Overbooking flights to cost airlines more

WASHINGTON -- Passengers who get bumped off overbooked flights will soon be eligible to receive twice as much compensation from U.S. airlines.

Travelers forced onto another flight that takes them to their domestic destination more than two hours after their original arrival time will be paid the full price of their fare up to $800, under a new Transportation Department rule that goes into effect next month.

"Notice they say up to $800, which means passengers should negotiate and not just accept the first offer," said Joel Whalen, associate professor of marketing at DePaul University.

Although this could be a good deal for passengers, the extra fees airlines will be forced to pay are on top of other financial woes for the industry, said Joseph Schwieterman, director of the Chaddick Institute for Metropolitan Development in Chicago.

"The airlines have brought this on themselves," Schwieterman said. "They've been bumping far too many without sufficient compensation."

While meant to provide some financial relief to passengers, the rule could wind up raising fares. Groups representing both large and regional carriers blanched at the decision and said their members may have no choice but to bump up ticket prices and end service to smaller cities.

If bumped passengers arrive less than two hours after their original arrival time, the new compensation limit for domestic flights is $400, according to the new rule. The arrival time limit is four hours for international flights, and the amount of the payments are in addition to the value of the passenger's ticket, which can be used for alternate transportation or be refunded if unused.

The new bumped fliers rule also applies to more planes, covering most aircraft that carry more than 30 passengers instead of 60.

"It's hard to compensate for a missed family occasion or business opportunity, but this rule will ensure fliers are more fairly reimbursed for their inconvenience," Transportation Secretary Mary Peters said in a statement.

The previous $200 and $400 limits had not been raised since 1978.

"This administration … is tone deaf to the incredible challenges this industry is going through right now," including record fuel prices and the fact that four small carriers have sought bankruptcy protection in recent weeks amid a recession, said Roger Cohen, president of the Regional Airline Association. "This is not the time to be monkeying around with experiments."