American’s Contract of Carriage Change Is Actually a Good Thing

American

There was some minor uproar over the weekend when it was revealed that American had adjusted its domestic contract of carriage — or conditions of carriage, as the airline calls it — to remove some consumer protections that seemed to be baked in. The response was merciless, and I had one person even call for American to get the Cranky Jackass award. The thing is… I’m glad American made this change, because it conflicted with what the airline actually did in practice. This should have been fixed long ago.

Bill Holsinger-Robinson, CC BY 2.0, via Wikimedia Commons

The reality is that the Contract of Carriage (CoC) is meant to be a baseline document showing what you are entitled to when you buy a ticket from an airline. Policies may go above and beyond what you’ll find in the CoC, but that’s not required. For that reason, the CoC should be very clear in what it provides at the lowest level.

The changes that were made recently effectively matched the CoC up with American’s policies that were already in place. In other words, there was ambiguity in the CoC wording, and there were ways for people to try to take advantage of the situation to get more than American would allow. That just ends up in fights and is bad for everyone. Now, that ambiguity is gone. Good.

You can follow along with the airline’s conditions of carriage here. The list of complaints from JT Genter, who first publicized the change, is as follows:

AA disclaims any liability when “we (or our partners) cancel a flight or route”

American already had a list of things that it was not liable for in the CoC. Specifically, it said it is not liable if:

  • We’re late or you don’t make your connection
  • We change the schedule of any flight
  • There are special, incidental or consequential damages because of these changes
  • Your checked baggage is late (except as required by statute, regulation, or Convention)

And what this means it that you can’t go and sue American because you missed an important meeting or something like that. American has just clarified that it’s not just schedule changes and missed connections but also canceled flights. American isn’t alone in this.

Delta, for example, says “Delta will not be liable under any circumstances for any special, incidental or consequential damages arising from the foregoing.” United says “Except to the extent provided in this Rule, UA shall not be liable for failing to operate any flight according to schedule, or for any change in flight schedule, with or without notice to the passenger.”

This was just poor wording before for not including canceled flights. It created a potential loophole for someone to try and exploit.

If AA “or our airline partner fails to operate or delays your arrival more than 4 hours, our sole obligation is to refund the remaining ticket value and any optional fees according to our involuntary refunds policy.” So, AA may strand you on the day of travel.

Note that this verbiage was added and there was no verbiage there before. So what this does is just link this with the refund rule and make it easier for passengers to clearly understand what American’s obligation is. It may not have to offer you alternate transportation, but it will. You may not like it, and if you turn it down, you can get a refund. Remember that American doesn’t want to give you a refund. It would much rather put you on a later flight and keep your money. But ultimately you do have the option to get your money back if you meet this requirements.

When there’s a flight cancellation or delay that causes a missed connection, AA will no longer “rebook you on the next flight with available seats”. Instead, you’ll have to wait to be rebooked “on the next American Airlines or American partner flight with available seats”

This is also just aligning with policy — and reality — though it’s admittedly rather strange since “partner flight” does not appear to be defined. Let’s use an example. Pretend you were flying American from LA to Vegas and your flight canceled. The next flight is on Spirit. The two airlines have no relationship, but the way the CoC was worded, you’d think American would have to go and buy you a ticket out of pocket on Spirit because it’s the next available flight.

Not only is that not policy, but it’s silly to think that it should be. Assuming the delay is long enough, you’d have the right to get your money back and buy a new ticket on another airline. What people were doing, I suspect, is just buying a ticket on Spirit and then demanding American send reimbursement because of what’s in the CoC. Now that clearly isn’t allowed.

If AA strands you somewhere *and it’s their fault*, AA will only cover the cost of a hotel if it’s an approved hotel or you get “written authorization from American Airlines”. So, make sure to stay in the (long) airport line to get a hotel when AA strands you.

You can see where this probably came from. American used to say it would cover the cost of an approved hotel. What’s an approved hotel? That’s pretty vague. So what people would do is not want to either wait in line or get the hotel voucher email (as American has been offering to speed up the process) and just book a fancy hotel and then tell American to pay for it. That’s a distortion of what should be happening here.

Even worse, AA then emphasizes in the next section that if “you book your own arrangements without written authorization from American Airlines, you’re responsible to pay for your hotel, meals and other expenses”.

Right, because you’ll go and book some Four Seasons or Ritz-Carlton and then demand reimbursement. American should have control over this process to avoid runaway costs.

In the end, all of these changes simply clarify the CoC to match policy that’s already in place. If there’s anything disturbing about the changes, it’s that American took so long to actually make them. I wonder how many legal tussles have happened over the last few years as American fought against the arbitrary interpretation of the CoC by passengers looking to take advantage of poorly-worded paragraphs. Now the ambiguity is gone.

28 comments on “American’s Contract of Carriage Change Is Actually a Good Thing

  1. IMO, the problem is that AA is such an operational mess that it’s difficult to understand how these actually improve the customer experience. For every person who booked a Four Seasons when their flight was cancelled, there’s likely 100 more who just booked a Holiday Inn for $125 3 miles away from the airport. As someone who has had a flight canceled at 2AM on AA, I could not call the call center. All 180 of us had to stand in line and get our stuff. It was frustrating, and AA needs to get it’s operational issues in order before they should worry about this.

    It just leaves a bad taste in the mouths of customers, leading to poor brand health.

  2. Pointing out that this is not as bad as some have made it out is admirable, but calling this a good thing is a stretch. They could have resolved the ambiguity in much more costumer friendly ways.

    Expecting them to buy you a ticket on Spirit is probably not realistic, but commiting to using available interline partner flights when delays pass a certain threshold would both be in line with current practice and generate less bad will.

    1. Aliqout – They do that as part of policy, and it varies depending upon your status with the airline how quickly they’ll allow you to look at interline partners. But also remember that this only applies to the domestic world anyway. This doesn’t impact international where interline options are much more helpful, especially since JetBlue and Alaska should be considered partners in the US. That covers things pretty well.

  3. Given that the DOT received four times more complaints from American passengers in June than from Delta customers and 3X more than for Southwest, there is clearly a disconnect between what AA is delivering and its customers are expecting. AA and UA’s on-time and cancellation rates are generally middle of the pack in the industry but flight problems are the most commonly complained problem for AA; the number of flight problem complaints is 8X higher than for Delta.
    CF is right that AA needs to readjust its customers’ expectations about what it will deliver. He is right that they haven’t been delivering the level of amenities in IROPS that customers expect. In reality, neither do low cost carriers and Southwest both cancelled and delayed higher numbers and percentages of flights than AA but didn’t get near as many complaints.
    AA chose early in the pandemic to chase leisure volume rather than hold onto business passengers and this move further validates why business travelers are going to continue to move to Delta and United, both of which actually provide a higher level amenities for more passengers regardless of what their CoCs say. DL and UA’s sales teams are undoubtedly working overtime this week.
    DOT data also shows how successful Delta and United have been in gaining passengers in traditional business markets esp. from American. In the first quarter, as just one example, Delta carried the most revenue in the ORD-LGA local market even though Delta blocked seats. Forward schedules shows that Delta operating a higher percentage of capacity in that market than they ever have.
    Most of the airlines filed updated investor guidance this morning and AA expects an even deeper loss for the 4th quarter than they expected before. Only Delta of the big 4 expects to be profitable on an adjusted pre-tax basis (essentially excluding government aid). Perhaps the key to financial success for the big 4 is to deliver a product that supports their cost structure in line with customer expectations.

  4. Thanks for the sane analysis of the CoC changes, instead of giving into the mob mentality. My initial reaction was aligned with your analysis, so thank you for confirming my thinking.

  5. Any company that has to resort to stuff like this and/or resort to deception and trickery to stay in business, does not deserve to be in business in the first place.

    Anyone that cannot make an honest dollar deserves to be in prison.

    This is one of the very few things I side with the Democrats on, Tighten the vice on business on every level till they either cry ‘Uncle’ out of sheer beaten-into-submission pain. Or go out of business..

  6. I’m but not giving AA a Cranky Jackass for one change in particular perhaps merits your readers awarding you a Cranky Jackass for being an AA apologist.

    That harsh I know but the change that allows AA when your flight cancels to simply refund the unused portion of your fare (and how they calculate that is a very interesting question) and leave you to your own devices is unconscionable.

    You say AA would rather not do this and would rather keep your money and get you on a flight but that’s not what this change allows. It doesn’t allow you to just reject a schedule change and get a refund where the right to do so did not exist previously. It gives AA the complete and total ability to cancel your flight mid trip and refund you some portion of your fare. So to get home your now going to have to buy a new ticket at the prevailing rate.

    This allows all sorts of nasty moves. AA could decide they had sold the seats on a flight too cheaply and cancel it, refund those seats, and put a new flight operating on the same route on the same schedule back up for sale at a higher price.

    Remember all that is required to trigger the unrequested and possibly unwanted refund is fo a flight to cancel or delay 4+ hours. Once either of those things happens AA may choose at its sole discretion to refund some portion of your fare and wash its hands of you.

    You can’t really be ok with that.

    1. 121Pilot – Oh the drama… This is all silly and it would not happen. The airlines all know if they tried this, they would be instantly forced to deal with a slew of new DOT rules. The thing is, this isn’t what AA is saying at all. AA is saying that this is their sole monetary obligation.
      When it comes right down to it, if all other options are bad, you will get your money back but you aren’t entitled to damages or anything like that.
      This is a good thing and it’s simplified wording. It means you will get your money back, but you don’t have to take that option.

      All you have to do is scroll down further in the contract to show this as already mentioned. You have this option available to you.

      “When your flight is canceled or a delay will cause you to miss your connection, we’ll rebook you on the next American Airlines or American partner flight with available seats. We’ll rebook you in your originally ticketed cabin or class with your original form of payment. If your flight was delayed or canceled and you don’t accept our alternative arrangements, or none were available, we’ll refund the remaining ticket value and any optional fees according to our involuntary refunds policy. Beyond that, we have no further contractual obligation.”

      1. I have to agree with 121Pilot here. I will not depend on the airlines being worried about new regs keeping them from screwing us over. “The airlines all know if they tried this, they would be instantly forced to deal with a slew of new DOT rules.” Yeah, right. The airlines knew bailouts were a one time thing, right? They wouldn’t dare ask for a second bailout, right?? Or a third? This passage: “When your flight is canceled or a delay will cause you to miss your connection, we’ll rebook you on the next American Airlines or American partner flight with available seats.” I am flying to Memphis thru DFW. First flight late, miss second flight. No seats available for 2 days. AA’s policy says I will get a refund of my DFW-MEM portion whatever that is. Sorry Cranky – thats not good enough.

        1. Allan – Every airline has the exact same rules in the contract of carriage. No airline is going to guarantee in the contract that they will put you on the next flight on any airline. It may not be good enough for you, but it’s standard. In fact, Delta went so far as to end the agreement to reaccommodate people on American for some time before it finally came back. American is hardly stepping out of line here.

          1. CF,
            every US airline does NOT have the same CoCs which are available directly from their home pages.
            Delta’s section 19.b says
            However, when a passenger’s travel is interrupted for more than 4 hours after the scheduled departure time as a result of flight cancellation or delay on the date of travel other than from force majeure, Delta will provide the passenger with the following additional amenities during the delay:

            (a) Hotels

            If overnight accommodations are available at Delta contracted facilities, Delta will provide the passenger with a voucher for one night’s lodging when the delay is during the period of 10:00 pm to 6:00 am. Delta will provide free public ground transportation to the hotel if the hotel does not offer such service. If accommodations are not available, Delta will provide the passenger with a voucher that may be applied to future travel on Delta equal in value to the contracted hotel rate, up to $100 USD.

            That language is not the same as American’s or Southwest’s.

            Neither are the terms re: booking on other carriers (or not) the same between American, Delta or Southwest.

            and the point is what is done in practice, not what is written.

            American is moving in the direction of a low cost carrier in its CoCs and away from what Delta and United not just say but do.

          2. Every airline has similar rules, but far from exact. AS for example does not limit rebooking to “partner flights”, allows rebooking in higher classes of service, and allows ground transportation to be provided at the passengers request.

            As far as whether AA will provide more than the contract requires…I don’t think we can count always count on it. I was once initially denied rebooking after a missed connection because, although there were seats available in economy, they were only being sold in a higher “class” than my ticket (O vs. Y, or something like that).

            1. Aliqout – It sounds like you got a bad agent, because that is not what the contract specifies for American. American says it will rebook you on the next available flight in the “originally ticketed cabin.” What RBD (bucket) you’re in should not make a difference as long as it’s the same cabin/class of service.

              Further, Alaska’s contract specifically says that it can provide surface transportation “at its option.” Anyone can provide surface transportation if they feel like it, but this clause in the contract says nothing of substance. Alaska can decide it doesn’t want to offer that and it’s perfectly within its rights.

            2. Sure, but my point was that we can’t rely on AA exceeding their minimum requirements. My experience in the past few years is that AA is by far the least costumer friendly legacy when it comes to rebooking. I have always managed to get what I expect from the other legacies but it often takes quite a bit of work and multiple tries.

            3. Barowsky – I think there are different things being discussed here. My point in this post is that the contract of carriage changes are good because they align with what American is actually doing. That is good.
              Whether the contents of the policy could be better or not is separate, and of course they could always be better. American’s policies haven’t changed at all in this, but at least the contract matches what the airline is actually doing.

      2. Cranky,

        If there is one thing I’ve learned in over 20 years of airline operations is that “they would never do that” is a phrase that you just can’t apply to an airline. Just because it’s stupid and self destructive doesn’t mean the airline won’t do it. If the COC allows them to just issue a refund and be done with you eventually it’s going to happen to people.

        Think about a major IROP for example. Where they have a metric ton of people that now need to be rebooked and it’s potentially overwhelming their system. Here is an easy out. Just refund everyone and get back to business.

        It may not be the smart choice and it may be self destructive but airlines do dumb self destructive stuff all the time.

        1. 121Pilot – Again, that is not what the contract says. The contract says they will offer alternate options on American or partners.

  7. To the post: It’s good to see another view of this issue. I’ve seen much of the overreaction elsewhere, and am happy to see the “other side” represented. Most of these contracts have been litigated to death.

    But to the broader issue of the industry as a whole, I feel I need to respond to Tim Dunn’s comment above. As usual, Tim raises some good points. However … Tim wrote: “Most of the airlines filed updated investor guidance this morning and AA expects an even deeper loss for the 4th quarter than they expected before.”

    My first reaction to his observation that American expects “a deeper loss than was expected before” is this: “No S*it, Sherlock!” Or to quote from the movie Casablanca, “I’m shocked, shocked, to find that gambling is going on in here (at Rick’s)!” I’m guessing (and it’s not much of a stretch) that every airline is revising its guidance down to some extent. But I want to be a bit less snarky, so I’ll respond thus:

    As usual, Tim seems to celebrate when there’s bad news about American Airlines. But his observation is a bit of a mischaracterization of what was contained in American’s filing. to wit:

    “The change in pre-tax margin guidance is primarily due to lower revenue due to the softness in demand cited above and slightly lower flown capacity. *****Despite these changes, the Company continues to expect a **sequential improvement** in both revenue and pre-tax loss **before special items** from the second quarter 2021 and expects that its reported third quarter financial results will be the **best** quarter as measured by revenue and pre-tax loss before special items, since the pandemic began.*****

    The press release states that the company expects that its quarterly loss “before special items” (i.e., government assistance) will be the BEST since the pandemic began.” Tim conveniently ignored that last sentence.

    To be clear, I fully expect American and most other majors to post losses for this quarter, but unlike Tim, I’m not rejoicing those expected losses, nor am I gloating about Delta’s anticipated profit. I want to see the entire airline industry get back to “normal” because it reflects on the economy as a whole. Unlike most politicians, I don’t celebrate when people are suffering.

    There’s a tendency among some airline pundits and “armchair CEOs” to look at the current situation in the same manner as one would look at 2019. It’s not 2019. This is still an unusual time. Let’s see what things look like in 5 years. There may very well be a new normal. I also must ask the rhetorical question: “How many major U.S. airlines would be in Chapter 11 bankruptcy if this pandemic had occurred in 2008?” The fact that Southwest Airlines posted its first quarterly loss in decades during this pandemic tells me all I need to know.

    1. Nobody is celebrating anyone’s bad news. Period.
      American is reaping the results of its own strategic decisions. They – along with Southwest – went all in last summer on a high volume leisure strategy and have operationally executed poorly. American has done a little better than Southwest this year.

      Delta and United chose a limited capacity focus on premium passengers. Delta said in its investor conference remarks that it is carrying about 40% of its pre-covid business travel volume which has not changed a lot in months. Even though both Delta and United seem to be pursuing similar strategies, Delta has figured out how to get a higher percentage of business travelers on its flights than United.

      Delta and United are both taking a higher road re: service although they are taking different paths to get there.

      American’s move here is almost certain to result in a further move of high value passengers away from them to other carriers with more customer-focused policies.
      AA’s decision cannot realistically be called a “good thing” for anyone other than AA’s bean counters but they are being honest in that they don’t intend to compete on the same levels of service as DL and UA.

      There is only so much business travel in the market now and I believe the number of business passengers will be reduced for years to come. American’s network is highly competitive and each of the big 3 compete aggressively for high value passengers throughout the US. They aren’t making the decision for this quarter but what they see for years to come.

      It’s not rooting for anyone’s demise to cite data which shows that AA is losing high value revenue in highly competitive markets at a faster rate than DL or UA.

      As to your last paragraph, the first round of covid era government funding reopened capital markets which nearly immediately allowed Delta and Southwest to pull down $10 billion in loans; United followed soon after while American was the last of the big 4 to be able to convert its loans from government-backed to private sector. THAT should tell you the order of how the industry would have gone bankrupt.

      And Southwest is not guiding to a profit this quarter while Delta is. There clearly is more at play than track records.

      1. Your nonsense posts with no data about AA and weird hatred for American never cease to entertain.
        Thanks for the laugh

  8. Thanks for this post. It made me put away my pitchfork.

    I’m still confused about the first element regarding delays of 4+ hours. The basis of your argument is that AA doesn’t want to refund the money and will accommodate passengers out of fear of a DOT crackdown, but that’s not what the T&C say. I’m suspicious that in the event of a severe IROP, AA won’t do the math and realize it’s cheaper to cancel a flight, refund and walk away from the customer than it is to pay a hotel…or is this the case in every other airline T&C and AA is just late to the party?

    1. Chicago Chris – No, no, that’s just a part of the argument. It says specifically in the contract that American will put people on the next American orAmerican partner flight if they want it. I think the wording may be tripping people up here, but nothing is going to change in that regard.

  9. As the person who suggested to Cranky that AA deserves a Cranky Jackass award over this (based on JT Getner’s original tweets), perhaps that is a bit much. But I’m also enough of a pessimist to not want to take as a given that American would continue to hold themselves to their current policy, and not limit themselves to the minimum they obligate themselves to in their CoC. Nearly all of these sorts of business-consumer contracts are drafted by the business with no input from the consumer (who rarely reads it in any case). The customer clicks the box and agrees (if there even is a box) just like all those software end user license agreements. So the business has no disincentive to swaying the contract in their favor.

    Sure, American might say they’re not changing anything in practice and just clarifying wording, and Cranky might argue that they’ll continue to go above and beyond what they obligate themselves to legally in the CoC, but all it takes is one finance type in lean times to add up how much they’re spending in compensation above what they require and they’ll start cutting back on what they offer. Sure, there might be some backlash, but taking care of anything Congress or the DoT might mandate is what they pay their lobbyists for, and consumers might throw a fit but they shop on price and schedule, not on what’s buried in the pages and pages of legalese that the CoC is, and they have a short term memory for bad treatment (and for every customer who really does defect away from American over something, someone else will defect to American from United or Delta over something else).

    1. I’m a business flyer who also flies leisure. My business flights are dictated by convenience: departure and arrival time and length of flight. I live in the CLT area so AA is my (forced) number 1, 2 and 3 option. Sometimes, UA or DL are in play. But mostly not. I really do not want to add 3 hours to a flight to Philly or Miami.

      For leisure, I’m a frugal flyer. I don’t care too much about number is stops or airline.

      So TOC’s are immaterial. I like the Apple environment so I (blindly, I will admit) accept their terms. I like the Alexa convenience from Amazon so I’ve accepted those too. And so it is with airlines.

      I’ve been flying for over 25 years. I’ve been pissed off with airlines on numerous occasions, but have also been pleased. Its good to get a nuanced evaluation from publications like this. I will still be on AA for business for convenience. Or leisure if they’re the best option.

  10. .. and you only need one major airline to start the ball rolling and all the others will follow. They’ve either waken up to the fact that they can’t afford to feed and house thousands of passengers during irregular operations and/or they truly don’t care.

    1. Right-this-way, the airlines ALREADY don’t generally house and feed passengers during irregular operations, because that is almost always weather related.

      If your flight is canceled or you miss a connection and are stuck overnight, and they can blame it on weather, you are SOL. That’s the same whether it’s American, Delta, Southwest, whatever.

  11. I think people are missing the point that AA’s depends on ticket revenue to pay its bills so it is highly incentivized to not return those funds to passengers. If AA just refunded everyone’s ticket during IROPS, that is sure way to be unprofitable. AA would get all the added costs of handling IROPS but none of the revenue from the affected flyers. They are not going to do this, they want to rebook you on the next AA flight so they can keep the revenue.

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