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Honoring Tickets of Insolvent Airlines Pursuant to the Requirements of Section 145 of the Aviation and Transportation Security Act

  August 8, 2002 Notice Honoring Tickets of Insolvent Airlines

After the recent cessation of operations of Vanguard Airlines, there has been considerable confusion, on the part of airlines and the traveling public, over airlines' responsibilities under section 145, particularly with regard to the meaning of the phrase "to the extent practicable" as it relates to the carriers' duties to transport persons holding Vanguard tickets. Carriers have implemented varying policies regarding the treatment afforded to persons holding Vanguard tickets. Some carriers are providing those passengers transportation at no additional cost, either on a confirmed or stand-by basis. Others permit passengers to fly stand-by but assess up to a $100 "administrative fee" each way, along with offering to drop advance purchase requirements for restricted positive-space fares, and still others offer restricted positive-space fares and do not permit stand-by travel at all. [n some of the instances, carriers have announced that their accommodations for Vanguard passengers will be available for only a short period of time.  It is the Department's position that section 145 requires, at a minimum, that passengers holding valid confirmed tickets, whether paper or electronic, of the insolvent or bankrupt carrier must be transported by other carriers who operate on the route for which the passenger is ticketed on a space-available basis on the date of travel shown on the ticket or other documentation demonstrating e­ticketing, without significant additional charges. We recognize that there is a cost to airlines of transporting such passengers and we do not believe that in enacting section 145 Congress intended to prohibit carriers from recovering from accommodated passengers minimal amounts associated with the actual cost of providing such transportation, such as direct cost of rewriting a passenger's ticket, onboard meal costs, and additional fuel costs for transporting an additional passenger. However, in no case do we foresee those costs exceeding $25 each way.

We also believe that the 60-day provision in the statute is clear. Consumers holding Vanguard tickets have until 60 days after the carrier suspended operations, or until September 28, 2002, to attempt to make alternative arrangements with another carrier.

By:  Read Van de Water


National Airlines

Undocketed November 14, 2002 Notice Honoring Tickets of National Airlines Pursuant to the Requirements of Section 145 of the Aviation and Transportation Security Act Section 145 of the Aviation and Transportation Security Act

After the issuance of our August 8 notice, several carriers informally sought additional clarification, specifically regarding recovery of the costs of accommodating passengers under section 145. In our August 8 notice, we stated that we did not foresee that such costs would exceed $25.00. We wish to make clear that the $25.00 amount stated above was simply an estimate of the magnitude of the additional direct costs carriers might incur in transporting affected passengers on a standby basis.

Several carriers have informally raised concerns that the $25.00 cost estimate was too low. In each such instance, Department staff has advised those carriers that, to the extent they experienced and could document reasonable direct costs in excess of the $25.00 estimated amount, they should be entitled to recover such costs under the statute. Department staff has specifically requested each airline that had expressed concern to provide evidence demonstrating that its reasonable direct costs exceeded the estimated $25.00 amount. No airline has provided any documentation in response to that request. We thus have no information demonstrating that the estimated amount of $25.00 would be inadequate to cover additional direct costs to transport persons holding Vanguard Airline tickets on a space available basis.

By: Read Van de Water


National Airlines - Honoring Tickets Pursuant to the Requirements of Section 145 of the Aviation and Transportation Security Act

OST-02- November 19, 2002 Comments of Delta Air Lines National Airlines - Honoring Tickets Pursuant to the Requirements of Section 145 of the Aviation and Transportation Security Act

By Notice dated November 14, 2002, the Department reiterated the statutory requirements of section 145 of the Aviation and Transportation Security Act for U.S. carriers to accommodate ticketed passengers of bankrupt or insolvent carriers on certain routes to the extent practicable. The Department also invited comments concerning whether the Department's prior establishment of new fee rules, setting a de facto cap of $25.00 for reticketing passengers from insolvent carriers, was sufficient to recover the operating carrier's costs.

Delta respectfully disagrees with the Department's approach. The rate making exercise contemplated by the Notice exceeds the Department's statutory authority because it is prohibited by the Airline Deregulation Act and not authorized under section 145. A Petition for Review is currently pending before the U.S. Court of Appeals for the District of Columbia concerning the Department's invalid establishment of new price rules in its August 8, 2002 Notice. See, Delta Air Lines, Inc. and American Airlines, Inc. v. U. S. Department of Transportation, Case No. 02-1309.

Counsel:  Delta and Shaw Pittman, Robert Cohn, 202-663-8060


Honoring Tickets of Bankrupt Carriers / National Airlines, Inc. / Vanguard Airlines, Inc.

Undocketed November 21, 2002 Re:  Comments of American Airlines Honoring Tickets of Bankrupt Carriers / National Airlines, Inc. / Vanguard Airlines, Inc.

In the ordinary course of business, carriers often accommodate one another's passengers in service interruption situations, and are made whole through the clearinghouse process. In circumstances involving bankruptcy or insolvency and triggering Section 145, American will seek reimbursement for the value of the ticket from the non-operating carrier, either through the clearinghouse or through whatever other means are available. In addition, American will collect a reaccommodation fee from the passenger, as the Department has recognized (in principle though not in amount) in both its August and November notices. But the Department has no statu­tory authority to set the amount of the fee collected from the passenger.

American also objects to the Department's failure to recognize that the transporting carrier has a right to know that the tickets it must honor are valid. Section 145 imposes an obligation, "to the extent practicable, [to provide] air transportation to passengers ticketed, for air transportation" on a failed carrier (emphasis added). The Department's August Notice required transporting carriers to honor "valid confirmed tickets, whether paper or electronic" (p. 3). While paper tickets are valid on their face, receipts or itineraries for tickets provide no such assurance of validity, absent the ability of the transporting carrier to interface electronically with the issuer's ticketing system.

Counsel:  American, Carl Nelson, 202-496-5647, carl.nelson@aa.com


National Airlines, Inc.

Undocketed January 23, 2003 Notice Honoring Tickets National Airlines - Tickets

We see no reason, based on the comments submitted, to change our guidance with respect to the implementation by carriers of the requirements of section 145. We find particularly unpersuasive Delta's and American's argument that we lack the authority to provide any guidance with respect to section 145, and that our actions are unlawful ratemaking. Equally unpersuasive is the carriers' argument that the so-called "marketplace" rate, i.e. whatever rate those carriers elect to charge, is what Congress intended in requiring carriers to accommodate displaced passengers "to the extent practicable."

Notwithstanding our public invitation to all affected parties, there is no evidence in any of the comments submitted to us indicating that our suggested charge of $25.00 each way to accommodate passengers under section 145 is unreasonable. As we informally made clear to every carrier that inquired at the outset, and as is plain from our November 14 notice requesting comments on the cost issue, we understand that costs may vary by carrier. We also agree with the commenters who suggested that the cost to a particular carrier of complying with section 145 may be affected by a variety of factors, including the number of passengers, the current fuel costs to carriers, and the markets and itineraries involved. We note that, consistent with our statutory responsibilities, including those under 49 U.S.C. § 41712, it is important in implementing section 145 to avoid uncertainty and unnecessary harm to the industry and the public. We therefore intend to continue to monitor this situation and work with all carriers informally to ensure that the Congressional intent of section 145 is effectuated in any given situation.

By: Read Van de Water


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