The U.S. Department of Transportation today announced their final rule requiring automatic refunds of airline tickets and ancillary service fees. We believe this will open a Pandora’s box of new regulations that will result in higher airfares and airline bankruptcies.
On Wednesday (April 24, 2024), The U.S. Department of Transportation (DOT) announced the final rule requiring automatic refunds of airline tickets and ancillary service fees. Under the new rule, airlines will have to automatically provide cash refunds when flights are canceled or significantly changed, as well as if checked bags are significantly delayed. Additionally, airlines will be required to provide immediate refunds if purchased ancillaries are not delivered.
In Wednesday’s final rule announcement, U.S. Transportation Secretary, Pete Buttigieg, said,
“Passengers deserve to get their money back when an airline owes them - without headaches or haggling. Our new rule sets a new standard to require airlines to promptly provide cash refunds to their passengers.”
Under the new rule, if a flight is canceled or ‘significantly’ changed, and the customer does not accept alternative transportation or travel credits, they will be entitled to a refund. The rule defines ‘significant change’ as departure and arrival times of more than three hours domestically and six hours internationally, as well as departures and arrivals from a different airport, increased connections, downgrades to a different class of service, connections at different airports, or flights on different planes that are less accommodating to a person with a disability.
Additionally, if a customer files a mishandled baggage report, they will be entitled to a refund of their checked bag fee if it is not delivered within 12 hours of their domestic flight arriving at the gate, or 15-30 hours of the arrival of an international flight arriving at the gate, depending on flight duration. Passengers will also be entitled to a refund if purchased ancillaries such as Wi-Fi, seat selection, or inflight entertainment, is not delivered, a rule which in our opinion, is the only one that makes any sense.
The final rule requires ‘automatic’ refunds from airlines in the original form of payment, with ‘prompt’ refunds within seven days for credit card purchases, and within 20 days for other payment methods. Carriers will no longer be able to substitute vouchers, travel credits, or other forms of compensation, unless affirmatively selected by the customer. Airlines must also refund the full amount of the fare, minus any portion already used, including government-imposed taxes and fees, airline fees, and taxes, whether or not these taxes and fees are refundable to the airlines.
U.S. airlines will also now be required to provide ‘prompt’ notification to customers affected by a canceled or significantly changed flight of their right to a complete refund. In the case where consumers are restricted by a government or advised by a medical professional not to travel to, from or within the U.S., due to a serious communicable disease, the final rule requires airlines to provide travel credits or vouchers, which are transferable and valid for at least five years from the issue date.
The U.S. DOT is also proposing additional onerous rules such as the banning of family seating fees, making passenger compensation and amenities mandatory for airline-caused flight delays or cancellations, and expanding the rights of disabled passengers using mobility devices. All U.S. airlines will be required to comply with the new regulations within six months for the automatic refund provision, and 12 months for transferable travel vouchers when customers are advised not to travel due to a serious communicable disease.
In response to the U.S. DOT’s final rule regarding automatic airline refunds, BREITFLYTE Airline News’ Editor-in-Chief, Joe Breitfeller, said,
“We would like to express in the strongest terms how misguided the U.S. Department of Transportation’s effort to re-regulate the U.S. airline industry is. The airline business is one of the most complex industries in the world, and the truth is, adjusted for inflation, the industry has not collectively earned a profit since the Wright Brothers’ historic flight at Kitty Hawk, North Carolina on December 7, 1903. Without government subsidies during the COVID-19 pandemic, the U.S. would have seen a host of airline bankruptcies and/or failures, subsidies that won't likely be available for future crises.
The industry is resilient, but often operates on a razor’s edge, and is not generally as profitable as the average consumer thinks. Some U.S. airlines actually earn more profit through co-branded credit card marketing deals than they do from operating the airline, and even this is now being scrutinized. We view the onerous new DOT rules as an effort to curry favor with consumers before the 2024 elections, without care or regard to the unintended consequences and damage it will cause to the U.S. airline industry. These are the kind of rules made by pencil-pushers from their ivory tower offices in Washington D.C., not by serious-minded professionals who understand the airline industry.
“Speaking specifically about the regulation requiring refunds for flights departing or arriving at a different airport than scheduled, the last thing the airline industry needs is added pressure on pilots to save their company money by second guessing diversion decisions, which could result in tragic consequences. This could be specifically acute for airline startups, or those facing financial headwinds. Additionally, the new rules ‘socialize’ the entire U.S. airline industry, taking away the competitive advantage that certain airlines may have had in regard to their specific refund policies. Sure, customers have been inconvenienced by airline refund policies, but the free market was working. Leave it to the U.S. Department of Transportation to open the anti-American, anti-free market Pandora’s Box of airline re-regulation.
To read the 272 page final rule tome regarding airline refunds and other consumer protections, please click here.
Source(s): U.S. Department of Transportation, BREITFLYTE Airline News Network