In April 2024, we wrote about the DOT finalizing a Rule which would require the automatic refund of airline tickets and disclosure of ancillary service fees under certain circumstances. See Enhancing Transparency of Airline Ancillary Service Fees, 89 Fed. Reg. 34,620 (Apr. 30, 2024). Just three months later, on July 29, 2024, the Fifth Circuit Court Appeals issued a stay declaring that the DOT (1) likely exceeded its authority in issuing the Rule; and (2) that there was ample evidence that the airlines would suffer “irreparable harm” absent a stay of the Rule. Airlines for America v. Dep’t of Transp., — F.4th —, No. 24-60231, 2024 U.S. App. LEXIS 18691 (5th Cir. July 29, 2024). This ruling stems from a challenge to the Rule filed by several Petitioners, including a number of airlines and airline industry organizations. 

Two takeaways from the Fifth Circuit’s stay order include:

1-The Rule may exceed the DOT’s authority under 49 U.S.C. § 41712(a) to “investigate and decide” whether an air carrier has been or is engaged in unfair or deceptive practices, or any unfair method of competition in the sale of air transportation. The Fifth Circuit previewed that the Rule may go beyond the DOT’s mandate to adjudicate whether certain practices are “unfair or deceptive,” and if so, to stop them. Airlines for America, at *4. The Court indicated that the Rule does not simply prohibit conduct, “it prescribes” conduct, which would be outside of its authority under § 41712(a). Id. at *5. The DOT’s enactment of “a code of online disclosure practices” is “not authorized by the statute.” Id.

2-The Court found that, without a stay order, airlines will suffer significant and irreparable harm. The Fifth Circuit referenced the substantial resources and costs airlines would have to expend to comply with the DOT’s rule – for instance, reengineering their websites so that the advanced fee disclosures are made at various points in the flight booking process. Id. at *8. 

It is important to note: the Court’s stay order does not mean that the Fifth Circuit agrees that the DOT exceeded its rulemaking authority. Rather, this stay order only indicates that the Court believes the DOT’s Rule likely exceeds its rulemaking authority. Given the content of the opinion, it appears that the Fifth Circuit, after a full review, may rule in favor of the Petitioners. 

As we wrote about last week, the DOT remains aggressive in implementing rules in the name of consumer protection. Those Rules can be susceptible to a challenge.