft, an air carrier shall not limit its liability

for provable direct or consequential damages resulting from the

disappearance of, damage to, or delay in delivery of a passenger's

personal property, including baggage, in its custody to an amount less

than $2000 for each passenger.

7. Section 254.5 would be revised to read as follows:

Sec. 254.5 Notice requirement.

On any flight segment using large aircraft, or on any flight

segment that is included on the same ticket as another flight segment

that uses large aircraft, an air carrier shall provide to passengers,

by conspicuous written material included on or with its ticket or other

written notice that is issued in conjunction with the sale of the

transportation, either:

(a) Notice of any monetary limitation on its baggage liability to

passengers; or

(b) The following notice: ``Federal rules require any limit on an

airline's baggage liability to be at least $2000 per passenger.''

Issued in Washington, DC on September 26, 1994.

Patrick Murphy,

Acting Assistant Secretary for Aviation and International Affairs.

[FR Doc. 94-24168 Filed 9-29-94; 8:45 am]

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