Hawaiian Airlines slapped with fines

Hawaiian Airlines has been fined $160,000 by the U.S. Department of Transportation for under-compensating passengers for late baggage and for deceiving customers on a credit card promotion.

The federal agency said in an order issued Thursday that Hawaiian must pay $80,000 within 30 days and the additional $80,000 within one year if the airline doesn’t correct its violations.

"Consumers deserve truth in advertising, and fair treatment when airlines lose or damage their property," U.S. Transportation Secretary Anthony Foxx said in a statement. "We will continue to make sure airlines comply with DOT’s consumer protection rules."

Hawaiian spokeswoman Ann Botticelli blamed the insufficient baggage compensation on a misinterpretation of company policies by the airline’s claims agents, and said the promotional fare problem was due to a computer glitch. She said Hawaiian has since made the necessary changes to comply with the DOT’s stipulations.

The DOT, acting on a consumer complaint, found that Hawaiian was limiting reimbursement for damages associated with delayed baggage to $30 a day for a maximum of three days — or $90 total. The DOT says that if a bag is missing for a short period, passengers are entitled to reasonable reimbursement for expenses incurred such as "the purchase of toiletries and a change of underwear."

The airline’s liability for late, damaged or lost bags is limited to a maximum of $3,400, according to the DOT. Even though reimbursements for late bags are typically well under $100 a day, an airline cannot arbitrarily limit the reimbursement to less than $3,400. At a certain point, such as a week or two, the airline will declare a bag lost and provide claim forms.

"Hawaiian’s actions effectively limited its liability for damage occasioned by the delay of checked baggage to an amount far less than the minimum level required," the DOT wrote in its order.

The DOT said Hawaiian limited compensation even though the airline’s own customer service plan on its website pledged to compensate passengers for all reasonable expenses that result due to a delay in the delivery of bags.

Hawaiian told the DOT that the incidents resulted from "a misinterpretation of guidance issued to claims agents by Hawaiian about what constitutes reasonable compensation as a limitation on compensation."

"We have updated our policies and embarked on employee training to make sure our policies are consistently followed," Botticelli said.

During the first quarter of this year, Hawaiian received 6,487 mishandled baggage reports, or 2.77 per 1,000 passengers, according to the DOT’s Air Travel Consumer Report. The 2.77 ratio ranked Hawaiian sixth out of 14 domestic carriers for fewest mishandled baggage reports. Mishandled baggage includes late, damaged, stolen or lost bags.

In 2014, Hawaiian had 20,875 mishandled baggage reports, or 2.20 per 1,000 passengers, to rank as the fourth-lowest carrier.

And in 2013, Hawaiian had 20,791 mishandled baggage reports, or 2.25 per 1,000 passengers, to rank as the fifth-lowest carrier.

Hawaiian relies heavily on checked baggage as a major source of revenue and last year generated a company record $76.1 million in baggage fees.

The other violation cited by the DOT involved Hawaiian’s advertised "one-time 50 percent round-trip companion travel discount" for flights between North America and Hawaii if consumers signed up for a Hawaiian Airlines credit card.

The DOT found that credit card customers who saw one fare online for their trip and then typed in a promo code to get the discounted companion ticket suddenly saw the original fare rise to a much higher fare for the same flight. The 50 percent discount was applied to the higher fare.

The DOT said it found this to be the case during a three-month investigation mid-2013.

Botticelli said, "The promotional fare problem with our former Visa card product resulted from a computer glitch created when we updated our computerized fare system. This was a one-time issue and Hawaiian acted promptly to resolve the glitch."

The DOT said, "Sellers of air transportation have long been on notice that … (they) must have a reasonable number of seats available at the advertised price when a fare is advertised. … Failure to have a reasonable number of seats available at the advertised fare is a violation. … and constitutes an unfair and deceptive practice and unfair method of competition."