Airlines were hesitant to give refunds: now they’re getting sued

United Airlines has been sued by a passenger for not refunding a ticket for a flight that was canceled during the coronavirus outbreak.

Passenger Jacob Rudolph alleged that United refused his request for a refund for flights he purchased from the airline that the carrier ultimately canceled.

Rudolph – a Minnesota police officer, according to the New York Post – purchased three tickets at a cost of about $1,500 for his family to fly from Minneapolis/St. Paul to Hilton Head, South Carolina, on April 4 for a vacation. The flights were canceled, and Rudolph said United agents offered him only a voucher – not a refund.

“United has engaged in unfair and deceptive conduct through its policy to issue refunds, limiting and forcing customers into a rebooked flight or travel voucher instead of returning their money,” Rudolph said in the suit, filed Monday in Chicago.

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Rudolph is seeking class-action status for his complaint, a move that underscores what a hot-button issue that the issue of refunds for canceled flights has become during the past month.

Air traffic has plummeted to levels that would have been hard to imagine just a few weeks ago. On Wednesday, the Transportation Security Administration screened fewer than 100,000 travelers – less than 5% of that total it screened during the same period a year ago.

For airlines, the implications of that steep drop-off have been dire. Not only have new bookings become virtually nonexistent, but cancellations have soared as travelers stay home amid calls for people to stay home and help “flatten the curve.”

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The sudden disappearance of revenue from new tickets coupled with a spike in requests to pay refunds for cancelled flights created a cash crunch for airlines — one that developed with alarming speed.

It also helped create the environment that ultimately set the stage for Rudolph’s suit against United.

Several airlines – both in the U.S. and aboard – tried to discourage travelers from refunds, asking them instead to accept credit for unused travel that could be applied toward future flights. Some carriers made it difficult to find refund information, making customers jump through additional hoops to make a request. And a smaller group simply said refunds would not be issued during the crisis.

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With most airlines canceling the majority of their schedules during the pandemic, not offering refunds put some carriers at odds with rules in the U.S. and EU that require refunds for flights canceled by the airline.

United was one of the U.S. airlines that made it difficult to request a cancellation refund. It said it would only offer a voucher that could be applied to future travel. If a customer hadn’t used it in a year, the voucher would expire and the customer could then request a refund.

JetBlue also rolled out a temporary policy against issuing refunds, even for flights it canceled. Foreign airlines such as Air France, KLM and Emirates also pushed about against cancellation refunds.

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Complaints from customers began to spike, and eventually regulators stepped in.

In the U.S., the Department of Transportation issued a public rebuke to airlines. It issued a statement on Friday, April 3, that not-so-gently reminded airlines of their legal and "longstanding obligation to provide a prompt refund" for flights canceled by carriers. The agency continued that those who didn’t comply would face “enforcement action.”

The International Air Transport Association – world’s largest trade group representing the airline industry – soon responded that it was “deeply disappointed” by the DOT’s decision.

“Passengers have the right to get their money. They paid for a service that cannot be delivered. And in normal circumstances, repayment would not be an issue,” IATA chief Alexandre de Juniac said in a blog post the same day of the DOT's statement.

“But these are not normal circumstances. If airlines refund the $35 billion immediately, that will be the end of many airlines. And with that an enormous number of jobs will also disappear,” he said.

But the DOT’s marching orders were clear. As a result, a number of airlines that hoped that the current extraordinary circumstances would give them some wiggle room are likely quickly figuring out how to come into compliance.

Now, at least one airline is facing additional pressure from customers like Rudolph, who are taking them to court over the issue.

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As for United, spokeswoman Leslie Scott told TPG on Wednesday that the company could not comment on the suit since it had not yet been served with the complaint.

But she said United has been doing its best to help customers.

“Since the start of the COVID-19 health event we have implemented new policies to give our customers flexibility during these extraordinary times by allowing them to change their travel plans without a fee,” she said in a Wednesday statement. “We are proud of the role our company and our employees play during this crisis and continue to operate to nearly every domestic destination as well as six international markets across the globe including our partner hubs.”