[BA And LATAM Fined As Well] DOT Issues Deceptive Press Release Detailing Fines Against El Al, Frontier, TAP, And More Airlines For Their Deceptive Refund Practices

Never Miss Another Deal - Follow DansDeals on Facebook

Update, 6/2/23: News coverage is reporting that the DOT has fined British Airways $1.1 million for delayed refunds during COVID, though it’s actually just a $550K fine after a $550K credit for past refunds issued that weren’t required. British Airways remains devious in their response to the DOT, claiming their hold time averaged just 10 minutes when in fact their phone line would just disconnect without connecting you to an agent. The response also ignores that BA removed the automated refund option during COVID.

It’s great to see the DOT enforcing their rules, but will this slap on the wrist be enough to encourage future good behavior?

On the other hand, LATAM was actually fined $1,000,000 for delayed refunds during COVID.

Originally posted on 11/15/22:

At the beginning of the pandemic, many airlines took the position that non-refundable flights were non-refundable, even if they were cancelled by the airline. Until that point it was clearly understood that non-refundable was referring to the consequence for passengers voluntarily cancelling their ticket.

United tried claiming that flights weren’t cancelled if they could find you an alternate flight within 25 hours and that passengers would have to wait a year for a refund.

JetBlue also refused refunds unless flights were changed by more than 24 hours.

The DOT announced in April 2020 that airlines had to provide timely refunds for US flights that they cancelled.

The DOT announced again in May that fines would be coming for airlines that failed to come into compliance with timely refunds. The DOT highlighted United’s new policy as being deceptive and unfair.

That forced United and JetBlue to resume their pre-pandemic refund policy for cancelled and changed flights.

But airlines like El Al continued to refuse refunds.

To be fair, US taxpayers bailed out US airlines, while airlines like El Al didn’t receive anything like that. But the DOT didn’t take bailouts into consideration.

Air Canada was the only airline that refused to cooperate by challenging the DOTs authority to force airlines to offer refunds. In the end they used that to squeeze a bailout out of the Canadian government, but the DOT tried to fine them over $25 million.

The DOT announced yesterday that they have assessed fines and required refunds from more airlines as follows:

• Frontier – $222 million in required refunds paid and a $2.2 million penalty
• Air India – $121.5 million in required refunds paid and a $1.4 million penalty
• TAP Portugal – $126.5 million in required refunds paid and a $1.1 million penalty
• Aeromexico – $13.6 million in required refunds paid and a $900,000 penalty
• El Al – $61.9 million in required refunds paid and a $900,000 penalty
• Avianca – $76.8 million in required refunds paid and a $750,000 penalty

I guess JetBlue and United got off without fines because they came into compliance after the DOT announced that COVID-19 wasn’t a valid reason to refuse refunds? Still, I’m surprised that other airlines, like many in the Lufthansa Group, got away without penalties for their failing to issue timely refunds even after the DOT announcements.

The fines are due to violating DOT rules on deceptive practices, which includes requiring airlines to provide timely refunds for flights cancelled by the airline, without having to “haggle or wait months to get your refund.”

That sounds great, but the announcement itself is somewhat deceptive, to make this sound like a bigger deal than it is.

It’s no surprise that news media is getting this wrong by reporting that airlines will have to make those refunds and pay $7.25 million in fines, based on the DOT announcement.

In fact, those are refunds the airlines have already made since the start of the pandemic, so they aren’t being forced to pay out more refunds. And those fines aren’t actually as large as they seem.

For example, I wrote last year about Air Canada agreeing to a $4.5 million DOT fine for failing to provide timely refunds, but the actual amount paid to the US treasury as per the agreement was just $2 million.

And sure enough, if you look at the enforcement orders for each airline, you can see the actual assessed fines:

• El Al’s “$900,000 fine” is actually $450,000, “in consideration of refunds it provided to passengers with non-refundable tickets for flights to or from the United States who chose not to travel and were not entitled to refunds under U.S. law.”
• Frontier’s “$2,200,000 fine” is actually $1,000,000 as, “$1,200,000 shall be credited to Frontier for refunds provided to passengers who voluntarily cancelled their non-refundable tickets.“
• TAP’s “$1,100,000 fine” is actually $550,000 as, “The remaining $550,000 shall be credited to TAP Air Portugal for refunds that TAP Air Portugal provided to passengers with non-refundable tickets for flights to or from the United States who chose not to travel and were not entitled to refunds under U.S. law.”
• Avianca’s “$750,000 fine” is actually $375,000 as, “$375,000 shall be credited to Avianca upon the service date of this order in consideration of the approximately $4.4 million in refunds it provided to passengers with non-refundable tickets for flights to or from the U.S. who chose not to travel and were not entitled to refunds under U.S. law.”
• Aeromexico appears to have a true $900,000 fine, as they didn’t claim to offer any refunds to people who didn’t deserve them under U.S. law.
• Air India appears to have a true $1,400,000 fine, as they didn’t claim to offer any refunds to people who didn’t deserve them under U.S. law.

That’s an actual total of $4,675,000 in fines against those 6 airlines in my book, but I guess the DOT uses the bigger number to make it sound more impressive despite it not actually being owed.

Of course the real reason for these fines is to discourage future bad behavior. But will a $550,000 penalty against an airline that held onto over $125 million of passenger funds actually do that? Somehow I doubt it, as they probably made far more than that in just the interest earned from holding onto those funds for so long.

But hey, it’s certainly good that we have the US DOT (and not the Canada Transportation Agency) to keep the airlines honest, otherwise I have no doubt that many airlines would have tried to keep all the money from flights that they cancelled.

What do you think of these penalties?

Have a dispute with an airline that you can’t get resolved? File a DOT informal or formal complaint to help get it fixed!

HT: chff