Cash Compensation For Delayed Flights? Trump Formally Cancels Biden’s Plan

In December 2024, the United States Department of Transportation (DOT) proposed a regulation whereby airlines would be required to pay passengers cash compensation in the event that flights are delayed or canceled, just as we see in the European Union and United Kingdom.

Given how late in the Biden administration this was proposed, it couldn’t actually be made law before the leadership change, as there was first a public commenting period, which put us into the Trump administration. A couple of months ago, the Trump administration made it clear that it didn’t plan to move forward with this proposal, and that has now been finalized. I don’t think this outcome should come as much of a surprise.

Biden’s proposal for up to $775 flight delay compensation

For some background, in December 2024, the DOT under the Biden administration announced its plan to protect passengers who are stranded by airline disruptions.

This involved airlines being required to pay passengers cash compensation, rebook them for free on the next available flight, and cover meals, overnight lodging, and related transportation expenses, when a disruption is airline caused, such as a mechanical issue or an IT airline system breakdown.

Here’s how former Transportation Secretary Pete Buttigieg described this:

“Americans know the importance of a robust airline industry, which is why this country—and U.S. taxpayers — kept U.S. airlines afloat when the COVID pandemic threatened their very existence. Now that we are on the other side of the pandemic and air travel is breaking records, we must continue to advance passenger protections. This action we’re announcing is another step forward into a better era for commercial air travel—where the flying public is better protected and passengers aren’t expected to bear the cost of disruptions caused by airlines.”

Currently, airline passengers face many challenges in holding airlines to their promises, because there’s no legal obligation for airlines to notify passengers when they are entitled to services promised in the customer service plan, and their policies are generally vague on the details of delivery.

Passengers must also typically request these services at the airport in person, and frontline staff may not know if a flight disruption is caused by the airline, or may not have enough vouchers to provide upfront services to everyone. Airlines generally do not clearly disclose when, what, and how much they will reimburse passengers who pay out of pocket.

So the DOT’s rulemaking was aimed at addressing these gaps, and establishing baseline standards on what airlines are obligated to deliver to stranded passengers during disruptions. This would apply specifically to delays and cancelations that are due (in whole or in part) to any circumstance within the control of the airline.

For one, airlines would need to pay cash compensation to passengers when a trip is disrupted. The DOT considered a tiered approach. For example, for domestic flights, compensation could be $200-300 for delays of three to six hours, $375-525 for delays of six to nine hours, and $750-775 for delays of nine or more hours.

The DOT was also considering whether smaller airlines should pay less than larger airlines, and whether or not compensation should be required if a passenger is notified a week or two in advance of a cancelation or significant delay.

The DOT was also planning on requiring airlines to provide meals, overnight lodging, and transportation to and from the airport, for stranded passengers, and defining very clearly what would need to be included as part of each service.

This could also include requiring airlines to automatically pay a minimum reimbursement for each service an affected passenger is entitled to receive when airlines do not provide these services upfront, and passengers do not submit receipts for costs, up to a maximum reimbursement threshold per service.

Lastly, the DOT was considering requiring airlines to rebook passengers on the next available flight on any carrier that the airline has a commercial agreement with, in the event of delays or cancelations.

The Trump administration has dropped this proposal

In January 2025, we transitioned from the Biden administration to the Trump administration, and that also meant major changes at the DOT, as Sean Duffy took over as Transportation Secretary. Not surprisingly, the DOT under Duffy has formally dropped this proposed new regulation, describing the proposal as “unnecessary regulatory burdens.” Airline executives were vehemently opposed to this, and I guess they won out over consumers.

So at least under the current administration, cash compensation for delayed flights is off the table. I don’t think that’s a surprise. But keep in mind that this would’ve gone way beyond that, even covering things as basic as requiring airlines to rebook you on another airline if there’s a meltdown.

If anything, I just hope we don’t see existing regulations cut. We know that US airlines are lobbying to cut consumer protections, and are requesting to increasingly self-police, to “unleash American prosperity and the new ‘golden age’ of air travel in America.” Nothing says “golden age of air travel” quite like being stranded in Atlanta for a week the next time a carrier’s operation falls apart!

My take on stronger protections for consumers

As you’d expect, airline executives universally came out against this, arguing that this would raise the cost of flights, and be bad for the traveling public. I strongly disagree with that, and airlines in the US have gone far too long with minimal obligations to their customers, and a completely one-sided contract of carriage.

Just look at aviation in Europe, where similar regulations are in place. Can anyone point to how airfare has increased as a result of these obligations? Quite to the contrary, a bunch of ultra low cost carriers operate there quite successfully, and have very low ticket prices.

Studies have even shown that these regulations have caused a decrease in avoidable delays, both in terms of the number of delays, and the length of each delay. Part of the hope is that airlines would put more effort into minimizing disruptions, which could come in the form of not having an overly aggressive flight schedule, leading to situations where there aren’t enough staff and aircraft to operate flights.

Currently airlines have a strong incentive to create best case scenario schedules, and not plan for worst case scenario outcomes. After all, their obligations to passengers when things go wrong are minimal. They want to get as much revenue as they can upfront, with limited downside to them.

Furthermore, this would encourage airlines to negotiate proper contracts with employees. For example, remember several years back when American mechanics were (unofficially) delaying flights while contract negotiations were ongoing? Stuff like that would suddenly become much more costly for airlines.

Even beyond the cash compensation, I’m a huge fan of the concept of airlines having to rebook customers on other airlines in the case of substantial delays. It’s ridiculous how right now if you’re on a flight that’s canceled last minute due to something within a carrier’s control, they may very well tell you that their next available flight is in a couple of days, and your options are to either accept that, or to take a refund.

Like any of these schemes, the one challenge would’ve been holding airlines accountable as to what’s a controllable delay and what isn’t. Airlines love to blame weather and air traffic control for just about everything. Obviously a key part of any legislation is how consumers would be able to determine what the cause of a delay is.

Bottom line

The DOT under the Biden administration had proposed new regulations that would hold airlines accountable for delays within their control. In the event of significant disruptions, this would have included cash compensation, the requirement to book travelers on other airlines, and clear guidelines on reimbursement for expenses that are incurred.

As you’d expect, airline executives were strongly opposed to this. We had reason to believe that the Trump administration wouldn’t move forward with this proposal, and the proposal has now officially been scrapped.

I’m sad we won’t see these regulations go into effect. The value in regulations like these isn’t just the compensation as such, but instead, the incentive it gives airlines to operate reliably and not cut corners. Airline contracts of carriage are really one-sided, and this would’ve been beneficial for consumers.

What do you make of this proposed rulemaking being shot down?