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The Department of Transportation will also extend the ban on lengthy tarmac delays to include foreign carriers.
The new measures, which officially go into effect on Aug. 23, come about 16 months after a December 2009 rule change that forced airlines to end the practice of stranding passengers on airport tarmacs for hours on end.
"Airline passenger have a right to be treated fairly," LaHood said in a statement. "It's just common sense that if an airline loses your bag or you get bumped from a flight because it was oversold, you should be reimbursed. The additional passenger protections we're announcing today will help make sure air travelers are treated with the respect they deserve."
A government official, who asked not to be identified, acknowledged that airline passengers are increasingly frustrated with new fees imposed by the industry.
"There have been a lot of complaints from consumers complaining by hidden fees," the official told AOL Travel.
Kevin Mitchell, chairman of the Business Travel Coalition, an advocacy group that represents corporate travelers, applauded the new rules, but said the DOT still needs to require full disclosure of ancillary fees for online and brick-and-mortar travel agencies.
The airline industry has increased the use on ancillary fees for everything including meals to in-flight entertainment and frequent flier tickets as a way to avoid raising airfares amid sharp increases in the price of jet fuel.
"Today more than 60% of all consumers and over 100% of all corporate travelers don't have access to these fees," Mitchell told AOL Travel. "If you're surprising people halfway through the purchase decision or at the airport its deceptive."
Under the rules announced on Tuesday, the following changes will go into effect:
Airlines that involuntarily bump a passenger on oversold flights will have to refund double the price of a ticket, up to $650 for delays over two hours on domestic flights and four hours on international flights. For delays over two hours, passengers will be allowed to recoup up to four times the ticket price, up to $1,300.
Airlines will be required to disclose all potential fees on their websites, including fees for bags, meals, itinerary changes and cancellations and seat upgrades. Later this year, new rules will be introduced to require that ancillary fees be disclosed up front.
Airlines will have to refund any bag fee if the piece of luggage is lost; this will also apply to code-share and interline partners.
Foreign carriers will be banned from tarmac delays of over four hours, unless there is a safety, security or air-traffic control reason. Carriers must also provide adequate food and water to passengers after two hours, as well as working bathrooms and medical treatment, if needed.
The Air Transport Association was scheduled to come out with a response to the new rules. American, Delta and Jet Blue officials did not immediately return calls.
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