In recent years, the airline industry has been under a magnifying glass regarding its refund policies, particularly during flight disruptions caused by COVID-19. The prior policy by the Department of Transportation (“DOT”) frequently left passengers at the mercy of airline carrier discretion when flights were canceled or seriously delayed, forcing many to accept non-refundable vouchers instead of cash refunds or, in some cases, no compensation at all.[i] This gap in consumer protection has led to a public outcry from travelers pleading for policy refinement.
Consequently, the DOT has enacted a new rule intended to increase the scope of passenger protections by ensuring that airlines facilitate straightforward experiences for consumers to get refunds by implementing uniform requirements that airlines must abide by. This requires airlines to issue automatic refunds to passengers when their flights have been canceled, making the process swift for consumers and avoiding substantial difficulty throughout the refund process.[ii]
The regulation is part of an extensive effort to heighten consumer protections in air travel. This legislation emerged in response to significant complaints during the COVID-19 pandemic, where many passengers were left without timely refunds for canceled flights.[iii] Traditionally, airlines were allowed to offer vouchers or delay cash refunds on a discretionary basis, largely with limited accountability. This new rule from the DOT seeks to address this deficit by laying out strict regulations that will ensure that passengers will be refunded instantly upon cancellation or delay of flights.[iv]
According to the Biden-Harris Administration, the rule provides for automatic refunds, as well as full information to passengers from the operating carrier about their rights and choices.[v] This proactive approach toward developing a more consumer-friendly environment aligns airline practices with the expectation of accountability that is due. Lawmakers have advocated for and recommended similar policies to strengthen passenger rights.[vi] However, with these developments, some very valid challenges arise concerning the rule’s requirement for passengers to give up their tickets to avail themselves of refunds.
The new rule on airline refunds offers several key benefits to passengers, marking a new frontier for the consumer protection of air travel. First, the rule bolsters transparency by requiring that airlines provide customers with clear and consistent information on processes for refunds.[vii] This helps passengers understand what happens when a flight is canceled or seriously changed, along with their entitlements as affected passengers. More informed travelers will now feel more assured when booking flights and communicating with carriers. Additionally, the rule introduces stronger means of enforcement that may, over time, increase the percentage of airlines processing refunds in a timely manner. In the past, passengers faced long delays in getting refunds, which usually proved frustrating and costly because of the lack of rules governing such refunds.[viii] Moreover, this rule responds to a growing call to hold businesses accountable for consumer rights. It recognizes sacrifices made by passengers in the form of travel expenses and, as such, provides protection by limiting the discretionary power of airlines. This new rule of the DOT enhances the overall travel experience because it builds an environment where consumers feel valued and protected.
However, while there are noted benefits, the requirement for passengers to give up their tickets in the refund process complicates matters and suggests there are still further refinements required for this proposed solution to fully meet consumer needs in the post-pandemic setting. This is a disadvantage of the rule that creates an undue hardship for consumers who would want to continue using their tickets while also being compensated for the inconvenience of delays. Although this new regulation indeed promotes transparency and accountability among airlines, the rule has put passengers in a predicament by forcing them to choose between forfeiture or refund without providing a middle-ground option.
When comparing the new DOT regulation to the European Union (“EU”) regulations, the rule from the DOT appears rather sparse with respect to passenger protection. The EU has long set out extensive regulation concerning passenger protection under EU Regulation 261/2004. This regulation mandates that passengers receive compensation for flight cancellations and delays, including cash refunds, without the requirement to abandon tickets.[ix] The EU model respects passenger inconvenience by offering compensation alternatives that treat passenger rights and choices with greater consideration. Prior to the new DOT rule, U.S. regulations were less comprehensive, with minimal consumer protections. Airlines held the discretion over whether vouchers would be issued rather than cash refunds. This left many passengers with little satisfaction during disruptions and few options for further action.[x]
On the other hand, EU law imposes strict liability on airlines, ensuring compensation is granted for delays and cancellations irrespective of the airline’s operational situation. The new DOT rule is a quantum leap for U.S. passenger rights through the imposition of duties on airlines.[xi] Nevertheless, it retains the limitation of a refund being conditioned upon the surrender of passengers’ current travel reservations. This straightforward divergence in conditions between the U.S. and the EU highlights the much more passenger-friendly principles that form the foundation of the EU regulations, whereby a passenger may be compensated for delays and cancellations while keeping their current travel plans intact. As the U.S. continues to reform airline refund policies, consideration of the effectiveness of EU regulations may provide valuable insight into creating a more just and responsive system for air travelers in years to come.
While the new DOT rule takes steps in the right direction compared to prior regulations, the fact that passengers must forfeit their tickets to get a refund is a key inconvenience that should be accounted for. This condition presents hurdles for passengers while not providing a true remedy. The rule does not compensate for the inconvenience caused to the traveler or the financial loss they may incur, especially in cases of last-minute flight cancellation or change. This can result in high external costs for members of society who rely on airlines, including low-income passengers or those who travel out of necessity for business purposes. For these categories of passengers, losing their ticket in exchange for a refund or taking the flight is not a binary decision since they rely on flying schedules that accommodate their financial or personal circumstances.[xii] As the Biden administration has noted, the automatic refund rule ensures that refunds should be less problematic in processing.[xiii] However, this inadvertently fails to account for the costs incurred by passengers as a result of the mere inconvenience of cancellations and delays. In this regard, it would be advisable for the DOT to institute changes to the rule to allow partial or full refunds without requiring forfeiture of the passenger’s ticket. This flexibility would fortify consumer rights while building goodwill between airlines and passengers.
Considering the complexities of travel and the diversity of consumer needs, the DOT can devise a fair refund policy that allows passengers to make real choices while still providing economic protection. More importantly, as an added protection to consumers, the government should establish a set framework for compensation for passengers who have been inconvenienced by delays by creating guidelines for compensation based on delay time and trip mileage. In such a manner, the DOT can properly weigh the accountability of the airlines and shift the burden of paying costs to airlines in certain cases. Such an amendment to the new DOT rule will surely increase passenger rights by creating more equitable remedies for passengers in vulnerable situations.
[i] See PJ Randhawa et al., New Airline Refund Policies to Take Effect This Summer: Here’s What Is Changing, NBC Chi. (Jun. 10, 2024, 11:13 PM), https://www.nbcchicago.com/consumer/new-airline-refund-policies-to-take-effect-this-summer-heres-what-is-changing/3458223/.
[ii] See Dawn Hasbrouck, New Automatic Refund Rule for Flight Disruptions, Fox 32 Chi. (Aug. 8, 2024, 11:02 AM), https://www.fox32chicago.com/news/new-automatic-refund-rule-flight-disruptions.
[iii] See Randhawa et al., supra note i.
[iv] See id.; see also Final Rule: Refunds and Other Consumer Protections, Dep’t of Transp., https://www.transportation.gov/airconsumer/refundsfinalruleapril2024 (last visited Nov. 4, 2024).
[v] See Biden-Harris Administration Announces Final Rule Requiring Automatic Refunds for Airline Tickets and Ancillary Service Fees, U.S.Dep’t of Transp. (Apr. 24, 2024), https://www.transportation.gov/briefing-room/biden-harris-administration-announces-final-rule-requiring-automatic-refunds-airline
[vi] See David Shepardson, U.S. Lawmakers Seek to Strengthen Bill to Ensure Quick Airline Refunds, Reuters (May 8, 2024, 12:15 PM), https://www.reuters.com/business/aerospace-defense/us-lawmakers-seek-strengthen-bill-ensure-quick-airline-refunds-2024-05-07/.
[vii] See Refunds and Other Consumer Protections: 2024 FAA Reauthorization, Fed. Reg., https://www.federalregister.gov/documents/2024/08/12/2024-17602/refunds-and-other-consumer-protections-2024-faa-reauthorization (last visited Nov. 4, 2024).
[viii] See Alison Fox, A Guide to the Department of Transportation’s Airline Refund Rules, Travel + Leisure (Apr. 29, 2024), https://www.travelandleisure.com/us-airlines-refund-rules-dept-transportation-8640403; see also Randhawa et al., supra note i.
[ix] See Sally French, Should U.S. Airlines Pay Passengers for Delays Like the EU?, NerdWallet (Apr. 5, 2023, 5:10 AM), https://www.nerdwallet.com/article/travel/should-u-s-airlines-pay-passengers-for-delays-like-the-eu.
[x] See id.
[xi] See Refunds and Other Consumer Protections: 2024 FAA Reauthorization, supra note vii.
[xii] See Shepardson, supra note vi.
[xiii] See Biden-Harris Administration Announces Final Rule Requiring Automatic Refunds for Airline Tickets and Ancillary Service Fees, supra note v.
