Airlines must now pay automatic refunds for canceled flights
Airlines will now have to provide automatic refunds to travelers if flights are canceled or significantly altered under a new U.S. Department of Transportation rule, a change that could drive up costs across the industry.
The final regulation released Wednesday outline the circumstances in which passengers are entitled to refunds for all travel to, from and within the U.S.
The goal is to make it easier for people to get money back and to make refund policies more consistent from one airline to the next.
According to the department, complaints related to airlines and ticket agents rejecting or delaying refunds made up 87% of all air-travel service complaints at the height of the COVID-19 pandemic in 2020.
“Passengers deserve to get their money back when an airline owes them — without headaches or haggling,” Transportation Secretary Pete Buttigieg said in a written statement.
Under the new rule, passengers will be entitled to refunds if there is a “significant change” to their flights. These include:
Departure or arrival times that move by more than three hours domestically or six hours for international flights
Being downgraded to a lower class than originally purchased
Change of departure or arrival airport
Increase in number of connections
Changes to connecting airports or planes flown if they are less accommodating for people with disabilities
Travelers will also get refunds for checked-bag fees if bags are lost and not delivered within 12 hours of a domestic flight’s gate arrival.
International flights will have from 15 to 30 hours to return lost bags, depending on their length.
Anyone who pays for a service, such as in-flight Wi-Fi or entertainment, and doesn’t receive it will also get their money back.
In addition, DOT made changes to make it easier for the passengers to receive the money they’re owed by requiring prompt automatic refunds in cash or through the original form of payment. Buttigieg said during a news conference at Ronald Reagan Washington National Airport on Wednesday that the bulk of the new requirements will go into effect in about six months.
The refund changes are poised to add significant costs across the airline industry, which could have a disproportionate impact on low-cost carriers, according to Seaport Research analyst Daniel McKenzie. “To the extent low cost carriers have to add costs to comply, reduce growth and/or downsize, they become less competitive,” McKenzie said in a note.
The Airlines for America trade group said its member carriers already abide by and often exceed regulations on consumer protection.
“U.S. airlines are providing more options and better services while ticket prices, including ancillary revenues, are at historic lows,” the group said.