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Biden administration requires cash refunds for canceled flights

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The U.S. Department of Transportation issued a final rule Wednesday that requires airlines to give passengers automatic cash refunds for canceled flights.

Another new DOT rule requires airlines to disclose fees earlier in the booking process.

“Passengers deserve to get their money back when an airline owes them – without headaches or haggling,” U.S. Transportation Secretary Pete Buttigieg said. “Our new rule sets a new standard to require airlines to promptly provide cash refunds to their passengers.”

Under the rule, passengers are entitled to a refund for:

Canceled or significantly changed flights: Passengers will be entitled to a refund if their flight is canceled or significantly changed. Significant changes to a flight include departure or arrival times that are more than 3 hours domestically and 6 hours internationally.Significantly delayed baggage return: Passengers who file a mishandled baggage report will be entitled to a refund of their checked bag fee if it is not delivered within 12 hours of their domestic flight arriving at the gate, or 15-30 hours of their international flight arriving at the gate, depending on the length of the flight.Extra services not provided: Passengers will be entitled to a refund for the fee they paid for an extra service – such as Wi-Fi, seat selection, or in-flight entertainment – if an airline fails to provide this service.

Airlines for America, a trade group that represents major airlines, said carriers frequently exceed DOT regulations regarding consumer protections. The 11 largest U.S. passenger airlines issued $43 billion in refunds between January 2020 and December 2023, in addition to issuing other forms of compensation, according to the group. That’s about $900 million per month.

“U.S. airlines are committed to providing the highest quality of service, which includes clarity regarding prices, fees and ticket terms,” the group said in a statement. “U.S. airlines are providing more options and better services while ticket prices, including ancillary revenues, are at historic lows. In real terms, average domestic round-trip fares, including ancillaries were 14 percent lower in 2023 than in 2010.”

Complaints against airlines peaked during the COVID-19 pandemic. At the height of the pandemic in 2020, refund complaints reached 87% of all air travel service complaints received by DOT. DOT officials said refund problems continue to make up a “substantial share” of the complaints that the department receives.

The DOT’s other final rule requires airlines to tell consumers upfront what fees they charge for a first or second checked bag, a carry-on bag, and for canceling or changing a reservation.

“Airlines should compete with one another to secure passengers’ business – not to see who can charge the most in surprise fees,” Buttigieg said. “DOT’s new rule will save passengers over half a billion dollars a year in unnecessary or unexpected fees by holding airlines accountable for being transparent with their customers.”

Airlines for America said carriers are “fierce competitors.”

“Passenger airlines – which are fierce competitors – offer transparency and vast choice to consumers from first search to touchdown,” the group said in a statement.