How much money could passengers earn if the U.S. had European airline consumer protection laws?

Whereas a deregulated marketplace for airline transportation has provided consumer benefits in reduced airfares, and options for amenities and quality of service, it has not exhibited improvements in the reliability of the transportation service with regard to on-time gate arrivals. For example, in 2016, U.S. domestic operations exhibited an 81 % on-time performance. Of the 27% of the flights that operated but were not on-time, 28% were attributed to “carrier delays.” These are disruptions that cannot be attributed to Extra-ordinary Circumstances (EoCs) such as extreme weather, national airspace system congestion, late arriving aircraft, or security. To protect consumers and incentivize airlines to address disruptions under their operational jurisdiction, the European Commission has a Passenger Bill of Rights (PBR) law, known as EC261, that requires airlines to compensate passengers when flights that are not under EoC are delayed by more than 180 minutes or cancelled without advance notice. This paper estimates the financial impact of EC261 if this law were applied to U.S. domestic and international flights that originate or terminate in the U.S. For the calendar year 2016, it is estimated that 0.4% of the flights meet the EC-216 compensation criteria. Compensation to passengers averaged $299 per disrupted passenger or $1.08 across all passengers. Under the assumption that every eligible passenger is compensated (i.e. no “breakage”), airlines operating these flights would be obliged to compensate passengers a maximum of $955.7M (4% of pre-tax net income) or $109 per flight. The methodology, results, and implications are discussed.