The Transportation Department on Friday issued an
enforcement notice, telling airlines that they remain obligated to pay out refunds
for flights that they have canceled.
The order was prompted by an increase in complaints from ticketed
passengers who have been denied refunds, the DOT said. Airlines instead are
often giving travel vouchers.
“The longstanding obligation of carriers to provide refunds
for flights that carriers cancel or significantly delay does not cease when the
flight disruptions are outside of the carrier’s control,” the DOT said in the
order. “The focus is not on whether the flight disruptions are within or
outside the carrier’s control, but rather on the fact that the cancellation is
through no fault of the passenger.”
The unprecedented schedule cuts airlines have made in
response to the Covid-19 crisis has left the airline industry with a $35
billion refund liability worldwide, according to a recent IATA estimate.
With airlines already struggling due to enormous losses in revenue, IATA
has been lobbying governments to suspend refund requirements. Thus far Canada,
Germany, the Netherlands and Colombia have issued favorable rulings for airlines.
Airlines have also acted individually to make refunds more
challenging to obtain. Some have stopped processing them entirely while many
others are making it difficult for customers to find information on applying
for refunds. In the U.S., United recently altered its refund process so that
international ticket holders will have to wait a year to get repaid for a
flight canceled by the airline.
In addition, 33 airlines (as of April 3) have unilaterally
suspended refunds through the GDSs or ARC’s Interactive Agent Reporting system,
forcing travel advisors to deal directly with the carrier.
Meanwhile, the sheer volume of refund transactions facing
airlines that are still processing them in the GDS has compelled ARC to delay
its weekly remittance schedule. ARC will now turn over refunds to agencies 10
days after the Sunday end of each business week, rather than five. That
decision, said ARC’s vice president of airline retailing and settlement Chuck Fischer, was
prompted by the fact that with current refund volumes, many airlines simply
can’t go through their procedures fast enough to meet the five-day schedule.
Fischer said ARC doesn’t like that some airlines have cut
off GDS refund processing, “but we can’t stop them from doing that.”
IATA, which oversees agent channel billing and settlement
for most of the world other than the U.S., has no such reluctance. In an open
letter to travel agents Thursday, IATA director general Alexandre de Juniac
said that the best solution right now for airlines and agents alike is for
governments to suspend refund requirements.
“This would remove the pressure that is currently on agents
to issue cash refunds at a time when airlines are making decisions based on
their own need to preserve cash,” he wrote.
The DOT’s enforcement notice pushes back against such
airline efforts. The department stated that it considers any contract of
carriage provision by an airline that denies refunds for cancellations or
significant schedule changes to be a regulatory violation. (The DOT does not
specifically define “significant schedule change.” A DOT spokesperson said it
is determined on a case-by-case basis.) The notice applies to both U.S. and
foreign carriers that operate in the U.S.
The department said that for now it will hold off on
enforcement action against airlines that have provided travel vouchers in lieu
of refunds to travelers with cancelled flights, but only if they meet three
• Carriers must contact passengers to
tell them they have an option for a refund.
• They must update contacts of
carriage to make refund rights clear.
• They must brief all relevant
personnel on the circumstances in which refunds should be made.
Correction: Chuck Fischer is ARC's vice president of airline retailing and settlement.