US Airline Industry Regulatory Updates: Avoiding Thunderheads in New FAA Reauthorization

The US aviation industry has been in the headlines recently with the passage of a comprehensive bill to authorize funding of the Federal Aviation Administration (FAA) for five more years as well as Department of Transportation (DOT) litigation surrounding the Biden administration’s crackdown on what it refers to as “junk fees.” This is on the heels of several other regulatory updates from the first half of 2024.

FAA REAUTHORIZATION ACT OF 2024: IMPLICATIONS AND IMPLEMENTATION

President Joseph Biden recently signed the landmark FAA Reauthorization Act of 2024 following overwhelmingly bipartisan support in Congress.

A far-reaching piece of legislation, the act authorizes $105 billion to the FAA and an additional $738 million to the National Transportation Safety Board with a stated aim to address flight delays and cancellations, modernize airport technology, and improve the consumer experience. Provisions relevant to air carriers include the following:

• Enhancements for aircraft certification forms: Building upon the Aircraft Certification, Safety and Accountability Act of 2020 (ACSAA), the bill adds new oversight and accountability requirements to promote compliance with FAA safety standards for designing and manufacturing aircraft, including requirements around public notice and the opportunity for public comment on significant aircraft design changes.
• Codification of automatic refunds: Sets standards in law for passenger refunds when an airline cancels or significantly delays a flight. Customers will not need to request the refunds and, when airline credits are offered as an option in lieu of a refund to the original form of payment, credits must be valid for five years and convertible to the original form of payment on request within that time period. Furthermore, airlines must establish policies around reimbursement for reasonable costs of care incurred, such as lodging and meals, due to a cancellation or delay.
• Fee-free family seating: Prohibits airlines from charging families with young children to sit together and requires that adjacent seating be provided for parents with young children in most, but not all, circumstances.
• Accessibility enhancements: Strengthens DOT enforcement provisions of the Air Carrier Access Act that makes it illegal for airlines to discriminate against passengers due to a disability. Additionally, the bill requires airline personnel to be trained in safely storing motorized wheelchairs.
• Customer Service Requirements: Airlines must maintain 24/7 live telephone, chat, and text customer service channels free of charge.
• Penalties for airline violations: An accountability measure, the Reauthorization Act triples the DOT’s maximum civil penalty for consumer violations from $25,000 to $75,000, per violation.

Now that the bill is signed into law, we anticipate that airlines will need to act quickly to ensure they comply with the provisions therein. Air carriers should:

• update their operational procedures;
• ensure that internal controls and processes, as well as employee training programs, are in compliance with the new law; and
• confirm the viability of existing customer service infrastructure, including safeguarding against evolving cyberthreats, to ensure 24/7 availability in compliance with Chapter 423 of Title 49 § 42307.

OPPOSITION TO DOT FEE DISCLOSURE RULES

Several US airlines and an industry trade association recently filed a suit in the US Court of Appeals for the Fifth Circuit challenging the DOT’s ancillary fee rule that was finalized last month and set to go into effect on July 1. In it, the DOT seeks to require airlines to notify consumers upfront about fees charged for checked and carry-on baggage and reservation changes or cancellations.

This is part of a wider crackdown by the Biden administration, Federal Trade Commission (FTC) rulemaking, and Consumer Financial Protection Bureau (CFPB) enforcement on so-called “junk fees,” which has brought a number of consumer-oriented sectors into the fray, including airlines, credit card companies, hotels, and live events.

With the lawsuit, airlines are underscoring their position on the fee transparency debate, calling the new rule “an abuse of discretion.” If authorized, airlines will be required to provide upfront disclosure of all fees associated with air travel. The industry had previously scored a win in the FAA Reauthorization Act of 2018 when Congress was convinced to drop plans to mandate baggage and change fee disclosures.

The airlines have so far not challenged the separate DOT rule requiring automatic cash refunds for canceled flights.

For more information on the crackdown on these fees, refer to our Insights Mitigating the Risk from ‘Junk Fees’ and Recent Crackdown on Junk Fees: Federal, State, and Private Actions.

STATE ATTORNEY GENERAL INVESTIGATIONS TARGETING AIRLINES

On April 18, the DOT and 18 states agreed to a Memorandum of Understanding (MOU) that grants more authority to state attorneys general (AGs) to investigate consumer complaints against airlines. The MOU allows signatory state AGs to investigate unfair or deceptive acts or practices violations; ensure that carriers cooperate with investigations; creates an expedited channel for state AGs to report violations; and grants states access to DOT’s nonpublic consumer complaint database. With the MOU in effect, state AGs are expected to move expeditiously to identify complaints and initiative investigations.

Given the risk of confusion, differing interpretations, and uneven enforcement, airlines should take steps to develop legal strategies to ensure compliance with consumer protection regulations.

For more information, refer to our prior LawFlash State Attorneys General Fly Into Previously Federal Airspace.

HOW WE CAN HELP

Morgan Lewis is equipped to offer of-the-minute advice to achieve results with governmental agencies and manage the risk of government action. Our global aviation team has a keen grasp of the practical application of international legal and regulatory systems and stand ready to provide counsel on a broad spectrum of cross-border and multijurisdictional matters.