The US is making airlines pay for delaying refunds

Six airlines have to pay a total of $7.25 million in fines
Can't fly away from fines.
Can't fly away from fines.
Photo: Joe Raedle (Getty Images)
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If airlines won’t refund customers on their own accord, the US government will make them.

Six airlines that together owed customers refunds to the tune of more than half a billion dollars for “canceled or significantly changed” flights were fined a total $7.25 million for taking too long to process those payments, the Department of Transport (DOT) said in a press release yesterday (Nov. 14). The statement also hinted that more fines are on the way: “The department expects to issue additional orders assessing civil penalties for consumer protection violations this calendar year.”

US law says passengers are entitled to a full refund, including additional fees for baggage and seat assignments, if their flight is canceled or significantly altered, and they turn down other alternatives—another flight, vouchers—the airline is offering.

Charted: Airlines instructed to give refunds and pay fines

Airline customers deserve refunds, the US transportation secretary says

“When a flight gets canceled, passengers seeking refunds should be paid back promptly. Whenever that doesn’t happen, we will act to hold airlines accountable on behalf of American travelers and get passengers their money back. A flight cancellation is frustrating enough, and you shouldn’t also have to haggle or wait months to get your refund. US transportation secretary Pete Buttigieg

When is a flight delay or change eligible for a refund?

Until a few months ago, the DOT urged airlines to refund customers if there were delays or changes—but these requirements weren’t codified. Carriers and agents were expected to issue prompt refunds, but the definition of prompt was not clear.

Over the last few months, the government has tried to bring some method to the madness:

May: The transport department clarified what a “prompt” refund is for airlines. It gave the companies 7 business days to process a credit card refund, and 20 days for cash or check payments. For ticketing agents, though, “prompt” is left open-ended.

July: The Biden administration publishes its first ever bill of rights for disabled travelers. The same month, it calls on airlines to seat parents and children together free of charge.

August: DOT releases new proposed rules defining “significant changes” as the departure and/or arrival times changing by three hours or more for a domestic flight or six hours or more for an international flight; the departure or arrival airport changing; airlines adding more connections than the originally booked itinerary had, and change in the type of aircraft flown “if it causes a significant downgrade in the air travel experience or amenities available onboard the flight.” With the announcement, the clock starts ticking, giving the public 90 days to comment on the rulemaking before the DOT reviews and alters or implements it.

September: The Biden administration publishes a new rule to fight “hidden fees” in airline costs

If airlines deny refunds in circumstances where customers believe they’re rightfully owed one, they can lodge a complaint with the DOT via an online form.

Airline delays and cancellations, by the digits

2,321: complaints about cancellations, delays, or other deviations from airlines’ schedules in August

1,432: complaints concerning refunds in August

$8.1 million: civil penalties by the Department’s Office of Aviation Consumer Protection (OACP) in 2022, including the recent fine, is the largest amount ever issued in a single year by that office

10: airlines OACP was actively pursuing action against last month for extreme delays in providing refunds for flights the airlines canceled or significantly changed

$92 million: Refunds and redeemed credits and vouchers issued to customers who voluntarily canceled their non-refundable tickets during the pandemic and were not entitled to a refund under US law,” according to Frontier Airlines spokesperson Jennifer De La Cruz

100: days Air India took to issue refunds for more than half of the 1,900 complaints with the DOT

Airline of interest: Frontier

Frontier Airlines suddenly tweaked its qualification for a refund in March 2020. A “significant schedule change,” defined as changes of three hours until then, now referred to flights that didn’t leave within the same calendar day as the original departure time. And the airline applied this alteration retroactively to deny valid requests.

“Frontier was a bad player in all this, and they deserve to be fined, and we’re glad they are paying the refunds they were supposed to pay, but we are very critical of how the DOT just seems to not want to go after the biggest fish, the ones causing the most problems,” William McGee of the American Economic Liberties Project, a non-profit focussed on corporate accountability and antitrust regulation, told Fortune.

Frontier is an ultra low-cost carrier with a market share of around 3%. Bigger market-hoggers like American, Delta, SouthWest and United, who rank among the biggest offenders when it comes to flight cancellations—largely because of staffing shortage—have been left off the DOT’s list.

But that may be because they’re proactively handing out refunds anyway. Delta has given customers refunds to the tune of $6 billion since the start of 2020. Southwest said credits for canceled or delayed flights will not have an expiration date.

Use this: The transport department’s dashboard

An interactive dashboard created by the DOT provides a summary of how ten US airlines and their regional operating partners handle delays and cancellations, so customers can make informed decisions before booking. The dashboard also shows passengers what compensation— hotel stays, meal vouchers, and free rebooking—they’re owed when their flights change.

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