Strict instant refund rules for US flights

Kiwi passengers are in line for hundreds of millions of dollars in refunds a year as airlines scramble to comply

Air New Zealand is working through new rules for flights in and out of the United States which require automatic refunds for disruption and tackle “junk fees” for unexpected addons.

The rules coming in next year could be worth $840 million a year in fee savings to affected passengers.

The United States is a key part of Air New Zealand’s long-haul network and consumer protection for air travellers is more comprehensive than in this country.

“Air New Zealand will continue to comply with all United States Department of Transport regulations,” said chief corporate affairs officer Mat Bolland. “Our teams will work through the implementation of these changes for all customers flying to and from the US when they come into effect in 2025.”

The US Department of Transport’s (DoT) new rules are aimed at holding airlines to clear and consistent standards when they cancel, delay or substantially change flights, and will require automatic cash refunds to be issued within weeks. They will also require them to reveal all fees before a ticket is bought.

“Passengers deserve to know upfront what costs they are facing and should get their money back when an airline owes them — without having to ask,” said US Transportation Secretary Pete Buttigieg.

The rules were part of the US administration’s aim to lower costs for consumers and take on “corporate rip-offs”, a department statement said.

The first rule requires airlines to promptly provide passengers with automatic cash refunds when owed because their flights are cancelled or significantly changed, their checked bags are significantly delayed, or the ancillary services, such as Wi-Fi, they purchased are not provided.

“Without this rule, consumers have to navigate a patchwork of cumbersome processes to request and receive a refund — searching through airline websites to figure out how to make the request, filling out extra ‘digital paperwork’, or at times waiting for hours on the phone.” Passengers would also receive a travel credit or voucher by default from many airlines instead of getting their money back, so they could not use their refund to rebook on another airline when their flight was changed or cancelled without navigating a cumbersome request process.

The final rule requires refunds to be:

Automatic: Airlines must automatically issue refunds without passengers having to explicitly request them or jump through hoops.

Prompt: Airlines and ticket agents must promptly issue refunds within seven business days of refunds becoming due for credit card purchases and 20 calendar days for other payment methods.

Cash or original form of payment: Airlines and ticket agents must provide refunds in cash or whatever original payment method the individual used to make the purchase, such as credit card or airline miles. Airlines may not substitute vouchers, travel credits, or other forms of compensation unless the passenger affirmatively chooses to accept alternative compensation.

Full amount: Airlines and ticket agents must provide full refunds of the ticket purchase price, minus the value of any portion of transportation already used. The refunds must include all government-imposed taxes and fees and airline-imposed fees.

Protecting against surprise airline junk fees

The DoT is requiring airlines and ticket agents to tell consumers about what fees are charged for checked bags, carry-on bags, for changing a reservation or cancelling a reservation. This ensures consumers can avoid surprise fees when buying tickets from airlines or ticket agents, including brick-and-mortar travel agencies or online travel agencies.

The rule will help consumers avoid unneeded or unexpected charges that can increase quickly and add significant cost to what may, at first, look like a cheap ticket.

Extra fees, such as checked baggage and change fees, have been a growing source of revenue for airlines, while also becoming more complex and confusing for passengers over time.

Airlines are required to:

Disclose baggage, change, and cancellation fees upfront: Each fee must be disclosed the first time that fare and schedule information is provided on the airline’s online platform — and cannot be displayed through a hyperlink.

Explain fee policies before ticket purchase: For each type of baggage, airlines and ticket agents must spell out the weight and dimension limitations they impose. They must also describe any prohibitions or restrictions on changing or cancelling a flight, along with policies related to differences in fares when switching to a more or less expensive flight.

Share fee information with third parties: An airline must provide useable, current, accurate information regarding its baggage, change, and cancellation fees and policies to any company that is required to disclose them to consumers and receives fare, schedule, and availability information from that airline.

Inform consumers that seats are guaranteed: When offering an advance seat assignment for a fee, airlines and ticket agents must let consumers know that purchasing a seat is not necessary to travel, so consumers can avoid paying unwanted seat selection fees.

Provide standard, passenger-specific fee information: Consumers can choose to view passenger-specific fee information based on their participation in the airline’s rewards programme, their military status, or the credit card that they use — or they can decide to stay anonymous and get the standard fee information.

End discount bait-and-switch tactics: The final rule puts an end to the bait-and-switch tactics some airlines use to disguise the true cost of discounted flights. It prohibits airlines from advertising a promotional discount off a low base fare that does not include all mandatory carrier-imposed fees.

Refund rules in the US (and Europe) were much stricter during the pandemic, forcing Air New Zealand to refund tickets for flights through the US or those sold there.

Consumer NZ has campaigned for stronger air passenger protection in New Zealand but planned new rules were watered down when aviation laws were overhauled by the last Government.

In response to a Consumer NZ push, Air New Zealand and Jetstar updated their websites to provide better information for disrupted passengers.

“However, we are still concerned that the airlines are not always providing accurate information in their notifications to disrupted passengers,” Consumer NZ said.