Cracking Down on How Airlines Treat Travelers - WSJ.com

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DOT Presses Carriers To Comply With Rules On Delayed Luggage

• By SCOTT MCCARTNEY

Many airlines may be violating federal rules on reimbursing travelers for expenses when baggage is lost, delayed or damaged on domestic flights, and the federal government is finally cracking down to help consumers.

Taking a tougher stand on how airlines treat travelers, the Department of Transportation fined Spirit Airlines $375,000 last month for multiple violations of federal rules, including violations of domestic baggage-reimbursement requirements. Late last week, the DOT warned other carriers that their baggage-reimbursement policies appear to violate federal rules, too. "We have learned that a number of airlines have adopted policies that purport to limit reimbursement for such expenses in a variety of ways," the DOT said in its notice to airlines Friday.

A Wall Street Journal examination of practices at 14 airlines shows that many carriers have some of the same restrictions that resulted in the official censure of Spirit Airlines. One violation cited by the DOT was that Spirit made customers wait 24 hours after luggage was lost or delayed before covering any incidental costs travelers had to pay, such as toiletries or replacement clothes. DOT rules prohibit such waiting periods. The agency also said Spirit reimbursed customers for incidental expenses only if bags went missing on the outbound portion of a round-trip journey, yet the DOT's rule applies to "any flight segment."

"Travelers should not have to pay for toiletries or other necessities while they wait for baggage misplaced by airlines," Transportation Secretary Ray LaHood said in a statement. "We expect airlines to comply with all of our regulations and will take enforcement action if they do not."

The DOT gave airlines 90 days to modify their rules and practices before the agency would launch any enforcement actions.

Lost or delayed bags are relatively rare—about one traveler out of every 190 on domestic flights ended up at the baggage office empty-handed last year. And airlines say most people get their bags back within a day or two. Still, a large number of people are impacted by the uncertainty, inconvenience and expense of lost luggage. In 2008, more than three million mishandled-baggage reports were filed by airlines, and that just covers domestic flights.

Part of Spirit's response to the DOT was that its baggage policies were consistent with those of several other airlines. Indeed, Continental Airlines Inc., Hawaiian Airlines and Allegiant Air, for example, all say they pay for expenses only after the first 24 hours from a flight's arrival. UAL Corp.'s United Airlines says it reimburses expenses only on the outbound portion of a trip.

And many airlines put a limit on what they'll offer to pay passengers per day for expenses related to the lost luggage, which the DOT says is a violation of its domestic baggage-liability rule. The only limit allowed, the agency says, is that total liability for lost domestic baggage is $3,300 per passenger, including replacement costs and incidental expenses.

Long-Standing Gripes

Travelers have been complaining about such restrictions for years. In January 2007, this newspaper charted baggage-reimbursement policies at different airlines and reported on customer unhappiness with airline reimbursement. But the DOT didn't explore the issue until a few months ago.

In our latest survey over the past week, Continental said its reimbursement to travelers for delayed or lost luggage tops out at $200—$50 a day for four days after a 24-hour waiting period. United says it will pay $50 to $100 a day. US Airways Group Inc. has a less-generous limit of $25 a day for up to three days.

Alaska Airlines says it doesn't provide interim expenses to passengers for baggage delayed or lost because of bad weather or air-traffic-control problems. When it does pay, Alaska limits its liability to $25 for the first day a bag is missing, then ups that to $50 a day for the next four days.

Allegiant, a unit of Allegiant Travel Co., says it pays $25 a day for four days, but that only begins 24 hours after a bag has gone missing.

Hawaiian, a unit of Hawaiian Holdings Inc., limits payments to $30 a day for three days. JetBlue Airways Corp. says its "standard" payment is $25 per day, but like other airlines it considers higher amounts on a case-by-case basis.

Continental said it was evaluating what changes it may need to make to its policy to ensure it is in compliance with the DOT regulation. Virgin America, which said it reimburses $25 a day for five days, then amended that statement to say it may pay more if customers provide receipts; the airline said it asked the DOT on Monday for "further clarity" to determine if it is in compliance. Allegiant says it has asked the DOT "for clarification on a few items.'' Others said they believe they are in compliance.

AMR Corp.'s American Airlines says it has no daily limit and will negotiate with customers, but it does require customers to get prior approval from the airline for any expense. Southwest Airlines says it offers customers $50 on the spot when luggage goes missing, and will pay more if passengers file formal claims.

Case-By-Case Basis

After the DOT warning was issued, many airlines stressed that they consider their reimbursement limits, sometimes included in published materials given to passengers, to be only "guidelines" and that higher amounts can be paid on a case-by-case basis. That may be news to some customers who get told there's a tight limit to what the airline will pay.

In 2007, when The Wall Street Journal charted baggage-reimbursement policies, Delta Air Lines Inc. said it limited customers to $25 a day for five days. This week Delta spokeswoman Susan Elliott said that amount is offered "in many cases, but because we handle these types of issues on a case-by-case basis the compensation could be more depending on the situation."

Likewise in 2007, AirTran Airways said it had a limit of $25 a day for three days. After the DOT warning was issued Friday, a spokesman for AirTran said it had no arbitrary limit. Asked when the policy changed, AirTran, a unit of AirTran Holdings Inc., didn't respond.

Arbitrary Expense Limits

The DOT said it considers "any arbitrary limits on expense reimbursement incurred in cases involving lost, damaged or delayed baggage to violate" its baggage rule, 14 CFR Part 254. The rule says an airline can't "limit its liability for provable direct or consequential damages...to an amount less than $3,300 for each passenger." It applies to any flight with more than 60 seats, or any passenger whose itinerary includes a flight using an aircraft with more than 60 seats.

Airlines say they delay any help with incidental expenses for 24 hours because bags often show up during that first 24-hour period. However, excluding the first 24 hours can greatly reduce airline payments to customers for incidentals.

And that policy leaves travelers in the lurch—typically they don't know when or even if the bag will turn up. If you need a tie for your presentation in the morning, you may have to buy one even though your bag may be delivered to your hotel at 10 p.m.

Travelers complain they often have to battle with airlines to cover the cost of lost items.

Borrowing Clothes

David Pykon, a New York hedge-fund trader, says he was given conflicting information by different American Airlines supervisors on daily expenses after his bag was lost on a Thanksgiving trip to Dallas last year. Although he had no clothes or toiletries, he was first told he had to limit his spending to $25 a day. Then he was told $50 a day. Later another official said $75 a day. Mr. Pykon borrowed clothes from friends but still spent nearly $200 over his four-day trip, and the airline gave him a check before his flight home for $170.

"They said tough luck—it is what it is," he said.

American spokesman Tim Smith said some of Mr. Pykon's expenses may not have been pre-authorized.

The bag was never found and Mr. Pykon filed a claim for more than $2,600. He included credit-card statements showing purchases. American sent a check for $740, saying it accepted only actual store receipts, and didn't cover electronics (he had lost an iPod), medication and sunglasses, he said. The airline discounted the value of other items for depreciation.

Mr. Pykon said he wrote to American three times, called repeatedly and was never allowed to speak to the person who handled his claim. (His credit-card company covered much of the loss the airline refused to pay.)

"It's easier for them to frustrate me," Mr. Pykon said of the airline. "A person is only going to take it so far."

American says it hopes its processes aren't frustrating and inconsistent. "We try to be fair and listen to what the customer needs," Mr. Smith said.