DOT to airlines: Refunds are not optional for canceled flights

The Department of Transportation issued a stark message to airlines that serve the U.S. Friday, reminding carriers that they must provide cash refunds to travelers whose flights are canceled by the airline.

Even the title of the missive was weighty. In its "enforcement notice," the DOT said "carriers have a longstanding obligation to provide a prompt refund to a ticketed passenger when the carrier cancels the passenger’s flight or makes a significant change in the flight schedule and the passenger chooses not to accept the alternative offered by the carrier."

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Demand for air travel has plummeted as a result of the coronavirus pandemic, and airlines around the world have been strapped for cash as they try to maintain their payrolls and meet other operating expenses even as revenue dries up. As a result, many carriers have tried to hold onto cash by issuing vouchers for future travel — instead of refunds — when they have canceled flights.

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That shift has drawn an increasing number of complaints from consumers. Underscoring the growing attention on the issue, a group of U.S. senators weighed in on the subject this week in open letters to airlines executives that implored them to change those policies.

Now, the DOT is making it clear that even the extraordinary circumstances created by the COIVD-19 pandemic are no excuse for airlines to flout the law and that their doing so has not gone unnoticed.

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"The obligation of airlines to provide refunds, including the ticket price and any optional fee charged for services a passenger is unable to use, does not cease when the flight disruptions are outside of the carrier’s control (e.g., a result of government restrictions)," the department said in a statement. "The Aviation Enforcement Office will monitor airlines’ refund policies and practices and take enforcement action as necessary."

The refund regulations apply even when just one segment of an itinerary is canceled, so long as every leg is on the same ticket.

"The requirement to refund passengers includes refunding all unused segments of a single ticket when a carrier cancels or makes a significant change to one or more segment of the passenger’s itinerary, and the passenger chooses not to travel," a DOT spokeswoman said in an email.

The DOT's refund regulations cover only involuntary cancellations made by the airline. Itineraries that are preemptively canceled by a passenger are not.

In Friday's statement, the department did recognize that airlines may struggle to comply immediately with its rules. In its memo, the agency suggested that there would be some leeway in enforcement to give carriers time to get in line, though it did not specify exactly how much slack airlines might get. For now, carriers have been told to contact customers who have been given vouchers for canceled flights to let them know they have an option for a refund.

With the warning issued Friday, a number of airlines might want to reconsider their existing policies.

Among them is JetBlue. It recently announced a “temporary” policy that would bar passengers from a refund even if their flight is canceled, so long as the carrier could accommodate them within 24 hours of their originally scheduled itinerary.

That policy is only in effect until April 15, but it’s unclear whether the DOT would tolerate even a temporary move not to follow its refund rules.

United also has drawn criticism for making refunds harder to get during coronavirus. Most recently, the airline said it would only issue travel credits for itineraries that would usually qualify for refunds, and those credits would become refundable if they went unused after a year.

And, on the international front, Air France and KLM, citing "the high degree of uncertainty surrounding air transportation and the vast number of requests for refunds," have said they would not issue refunds for canceled flights during coronavirus. Those carriers will likely now have to adjust that policy, at least on their services to and from the U.S., following the DOT’s new guidance.

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