DOT Requires Automatic Refunds of Airline Fees
Ending one of the big hassles of flying.
US Department of Transportation (“Biden-Harris Administration Announces Final Rule Requiring Automatic Refunds of Airline Tickets and Ancillary Service Fees“):
The Biden-Harris Administration today announced that the U.S. Department of Transportation (DOT) has issued a final rule that requires airlines to promptly provide passengers with automatic cash refunds when owed. The new rule makes it easy for passengers to obtain refunds when airlines cancel or significantly change their flights, significantly delay their checked bags, or fail to provide the extra services they purchased.
“Passengers deserve to get their money back when an airline owes them – without headaches or haggling,” said U.S. Transportation Secretary Pete Buttigieg. “Our new rule sets a new standard to require airlines to promptly provide cash refunds to their passengers.”
The final rule creates certainty for consumers by defining the specific circumstances in which airlines must provide refunds. Prior to this rule, airlines were permitted to set their own standards for what kind of flight changes warranted a refund. As a result, refund policies differed from airline to airline, which made it difficult for passengers to know or assert their refund rights. DOT also received complaints of some airlines revising and applying less consumer-friendly refund policies during spikes in flight cancellations and changes.
Under the rule, passengers are entitled to a refund for:
- Canceled or significantly changed flights: Passengers will be entitled to a refund if their flight is canceled or significantly changed, and they do not accept alternative transportation or travel credits offered. For the first time, the rule defines “significant change.” Significant changes to a flight include departure or arrival times that are more than 3 hours domestically and 6 hours internationally; departures or arrivals from a different airport; increases in the number of connections; instances where passengers are downgraded to a lower class of service; or connections at different airports or flights on different planes that are less accessible or accommodating to a person with a disability.
- Significantly delayed baggage return: Passengers who file a mishandled baggage report will be entitled to a refund of their checked bag fee if it is not delivered within 12 hours of their domestic flight arriving at the gate, or 15-30 hours of their international flight arriving at the gate, depending on the length of the flight.
- Extra services not provided: Passengers will be entitled to a refund for the fee they paid for an extra service — such as Wi-Fi, seat selection, or inflight entertainment — if an airline fails to provide this service.
DOT’s final rule also makes it simple and straightforward for passengers to receive the money they are owed. Without this rule, consumers have to navigate a patchwork of cumbersome processes to request and receive a refund — searching through airline websites to figure out how make the request, filling out extra “digital paperwork,” or at times waiting for hours on the phone. In addition, passengers would receive a travel credit or voucher by default from some airlines instead of getting their money back, so they could not use their refund to rebook on another airline when their flight was changed or cancelled without navigating a cumbersome request process.
The final rule improves the passenger experience by requiring refunds to be:
- Automatic: Airlines must automatically issue refunds without passengers having to explicitly request them or jump through hoops.
- Prompt: Airlines and ticket agents must issue refunds within seven business days of refunds becoming due for credit card purchases and 20 calendar days for other payment methods.
- Cash or original form of payment: Airlines and ticket agents must provide refunds in cash or whatever original payment method the individual used to make the purchase, such as credit card or airline miles. Airlines may not substitute vouchers, travel credits, or other forms of compensation unless the passenger affirmatively chooses to accept alternative compensation.
- Full amount: Airlines and ticket agents must provide full refunds of the ticket purchase price, minus the value of any portion of transportation already used. The refunds must include all government-imposed taxes and fees and airline-imposed fees, regardless of whether the taxes or fees are refundable to airlines.
The final rule also requires airlines to provide prompt notifications to consumers affected by a cancelled or significantly changed flight of their right to a refund of the ticket and extra service fees, as well as any related policies.
In addition, in instances where consumers are restricted by a government or advised by a medical professional not to travel to, from, or within the United States due to a serious communicable disease, the final rule requires that airlines must provide travel credits or vouchers. Consumers may be required to provide documentary evidence to support their request. Travel vouchers or credits provided by airlines must be transferrable and valid for at least five years from the date of issuance.
Offhand, these rules strike me as reasonable and well within the DOT’s statutory power. Especially as the industry consolidates, having consistent and transparent rules in place across airlines makes good sense.
While this is mostly good news for consumers, I would imagine that the second-order effect will be an increase in ticket prices. The main cause of flight cancelations and significant delays is weather. Currently, the airlines essentially hold ticket buyers hostage, forcing them to take another flight or accept a voucher for a later flight. Presumably, they’ll now lose money when customers don’t rebook.
The public has been conditioned for an increase in prices at any change or regulation. So, of course ticket prices will increase.
The thing about travel credits, and related stuff like store credit, is that some people wind up never using them. Suppose I had manged to book a ticket to Mazatlan to see the totality phase of the eclipse, and Aeromexico had cancelled the flight. A later flight would have done me no good, totality having passed by then. I had no other travel plans in the immediate future, so a credit would have sat there unused, or I’d have figured I better use it and incur in associated travel expenses elsewhere, before it expires, or I forget it.
I’ve heard criticism of store cash cards, like the Starbucks rewards card, as interest-free loans to large corporations. It’s not that, but it’s not that far off either.
@Kathy: Oh, I agree that infrequent fliers often have no immediate need for the credit. But this effectively transfers the responsibility for weather, which the airlines can’t control, to the airline. Better them than the consumers. But it’s definitely an added expense that I’d expect to see passed on.
Between this, the elimination of non-competes, and requiring more employers to pay overtime, the Biden administration has been on a roll this week.
@James Joyner:
This can get more complicated, because all airlines have a contract of carriage that you agree to by buying a ticket. It’s like a WULA. No one reads them nor has any clue what they say.
That aside, if you agreed to provide a service at a certain time, and can’t provide it within a reasonable interval, whatever the reason, you should return the money paid in advance. It should not matter whether providing a refund with credit or miles or stickers is more profitable.
Or, suppose we turn things around: have passengers charged only after their flight successfully concludes (some days I wake up feeling I should stir trouble).
@Kathy: IANAL but I presume this rule would overrule the contract of carriage—or, more likely, require that the contract be in conformity with the rule.
@Kathy: I mean… you don’t pay a taxi till you get to where you’re going! 😀
@Kathy:
This. I have about $175 credit with Southwest since we ended up canceling a flight and taking an earlier JetBlue one early in the pandemic. It’s still sitting there because I can’t transfer it to someone else who flies more, I don’t fly much and Southwest’s nonstop flights are always at inconvenient times compared to my other options. It’s “non-refundable” meaning I have to take the time to book a refundable flight of about that amount, apply the funds then cancel it to get the money back. It’s on the the list of things to do when I get free time…. which is why it’s been years and they have my money locked up.
@James Joyner:
I have personally experienced maybe half a dozen of the kinds of flight disruption this policy covers, two of them international. Most of them had nothing to do with weather, and everything to do with poorly-maintained equipment, inept ground crew, understaffed flight crews up against their continuous shift duration limits, and airlines who didn’t bother to open their ticket/baggage counter until noon, even though they were sitting on hundreds of bags they had been unable to deliver the previous day, because they didn’t have any flights departing that day until 2 PM.
Weather ain’t the problem here.
@Blue Galangal: True, but in Korea, I always paid the doctor before I saw him (which is just about as valid a comparison as hiring a taxi providing a metered, rather than fixed-cost, service).
@KM:
We had something like that happen with Aeromexico, pre-pandemic. I forget the details, but it was a PITA and then some to get them to apply the credit. That we had to first buy the ticket through the website. Then no, we had to buy it over the phone. Then something about blackout dates. I think we wind up turning the thing over to a pro travel agency (yes, they still exist).
@just nutha:
It’s all what you’re used to.
Second day at language school in the UK (long story), the group I wind up hanging out with went to get pizza for lunch off campus. I was about to grab a slice off my plate and eat it, when I noticed all the European kids were eating theirs with knife and fork, and so were many other customers.
This is great news. I had a Delta flight – cross country, that they changed the day after I booked to have me arriving in SW Virginia at midnight instead of 6 PM.
The flight was $100 cheaper, but Delta refused to refund the difference. After some badgering I got a flight credit that was good for one year toward future Delta flights. Plus, the flight credit wouldn’t appear on my “account” when logged in to Delta.com, I had to keep an e-mail around with an e-ticket number that I had to use in a specific order on the website in order to get the $100 discount on a future flight.
In the end, I ended up paying the higher price for the worse flight.
Under the new rules, Delta would have had to issue me an immediate credit for the difference in fares.
European carriers are already under much stricter rules. They not only have to reimburse you, they owe you for the cost of meals incurred during the delay, and up to $500 of additional “we’re sorry” compensation.
I learned about this by discovering that if my botched United flight from DC to Munich had been on Lufthansa instead, I would have been paid for my hassle.
@Gustopher:
And yet you and so many others still planning to protest vote against Biden, because he, like everyone, can’t engineer perfect solutions to all the world’s complex problems, satisfying everyone.
Let’s hope he makes it to 270. More for our sake than his, but especially for those in states in Republican governors or Republican asssemblies.