DOT proposes to give flyers more opportunities to get a refund

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In all cancellations or significant itinerary changes, passengers would be entitled refunds for ancillary purchases such as checked bags.
In all cancellations or significant itinerary changes, passengers would be entitled refunds for ancillary purchases such as checked bags. Photo Credit: Halfpoint/Shutterstock

New regulations proposed by the Transportation Department would require airlines to offer refunds when they delay domestic flights for three hours or longer or delay international flights for six hours or longer.

Under existing regulations, airline customers are entitled to a refund when a carrier cancels or significantly delays a flight. However, there is no definition of a significant delay. The DOT's proposed rule establishes a threshold. 

Also, proposed regulations would require airlines to issue flight credits, vouchers or refunds to customers who choose to cancel their travel due to advice from a doctor or because of government restrictions or guidance during a public health emergency. 

"When Americans buy an airline ticket, they should get to their destination safely, reliably and affordably," DOT secretary Pete Buttigieg said in a prepared remark. "This new proposed rule would protect the rights of travelers and help ensure they get the timely refunds they deserve from the airlines."

Wednesday's proposals came just two days after a group of House and Senate Democrats filed legislation calling for similar measures. But this new rulemaking has long been in the works at the DOT and aims to address a spate of consumer complaints related to the reticence of some airlines to provide refunds during the pandemic, especially during the pandemic's first few months. 

Airlines for America (A4A) didn't comment on the DOT proposal. The trade group, however, did issue a statement about the newly filed Cash Refunds for Flights Cancellations Act, noting that in 2020 and 2021, airlines issued a combined $21 billion in cash refunds, compared with $7.5 billion in 2019. 

"A4A member carriers comply with federal laws and regulations regarding cash refunds," the trade group said. "Carriers strive to provide the highest level of customer service and are committed to working with travelers to address their individual circumstances."

Legal Briefs: The DOT wants agencies on hook for air refunds

In a nutshell, the DOT is proposing that travel agencies be responsible -- equally with the airline -- for making refunds when an airline cancels or significantly delays a flight.

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Flyers whose itineraries are moved forward by three or six hours also would be entitled to a refund should they choose not to travel. In addition, the rule would stipulate several other itinerary changes that would entitle airline customers to a refund. They include changes to the arrival or departure airport, the addition of a connection point to the itinerary, cases in which the customer is downgraded to a lower seating class, and situations in which an aircraft change downgrades the plane's available amenities. 

In all cancellations or significant itinerary changes, passengers would be entitled refunds for ancillary purchases such as checked bags. 

Existing regulations don't require airlines to offer credits or refunds for trips canceled by their customers. But the DOT's proposed rule would require carriers to offer non-expiring flight credits to customers who are restricted from travel during an official public health emergency due to government orders or border closures. The same obligation would apply to customers who choose not to fly, consistent with WHO or CDC public health guidance.

And when there is no public health emergency, flyers would be entitled to non-expiring flight credits if they cancel travel plans on the advice of their doctor. 

Customers booked with airlines that accept "significant government financial assistance" in relation to a future public health emergency would be entitled to a refund rather than only a flight credit in the above scenarios. 

The proposed rules do offer at least one provision that is favorable to airlines and the travel advisors who would have to process all refunds and flight credits: They could charge a processing fee as long as that fee is prominently disclosed at the time the ticket is sold. 

One final element of the proposed rules relate to disclosure. In cases where customers are entitled to a refund, airlines and travel agents would continue to be allowed to offer travel credits or vouchers in lieu of those refunds but only after first informing customers of their right to a refund. That provision would address the common airline practice of not informing passengers about the option of a refund when a flight is canceled.

In a statement, ASTA vice president of advocacy Eben Peck said ASTA is reviewing the entire DOT proposal.

ASTA comments on the proposed rules

"At first glance, it contains several elements we supported in DOT proceedings on this rulemaking, including codifying airline changes/cancellations that trigger a refund and expanding refund rights for passengers unable to fly due to pandemic-related government travel bans."

Peck, however, noted concern that the proposal would make it the responsibility of travel agencies to provide refunds in cases when an agency books a flight for a client but the funds are in the control of the airline or another entity. The DOT proposes to make agencies the responsible party in such cases because consumers can't be expected to know who is actually holding the money.

The DOT is accepting public comments on the proposed regulations for 90 days. Comments can be made at the regulations.gov website, docket number DOT-OST-2022-0089.

In addition, the department's Aviation Consumer Protection Advisor Committee will convene on Aug. 22 to discuss the proposed regulations.

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