The U.S. Department of Transportation on Friday issued an enforcement notice to airlines, saying they are required to provide refunds, not vouchers for future travel, for flights that have been canceled or required a significant schedule change.
The notice, issued by DOT assistant general counsel for aviation enforcement and proceedings Blane Workie, noted "an increasing number of complaints and inquiries" from passengers who said they have been denied refunds for canceled or significantly delayed flights and instead were offered vouchers for future travel. While the DOT said carriers, both domestic and international that operate in the United States, can offer passengers that as an option, they also are required to offer—and make it clear to passengers that they offer—a refund.
"Although the Covid-19 public health emergency has had an unprecedented impact on air travel, the airlines' obligation to refund passengers for canceled or significantly delayed flights remained unchanged," Workie wrote in the notice. "The longstanding obligation of carriers to provide refunds for flights that carriers cancel or significantly delay does not cease when the flight disruptions are outside of the carrier's control—e.g., a result of government restrictions."
Workie said DOT would allow carriers a chance to become compliant "before taking further action" and would not pursue action against carriers offering vouchers so long as they make it clear in their policy and communication with passengers that a refund is an option.
In terms of "significant delays," airlines have been adjusting their policies of what triggers a refund in light of the Covid-19 crisis. United Airlines, for example, last month moved its threshold for a refundable delay from two hours to 25 hours, though it later amended that to six hours—but that refund currently comes in the form of a credit that becomes a refund if not used within one year. JetBlue recently changed its policy on refunds to apply only to flights unable to be rescheduled within more than a day of the original flight, though that applies only to flights from mid-April through the end of May.
Whether such changes will be deemed acceptable by DOT remains to be seen. In a letter to travel agents on Thursday, International Air Transport Association director general and CEO Alexandre de Juniac said the airline group is pushing regulators to modify such requirements around the world and allow for vouchers instead of cash refunds. Regulators in Canada, the Netherlands and Colombia have taken that approach, he said.
IATA has estimated that airlines' liability for refunds globally is about $35 billion.
"Most airlines are spending more cash in reimbursing their passengers than they receive in new booking revenues," according to de Juniac. "In this context, airlines' most urgent need is to keep their remaining liquidity to pay salaries and face their fixed cost. It is practically impossible for industry players to find sufficient financial means to keep the air travel value chain operating in the short time that airlines have before facing bankruptcy."