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DOT’s New Airline Refund Rules are a Godsend for Travelers

The Department of Transportation announced meaningful new rules last week. They couldn’t have come soon enough.

Last Wednesday at Washington’s National Airport, the U.S. Department of Transportation (DOT) announced sweeping new protections for airline travelers.  Considering how stressful air travel has become in recent years, asserting new rights for passengers is long overdue.

In the service of full transparency, I should note that I was asked by the DOT to introduce Transportation Secretary Pete Buttigieg when he made this announcement. I was surprised to be asked—I’ve been advocating on behalf of airline passengers for 24-years now, and my voice has been as loud as anyone’s in criticizing the Department. But I was happy to  participate, because some of the new rules have been eagerly awaited for many years.

Among the highlights of the new rules:

Mandatory refunds not just for flight cancellations but also “significantly delayed flights,” which for the first time are defined by the Department of Transportation (as in, 3 hours domestic and 6 hours international). Currently the existing rule on the DOT’s website states: “DOT has not specifically defined what constitutes a ‘significant delay.’…DOT determines whether you are entitled to a refund on a case-by-case basis.””

Refunds also for undelivered services, such as mishandled baggage or inoperative Wi-Fi. Believe it or not, currently you are not automatically entitled to refunds of such fees, which only adds insult to injury, for example, when you pay a checked bag fee and then don’t have it reimbursed when the bag is lost.

Now refunds will be automatic, thus eliminating the time and hassle for consumers (and DOT staffers) to track down missing payments. All of these refunds also are due within 20 calendar days, and cash must be the default.

Of course, DOT enforcement of all this will be critical once the rules kick in six months from now. But my organization, American Economic Liberties Project, praised the announcement as “a watershed moment for passenger protection in the airline industry.” We also joined four other consumer organizations in hailing the “landmark” rules, while our joint statement called on the House and Senate to codify these protections as federal law. While some Members of Congress have supported the DOT, unfortunately there are concerns that the pending Federal Aviation Administration (FAA) Reauthorization Act may not go as far, and Congress may not call for airlines to automatically refund fees. Sen. Elizabeth Warren (D-Mass.) tweeted that passengers “would still have to jump through hoops” for refunds if the legislation’s language is not changed

Airlines Sitting on Your Money

The airline industry’s collective behavior on not paying refunds has been reprehensible for years. As many have pointed out, a DOT rule has been on the books for years requiring carriers to issue cash refunds whenever a flight is canceled—and for ANY reason. The problem? Numerous airlines—both large and small, both domestic and foreign—have often simply ignored the mandate. What’s more, every single day airlines deceptively offer vouchers, credits, or mileage in place of cash, and unsuspecting consumers are duped.

At the height of the Covid pandemic in 2020-2021, Sen. Ed Markey (D-Mass.) and Sen. Richard Blumenthal (D-Conn.) estimated air carriers were sitting on more than $10 billion in unpaid refunds. What’s worse, they reported the nation’s seven largest airlines—Alaska, American, Delta, Hawaiian, JetBlue, Southwest, and United—refused to provide detailed answers to the senators on their companies’ refund and flight credit policies.

Those were dark days, made even darker by Buttigieg’s predecessor under President Trump, DOT Secretary Elaine Chao. She displayed indifference to millions of Americans during Covid lockdowns when they were banned from flying and yet couldn’t retrieve their much-needed refunds for rent or groceries. At one point Chao “called on” airlines to step up and do the right thing on refunds, yet she would not use her established authority to force them to do so—and they did not. As we wrote at the time in an op-ed for USA Today: “Unfortunately, Transportation Secretary Elaine Chao has stepped back from her duty to protect passengers.”

In September 2020, Colorado Attorney General Phil Weiser publicly called on Chao to act. Denver-based Frontier Airlines was generating more complaints than any other company in his state, but the AG’s office was powerless to act due to the federal preemption clause (included in the 1978 Airline Deregulation Act), which decrees that only the federal government has oversight of US carriers. State Attorney Generals, state courts, and state legislatures have no authority, leaving consumers with fewer rights when dealing with airlines than with virtually any other industry.

Chao did nothing in response to Weiser’s plea.  And that spoke to the frustration of federal preemption, which for decades now has effectively made the DOT the only sheriff overseeing airline misbehavior.

A few weeks ago, Secretary Buttigieg and AG Weiser announced new Memoranda of Understanding with 18 state attorneys general to work together in addressing consumer complaints on refunds and other passenger rights issues. After 46 years, this is an historic first.

DOT Flexing Its Muscles

There’s been other good news from DOT over the last year, which was especially welcome after the 2022 summer and holiday flight cancellation debacles. Consider:

• Throughout 2023, the DOT’s tougher stance with airlines paid dividends after the widespread messes of 2022: Flight cancellations hit a ten-year low at just 1.2% last year, after the Department issued warnings in advance of the holidays.

• In March 2023 Buttigieg became the first DOT Secretary to oppose an airline merger, when he spoke out against JetBlue-Spirit after the DOJ filed suit.

• We’ve seen a significant change in DOT enforcement, as shown by the response to the December 2022 Southwest Airlines holiday meltdown, with record fines and record reimbursements paid directly to passengers.

• The jury is still out on how the Federal Aviation Administration will address the Boeing meltdown. But so far the FAA has acted quickly and forcefully in responding to Alaska Airlines Flight 1282 and launching an investigation into Boeing’s widespread safety irregularities. As I told The New York Times in February, when comparing this to the FAA response after the two fatal Boeing 737 MAX crashes: “That is night and day compared to what happened in 2019.”

• More recently, the DOT announced it was investigating airline privacy policies, which is long overdue. The study will evaluate the “collection, handling, maintenance, and use” of passengers’ personal information, as well as whether airlines are “unfairly or deceptively monetizing or sharing that data with third parties.”

What’s Next?

We’ve been told there’s more good news in the DOT pipeline. This includes:

• Ending the most nefarious of airline fees, the infamous “family seating” issue that has seen toddlers given seat assignments apart from their parents.

Proposing to finally make passenger accommodations mandatory during flight delays and cancellations, including meals and hotels. This will emulate rules that have existed in places such as the European Union and Canada for years.

• Expanding protections for disabled passengers in wheelchairs.

As Secretary Buttigieg said last week at DCA Airport: “Taken collectively, under this Administration, USDOT has advanced the largest expansion of passenger rights, issued the biggest fines against airlines for failing consumers, and returned more money to passengers in refunds and reimbursements than ever before in the Department’s history.” It could not have come soon enough.