June 2009

DOT Issues Guidance on Airline Baggage Liability and Airline Responsibilities for Code-Share Flights

Holland & Knight Newsletter

On April 1, 2009, DOT published a Notice in the Federal Register1 that provides guidance to airlines about two key issues: (1) baggage liability; and (2) responsibilities of code-share partners on flights involving international itineraries. The Notice directs airlines to review their tariffs, policies, and practices in these areas and to take action, if necessary, to comply with the Montreal Convention and DOT policy. Although DOT initially indicated that carriers would have 90 days in which to bring their tariffs into compliance with these requirements, several carriers have expressed strong concern about their ability to complete these tasks in that time frame. It is unclear whether DOT will stick to its original plan to pursue enforcement action against carriers which are unable to comply with the new policies by July 1, 2009.

Baggage Liability

The Notice first addresses airline tariff rules relating to liability for lost, stolen, delayed or damaged baggage carried on international itineraries. The Department has noticed that some airlines have filed tariff rules that attempt to exclude from liability certain items in checked baggage. These liability exclusions, found in airline tariff rules and on airline websites, typically concern valuable and/or fragile items such as electronics, jewelry, or antiques.

DOT takes the view that these liability exclusions are not allowed under Articles 17 and 19 of the Montreal Convention, or under the relevant provisions of the Warsaw Convention, to the extent that Convention is applicable. (Article 17 of the Montreal Convention states that the airline is liable for damaged or lost baggage if the damage or loss occurred while the baggage is in the airline’s custody, with an exception for any damage or loss caused by an inherent defect, quality or vice of the baggage. Article 19 states that an airline is liable for damage caused by delay in the carriage of baggage except to the extent that the airline took all reasonable measures to prevent delay.) Under these provisions, once an airline has accepted checked baggage, it is liable for the contents of the baggage up to the limit of 1000 SDRs per passenger.

It is essential to note that airlines may continue to recommend that passengers not pack valuable and fragile items in checked baggage. DOT’s Notice simply makes clear that an airline cannot exclude liability for these items since that is a matter governed by the Convention. In order to address DOT’s concerns, airlines need only review and, if necessary, amend their filed tariffs and policies (e.g., on their websites) to ensure that the tariffs and policies do not contain liability exclusions that are inconsistent with the Montreal Convention. Provisions that do not comply will be considered to have no effect and will be in violation of the Convention, and could result in DOT civil penalties.

Code-Share Operations

DOT includes in its code-share approvals a condition that requires the airline that sells the air transportation (Ticketing Airlines) to accept responsibility for all obligations in the contract of carriage with the passenger for the entire code-share journey. Some airlines, however, have filed tariff rules that attempt to apply all or some of the Operating Airline’s terms and conditions. (Some airlines have no clear tariff rule for code-share services.) The Notice would require the Ticketing Carrier to review the contracts of carriage of its code-share partners, and clearly disclose to the passenger the areas in which the Operating Carrier’s policies and operations may differ from its own.

In order to ensure compliance with DOT’s requirements for code-share services, airlines should review and (if necessary) revise their tariff provisions to reflect the conditions in their DOT code-share approvals. The Notice does not require airlines to change their current practices for code-share services (e.g., to adopt the same practices as their code-share partners), but rather requires airlines to properly disclose to passengers the conditions that apply to their travel.

For example, the Ticketing Airline does not charge a checked baggage fee, but its code-share partner, the Operating Airline, imposes a checked baggage fee. If a passenger traveling on the Operating Airline would have to pay the checked baggage fee, DOT’s Notice directs the Ticketing Airline to inform the passenger that he will have to pay the Operating Airline’s baggage fee when traveling on a flight operated by the Operating Airline. This disclosure must appear in the Ticketing Airline’s rules tariff, contract of carriage, and any other place that discusses checked baggage, including the Ticketing Airline’s website.

Under the terms of the DOT Notice, the Ticketing Airline must disclose every term in which its rules differ from those of its code-share partners. While the list of potential areas is quite broad, the Notice includes the following examples of such terms: check-in deadlines, unaccompanied minors, carriage of animals, refusal to transport, oxygen service, irregular operations, denied boarding compensation, and baggage acceptance and liability. There may be other areas as well.

Currently, DOT is conferring with carriers about how to best make the required disclosures. Carriers are trying to get DOT’s “blessing” to use hyperlinks and other means of cross referencing rules without being required to engage in a wholesale restructuring of their rules. It is anticipated that carriers will attempt to streamline their compliance with these obligations to the greatest degree possible.

We will be monitoring DOT’s stance toward accommodating these efforts and will keep our readers up to date.

1 74 Fed. Reg. 14,837 (Apr. 1, 2009).

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