Much has been written about something called Rule 240. Some pundits claim it’s an “urban travel legend” and no longer exists. Others disagree.
What is Rule 240? Well, back in the days when airlines were regulated by a government agency, they all had to abide by some sensible rules to protect passengers in case of, among other things, a cancellation or misconnection that was within the airline’s control. These rules were incorporated in the airlines’ contracts of carriage. Post-deregulation, these rules no longer had to be followed, but some airlines, whether formed after or before deregulation, perhaps because they were too lazy to completely rewrite their contracts, kept the same rules. Airlines formed after deregulation typically didn’t incorporate these rules into their contracts, and some have done away with them.
Anyway, Rule 240 originally stated that in the event of a cancellation or flight misconnection, the airline would have to put you on their next flight out, or, if that wasn’t “acceptable,” on the next flight out of a competing airline if that flight would get you to your destination sooner, all at no additional cost to you. If only first class was available on the other airline, then they had to upgrade you. This only applied in circumstances under the airlines’ control, such as crew failing to show up, or mechanical problems.
So does Rule 240, or something like it, still exist? Well, we searched the contracts of carriage for a bunch of big and smaller airlines to find out, and near as we can see, several airlines, such as Alaska, Frontier and United, still have something they call Rule 240 or the same thing by another name, and others, such as Delta, Southwest, and Virgin America, have more vague language saying that they will put you on another airline at their “sole discretion” or that they “may substitute alternate carriers.” And some airlines don’t call it Rule 240 at all, instead using a numbering system of their own invention (Alaska calls it "Rule 240AS" for example).
Keep in mind that airlines can change their contracts at any time, and several of the larger ones have done so in recent months. And sometimes there isn’t a flight on another airline that will get you there sooner, especially if you’re traveling from or through a so-called “fortress hub,” such as Atlanta, a Delta Airlines stronghold, or there may be no seats available on the other airline’s next flight. Also, if you're traveling on a "bulk," "consolidator," or other unpublished airfare, then all bets are off.