The U.S. Department of Transportation (DOT) has finalized a rule to strengthen protections for air travelers seeking refunds when flights are canceled or significantly changed. This landmark regulation, effective June 25, 2024, mandates automatic refunds in certain situations and defines key terms to provide clarity and consistency for consumers. This article breaks down the new rules, ensuring you understand your rights regarding airline refunds under the Department of Transportation guidelines.
I. Key Provisions of the Final Rule
The Department of Transportation’s new rule addresses several critical areas to enhance airline passenger rights concerning refunds. Here’s a summary of the major provisions:
Definition of Cancelled Flight
A cancelled flight is now clearly defined by the Department of Transportation as a flight that was listed in an airline’s Computer Reservation System (CRS) at the time of ticket sale but was not operated by the carrier. This definition ensures that regardless of the reason for non-operation, if the flight is listed and then not flown, it’s considered cancelled under DOT regulations.
Definition of Significant Change of Flight Itinerary
The DOT has established a detailed definition for a “significant change of flight itinerary,” triggering refund eligibility. These changes include:
- Significant Departure/Arrival Time Changes: Departures moved forward by three hours or more for domestic flights, or six hours or more for international flights, and similar delays in arrival times.
- Airport Changes: Changes to origin or destination airports.
- Increased Connections: Addition of more connection points to the itinerary.
- Downgrade in Service: Being downgraded to a lower class of service.
- Accessibility Changes for Passengers with Disabilities: Changes in connecting airports or aircraft that negatively impact accessibility features.
Entity Responsible for Refunding Airline Tickets
The rule clarifies who is responsible for issuing refunds. U.S. and foreign air carriers are obligated to provide prompt refunds when they are the merchant of record, including for codeshare and interline itineraries. Ticket agents are also required to provide prompt refunds when they are the merchant of record. This ensures clarity and avoids consumers being caught between airlines and ticket agents when seeking refunds.
Notification of Right to Refund
Airlines and ticket agents are now required to inform consumers of their right to a refund before offering alternative transportation, travel credits, vouchers, or other compensation. This transparency ensures passengers are aware of their options and can make informed decisions. Carriers must also provide prompt notifications to consumers affected by flight changes, outlining their rights to refunds, alternative options, and airline policies.
“Prompt” Ticket Refund Defined
The DOT specifies what constitutes a “prompt” refund:
- Credit Card Purchases: Refunds must be provided within 7 business days.
- Other Forms of Payment: Refunds must be provided within 20 calendar days for purchases made with cash, check, or other payment methods.
“Business days” are defined as Monday through Friday, excluding Federal holidays, providing a clear timeframe for credit card refunds.
Automatic Refunds of Airline Tickets
The rule mandates automatic ticket refunds in several scenarios, removing the burden on consumers to explicitly request a refund when they are clearly entitled to one. These scenarios include:
- Carrier cancels a flight and offers no alternatives or compensation.
- Carrier significantly changes a flight, consumer rejects it, and no alternatives or compensation are offered.
- Consumer rejects significantly changed flight, alternative transportation, or compensation offered in lieu of a refund.
- Consumer doesn’t respond to offers by a carrier-set deadline, and the carrier policy treats non-response as rejection.
- Carrier offers only travel credits/vouchers for a significantly changed or canceled flight, and the consumer does not respond.
- Carrier offers alternatives and compensation without a response deadline, and the consumer does not respond and does not take the flight.
Carriers can set reasonable deadlines for consumers to respond to flight changes or alternative offers, but these policies must be clearly established and published.
Refunding Fees for Significantly Delayed Bags
Airlines are now required to automatically refund checked baggage fees when bags are significantly delayed. The timeframes for significant delay are:
- Domestic Itineraries: Baggage delivered more than 12 hours after arrival.
- International Itineraries (Flight Segment ≤ 12 Hours): Baggage delivered more than 15 hours after arrival.
- International Itineraries (Flight Segment > 12 Hours): Baggage delivered more than 30 hours after arrival.
Consumers must file a Mishandled Baggage Report to be eligible for a baggage fee refund due to significant delay.
Refunding Ancillary Services Fees for Services Not Provided
Airlines must automatically refund fees for ancillary services that passengers paid for but did not receive. This includes services like Wi-Fi, seat selection, or in-flight entertainment that are unavailable on the flight.
Providing Travel Credits or Vouchers to Consumers Affected by a Serious Communicable Disease
For consumers unable or advised not to travel due to a serious communicable disease, airlines are required to offer travel vouchers or credits that are:
- Transferable: Can be used by another person.
- Valid for at Least 5 Years: From the date of issuance.
This provision covers situations where:
- A consumer is advised not to travel during a public health emergency to protect themselves from a serious communicable disease and purchased their ticket before the public health emergency was declared.
- A consumer is prohibited from travel or required to quarantine due to a serious communicable disease and purchased their ticket before the restrictions were imposed.
- A consumer is advised not to travel because they have or may have a serious communicable disease that would pose a direct threat to others.
Airlines may require documentary evidence, such as a medical professional’s statement or government orders, to support these requests, unless the Department of Health and Human Services (HHS) advises against such documentation requirements.
Service Fees by Ticket Agents and Processing Fees
Ticket agents are allowed to retain service fees charged for issuing original tickets, provided these fees are clearly disclosed and are for services beyond payment processing. However, airlines are prohibited from retaining processing fees for issuing required refunds when they cancel or significantly change a flight. Airlines may retain a processing fee from the value of a required travel credit or voucher provided due to a serious communicable disease.
II. Statutory Authority and Rationale
The Department of Transportation is issuing this rule under its authority to prevent unfair or deceptive practices in air transportation (49 U.S.C. 41712) and to ensure safe and adequate interstate transportation (49 U.S.C. 41702), as well as specific statutory mandates related to baggage fee refunds (49 U.S.C. 41704 note) and ancillary service fee refunds (49 U.S.C. 42301 note prec.).
The DOT has determined that it is an unfair business practice for airlines and ticket agents to refuse refunds when flights are canceled or significantly changed, and passengers do not accept alternatives. This practice causes substantial harm to consumers who pay for services they do not receive, a harm not reasonably avoidable. The DOT also considers it unfair and deceptive to not inform consumers of their right to a refund before offering alternatives like travel credits or vouchers.
Similarly, the DOT considers it unfair for airlines not to provide travel credits or vouchers to passengers unable to travel due to serious communicable diseases, as it causes substantial and unavoidable harm when consumers lose the value of their tickets due to circumstances beyond their control. This measure also promotes public health by encouraging individuals with communicable diseases to postpone travel.
III. Comments and Responses to Rulemaking
The Department of Transportation received and considered over 5,300 comments on the proposed rule, encompassing a wide range of perspectives from consumer rights groups, airlines, ticket agents, and individual consumers. Key topics raised in the comments and the DOT’s responses include:
Scope of Rule Applicability
Airlines raised concerns about the rule’s global scope and potential conflicts with international regulations. The DOT clarified that the rule applies to flights to, from, or within the United States, regardless of the point of sale or passenger residency, to maximize consumer protection and simplify the refund process.
Need for Rulemaking
While airlines argued against the necessity of new rules, citing existing refund practices, the DOT emphasized the need for regulatory clarity and consistency to address consumer confusion and ensure fair practices, especially during periods of widespread flight disruptions.
Definition of Cancelled Flight and Significant Change
Airlines and consumer groups generally supported defining these terms, though airlines sought exemptions for minor changes. The DOT adopted definitions to provide clarity while acknowledging that airlines can offer more generous policies.
“Prompt” Refund Timeline
Airlines suggested longer refund timelines, especially during crises. However, the DOT maintained the 7-day and 20-day standards as reasonable and consistent with existing regulations. The rule clarifies that these timelines start when the refund is “due,” addressing concerns about processing times.
Entity Responsible for Refunds
Ticket agents opposed being mandated to issue refunds when they are merchants of record, citing financial burdens. The DOT upheld this requirement to streamline the refund process for consumers but mandated airlines to confirm refund eligibility to ticket agents promptly.
Form of Refunds
While airlines sought flexibility in refund forms, the DOT mandated refunds in the original form of payment as the default, allowing cash-equivalent alternatives only with consumer consent to ensure consumer protection and reduce complexity.
Travel Credits and Vouchers
Airlines expressed concerns about non-expiring vouchers and transferability, citing potential for fraud and financial liabilities. The DOT compromised by setting a minimum 5-year validity period and mandating transferability to balance consumer flexibility with airline operational concerns.
Documentation Requirements for Health-Related Vouchers
Airlines sought clearer definitions of “medical professional” and stricter documentation to prevent fraud. The DOT refined the definition of “licensed treating medical professional” and clarified documentation requirements but rejected overly burdensome or restrictive proposals to maintain accessibility for eligible passengers.
IV. Costs and Benefits
The DOT acknowledges that the final rule will impose costs on airlines, primarily through increased refunds and administrative expenses. However, the rule is expected to yield significant benefits by:
- Reducing Consumer Burden: Streamlining refund processes and reducing time spent seeking refunds.
- Increasing Transparency and Fairness: Establishing clear definitions and standards for refunds.
- Promoting Public Health: Incentivizing individuals with serious communicable diseases to postpone travel.
The DOT estimates annual consumer time savings of $3.8 million and increased refunds to consumers of $16.0 million, offset by $7.1 million in airline administrative costs and potential costs ranging from $3.4 million to $482.0 million related to travel vouchers during public health emergencies. The societal benefits of reduced disease transmission are unquantified but recognized as significant.
V. Conclusion
The Department of Transportation’s final rule represents a significant step forward in protecting air passenger rights. By clearly defining refund eligibility, mandating automatic refunds in certain situations, and setting firm timelines for refund processing, the DOT aims to create a fairer and more transparent air travel experience for consumers. While the rule imposes new requirements on airlines, it is expected to provide substantial benefits to passengers, particularly those affected by flight disruptions and serious communicable diseases, ensuring they receive the refunds and compensation they are entitled to under Department of Transportation regulations.
This information is intended to provide a summary of the final rule. For complete details, please refer to the official Final Rule document published by the Department of Transportation.
