Mark Pestronk
Q: Our agency buys a lot of tickets from consolidators. In the last five months, most of our clients' flights have been canceled by the airlines. When the airline cancels, isn't the consolidator obligated to provide a refund under the terms of the April 2020 DOT refund order? Sometimes the clients themselves have canceled because of fear, quarantine regulations or what the clients or their attorneys are calling "force majeure." Do consolidators have an obligation to provide a refund if the client cancels?
A: The DOT's April 2020 enforcement notice requiring airlines to provide full refunds if they cancel a flight applies only to airlines themselves. It does not mention consolidators, retailers, tour operators or any other industry players.
In May, the DOT issued Q&A guidance for its April enforcement notice. One question was: "What rights do passengers have if they purchased their airline ticket from an online travel agency?"
The DOT answered, "Ticket agents are required to make 'proper' refunds when service cannot be performed as contracted on a flight to, within or from the United States. The Department interprets the requirement for ticket agents to provide 'proper' refunds to include providing refunds in any instance when the following conditions are met: (i) an airline cancels or significantly changes a flight, (ii) an airline acknowledges that a consumer is entitled to a refund and (iii) passenger funds are possessed by a ticket agent. In enforcing the requirement for ticket agents to make 'proper' refunds, the Aviation Enforcement Office will focus on the totality of the circumstances."
"A ticket agent" is the statutory term for a travel agency or any other authorized agent of an airline. The term "proper" is a quotation from an old DOT regulation that the department was invoking. The question dealt only with an "online travel agency," but there is no legal reason why it would not apply to all agencies and consolidators.
The key here is the third requirement: The consolidator must make a refund when the "passenger funds are possessed by a ticket agent." Conversely, if the airline does not refund to the consolidator, the consolidator is not required to refund to the client.
Further, because the DOT used the word "proper" and stated that it will focus on the "totality of the circumstances," it is certainly conceivable that a consolidator's terms and conditions could explicitly state that it will not provide a refund under any circumstances, just as a merchant can allow no returns or exchanges, if that's what the buyer agrees to.
Even if a refund is due, a consolidator could induce the client to take a future trip credit instead, and if the client agreed, no refund would be due if the client changed his mind or never used the credit.
As to your second question, if the client cancels, neither the DOT notice nor the quoted Q&A applies. Rather, the client's rights are determined by the consolidator's terms and conditions, assuming that the consolidator can prove that your client agreed to them.