The DOT’s Proposed Refund Policy Is A Good Start, But Misses The Bigger Picture; Here’s What You Can Do

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The DOT is looking to codify their refund requirements as described here. It’s being marketed as great news for consumers, but I’m skeptical.

Before digging into the highlights of the proposed changes, here’s the background on why they’re proposing changes.

Background:

Airlines behaved badly when the world shut down due to COVID-19 in 2020.

Domestically, JetBlue and United were 2 of the worst actors.

Pre-COVID, United would offer refunds if they changed your flight more than 2 hours. When COVID hit they refused to offer refunds unless the schedule change was more than 25 hours and they said it would take 12 months to get a refund.

JetBlue matched United and also refused refunds unless they changed your schedule by more than 24 hours.

Those moves angered the DOT. They quickly called them out and said they would face large fines unless they offered refunds for significant schedule changes.

The DOT then specified that airlines can’t change the definition of a schedule change or cancelled flight as United had done since that is an unfair and deceptive practice. They also said that refunds must be given within 7 days and that travel agents were also obliged to offer refunds. United then walked back their changes.

The DOT never defined what constituted a significant schedule change, but for the most part airlines coalesced around a 2 hour change, as it was before COVID.

Air Canada fought back against the DOT before giving in and settling with them.

After all that, it’s understandable that the DOT wants to codify their rules for flights that involve travel to, from or, through the US.

Proposed changes:

• The DOT is proposing that US airlines, foreign airlines, and travel agents must provide cash refunds for cancelled flights or schedule changes greater than 3 hours on domestic flights and 6 hours on international flights if the consumer does not accept alternate flight options.
  • Dan’s take: Frankly, this is a downgrade from what most airlines currently offer, which is a refund if they change the schedule, such as the departure or arrival time, of any flight by 2 hours. While this may be helpful for some airlines, this is likely a net loss for consumers as airlines will change from a 2 hour rule to a 3-6 hour rule. Note that they will still have to honor the 2 hour rule if tickets were purchased before such a change is made.
• The DOT is proposing that cancelled flights should be defined as a flight that was published and is no longer operated.
  • Dan’s take: This is in reference to United claiming that a flight wasn’t cancelled if they provided another suitable alternative, the DOT is saying no way Kirby. That’s a good thing, but airlines stopped doing this when the DOT told them to knock it off in May 2020.
• The DOT is proposing that significant changes which are eligible for a refund should include when the origin or destination airport is changed, when additional connections are added, when the passenger is downgraded to a lower class of service, or when the aircraft type is changed and that results in a significant downgrade of amenities.
  • Dan’s take: These are all good to have codified, though except for the aircraft change, are things that most airlines already do. I do think the aircraft change is important as it’s unfair to not provide a refund when a customer is switched from a plane featuring business class suites to one offering domestic first class or when a plane offering a 2-3-2 configuration becomes a 3-4-3 configuration in coach.
• The DOT is proposing that airlines and travel agents inform consumers that they’re entitled to a cash refund, before making them an offer to take credits in lieu of a cash refund.
  • Dan’s take: This is a no brainer and good to see. Several airlines sweetened the pot over COVID to take credits with a bonus voucher over taking a cash refund, but it’s important for consumers to know they have the cash refund option.
• The DOT is proposing that airlines and travel agents issue non-expiring vouchers to:
  1. Consumers restricted by any government rule from traveling due to a serious communicable disease, even if there is no declared public health emergency.
  2. Consumers advised by a medical professional not to travel during a public health emergency, consistent with CDC or WHO advice to protect themselves from a serious
     communicable disease.
  3. Consumers advised by a medical professional not to travel consistent with CDC or WHO advice, even if there is no declared public health emergency, because they have or may have contracted a serious communicable disease and their condition would pose a threat to the health of others.
     • Dan’s take: Requiring airlines to offer a non-expiring voucher in these cases is a big deal. I’m not sure what the definition of serious communicable disease is, but it would seem that if someone develops a high fever, flu, or strep throat that this would allow them to convert their ticket into a non-expiring voucher. However, the DOT proposes that airlines be allowed to collect a fee for processing this voucher, as long as the fee is disclosed at the time of purchase. There is no dollar limit set for this fee, so this essentially opens a massive loophole for airlines to charge too much to make this worthwhile, especially in an era where many airlines provide vouchers on most tickets. Southwest now even offers non-expiring vouchers in all cases.
• The DOT is proposing that airlines and travel agents that receive significant government financial assistance after this rule goes into effect (pity this wasn’t done before the COVID bailouts!) must issue cash refunds to:
  1. Consumers restricted by any government rule from traveling due to a serious communicable disease, during a declared public health emergency.
  2. Consumers advised by a medical professional not to travel during a public health emergency, consistent with CDC or WHO advice to protect themselves from a serious
  3. Consumers advised by a medical professional not to travel during a public health emergency, consistent with CDC or WHO advice, because they have or may have contracted a serious communicable disease and their condition would pose a threat to the health of others.
     • Dan’s take: Requiring airlines to offer refunds in these cases would only apply during a declared public health emergency and only if airlines receive significant government financial assistance, so this isn’t like to come up very often. Once again, the DOT proposes that airlines be allowed to collect a fee for processing this refund, as long as the fee is disclosed at the time of purchase. There is no dollar limit set for this fee, so this essentially opens a massive loophole for airlines to charge too much to make this worthwhile.

Loopholes and the bigger picture:

Overall, we’re left with somewhat of a mixed bag.

The DOT codifying what represents a schedule change will make things worse for most consumers. If they won’t match US airlines 2 hour policy, then consumers may be better off without the 3-6 hour rule.

Requiring airlines to offer a non-expiring voucher when someone has a serious communicable disease is a good thing. However, giving the airlines an out by allowing to charge whatever they want to process that voucher may defeat the purpose of the regulation, which is to stop people from flying when they are ill by offering them the ability to not incur a financial loss. Airlines don’t charge to get a voucher today and this loophole should be stripped from the proposal.

All of this misses the bigger picture. Instead of piecemeal changes, this should all be part of a passengers’ bill of rights that exists in most of the western world.

After US taxpayers bailed out the airlines to the tune of tens of billions of dollars over COVID, it’s the least that should be done.

Passenger rights regulations such as Europe’s EU261, Israel’s Aviation Services Law, or the Canadian Air Passenger Protection Regulations mandate cash compensation when airlines delay, cancel, or overbook your flight, or lose your luggage.

If the DOT wants to fix air travel misery, that is where to start.

In March 2020 I wrote the things I would demand in return for transferring billions of dollars to airlines. While bailouts were handed out without conditions, some of those suggestions are being discussed, such as families with kids being seated together and seat sizes and legroom. Other points that I brought up such as requiring refunds were already addressed by the DOT. And airlines themselves stopped charging most change fees on non-basic economy fares.

So what can you do as a consumer?

You can comment on minimum seat dimensions and legroom here.

You can comment on the DOT voucher and refund proposals discussed in the post by going here.

You can read my comment to the DOT here and feel free to craft your own comment based on what I wrote.

Airlines have had their chance to self-regulate for decades, but have failed to make passengers whole when they are responsible for things going wrong. That’s despite taxpayers bailing them out time and time again. Will you stand up for your rights and reach out to the DOT or your elected representatives?

HT: 1avigrun, via DDF