Travelers sit with their luggage on the check-in floor of the Delta Air Lines terminal at Los Angeles International Airport in July 2024 due to a CrowdStrike outage. (Photo by Mario Tama)
Getty Images
The Department of Transportation (DOT) proposed on Thursday new rules that would require airlines to compensate passengers between $200 and $775 for significant flight delays or cancellations where the airline is at fault, such as a mechanical delay, staffing issue or IT failure like the one that caused Southwest’s $825-million meltdown over the Christmas holidays in 2022. In addition, carriers would be required to rebook passengers on other airlines.
“This action we’re announcing is another step forward into a better era for commercial air travel—where the flying public is better protected and passengers aren’t expected to bear the cost of disruptions caused by airlines,” Transportation Secretary Pete Buttigieg said in a statement.
The proposed rules are similar to the protections already enjoyed by travelers elsewhere in the world, such as in Canada, Brazil, in the European Union and the United Kingdom, says Eric Napoli, Chief Legal Officer at AirHelp, an online consumer-advocacy service that helps airline passengers seek compensation for flight cancellations, delays, or overbookings.
For example, the European law (known as EU261 and UK261) pertains to flights into, out of, or within the EU and the UK. If a flight is canceled within two weeks of the flight date or if a flight is delayed by three hours or more, and the reason for the delay is something within the airline’s control, the passenger is entitled to up to 600 euros ($634) in compensation.
Airlines for America (A4A), the U.S. airline industry’s lobbying group, said the law is unnecessary. “In this highly competitive industry, carriers don’t need further incentive to provide quality service,” the group said in a statement. “An analysis of the European scheme that DOT is attempting to emulate shows that government-mandated additional compensation needlessly drives up the cost of flying while negatively impacting operations.”
But one study from the European University Institute found that the EU’s compensation and service requirements reduced both the likelihood and duration of flight delays.
Consumer watchdog groups have also noted a positive impact from the European law, which went into effect in 2020. “For example, the tarmac delay, where you’re just waiting to take off,” Napoli says. “That doesn’t happen in Europe. People are not sitting on the plane for four or five hours waiting for the plane to take off. The airline would have to pay you 600 euros, right? So those things don’t happen.”
“A4A carriers are providing automatic refunds if the passenger chooses not to be rebooked—regardless of whether the significant delay or cancellation is within the carrier’s control—and also providing reimbursements for food, transportation and lodging for significant controllable delays,” said the A4A statement.
But airlines only began issuing automatic refunds in May after being forced to do so by the Biden administration in its years-long war on so-called “junk fees.” Previously, airlines typically issued vouchers instead of cash reimbursements, and only after a passenger had jumped through a series of hoops.
The DOT is now proposing the following levels of compensation:
- $200-300 for domestic flight delays of three to six hours
- $375-525 for delays between six and nine hours
- $750-775 for delays of nine hours or more
“It’s a huge step forward, really,” says Napoli. “Imagine that you’ve flown for the weekend somewhere, and your flight gets canceled or delayed for 10 hours, and you can’t get back until the next day at least. That money that can really help you out in those moments, when you’ve got to spend out of pocket right away to put yourself into a hotel until the next available flight.”
The DOT is inviting public comments on these proposals for the next 60 days.
Meanwhile, executives from five major U.S. airlines—American, Delta, United, Spirit and Frontier—were grilled by a Senate subcommittee on Wednesday over charging excessive ancillary or “junk” fees for everything from seat selection to checked and carry-on bags.
“Airlines like to say that they offer lower fares and more choices but the fact of the matter is that those lower fares, economy-class, are basically for people who travel with no more than the shirt on their back and the underwear and socks they have on,” said Senator Richard Blumenthal (D-Conn.), who chaired the panel.
In an industry characterized by tight margins and intense competition, so-called junk fees have been a cash cow for carriers around the world. A study released in October by IdeaWorks estimated global airline ancillary revenue will hit $148.4 billion in 2024—a 26% jump compared to $117.9 billion last year. All told, ancillary revenue now makes up roughly 15% of the industry’s total $996 billion revenue projected by the IATA.
Between 2018 and 2023, the five airlines at Wednesday’s Senate hearing, which together control 60% of the domestic air travel market, collected $12.4 billion in revenue from seat fees alone, according to a report released last week by the Senate Permanent Subcommittee on Investigations.
Throughout Wednesday’s Senate hearing, airline officials defended their business models. “Our seat selection products are all voluntary,” Stephen Johnson, American’s chief strategy officer, said in written testimony. “For customers who value sitting in more in-demand locations, we do offer the opportunity to pay for more desirable seats.”
Frontier’s chief commercial officer, Bobby Schroeter, claimed his company’s “transparent model” allows Frontier to keep its base fares “extremely low for the benefit of consumers.”
Seat fees—where passengers pay extra for additional legroom, a front-of-plane row for quicker deplaning, or a window or aisle seat—have rivaled baggage fees in recent years as the industry’s biggest source of ancillary revenue. Even Southwest Airlines, which for half a century has offered free open seating, announced earlier this year that it will shift to assigned seats in early 2026.
“When President Biden took office, none of the major airlines guaranteed fee free family seating,” the DOT said in a statement provided to Forbes. “Today, thanks to DOT actions and pressure, five of the 10 largest U.S. airlines no longer charge parents to sit next to their young children.”
“We don’t know yet exactly what the new administration will will do, whether they’ll kind of follow in these steps or not,” says Napoli. “I can tell you that there are people in the administration, like vice Vice President-elect J.D. Vance, who travels with with small children a lot so he knows kind of the impact of issues like family seating.”
Baggage fees were another bone of contention at Wednesday’s hearing. The Senate subcommittee scolded Frontier and Spirit Airlines, in particular, for paying gate agents incentives of roughly $26 million in 2022 and 2023 to encourage enforcement of bag policies.
For any small bag—think purse, laptop bag, briefcase, diaper bag— that’s larger than 14 in. x 18 in. x 8 in., “including handles, wheels and straps,” Frontier charges a minimum of $54 per item.
“These are shoplifters, these are people that are stealing,” Frontier CEO Barry Biffle told Reuters this week. “It’s not equitable to everyone who follows the rules.”
Frontier defended paying gate agents $10 every time they identify a passenger trying to board with a personal item larger than the permitted size. “We recognize this is a tough job and, therefore, we incentivize them to do that,” Schroeter told the panel of senators.