Airlines will now have to provide automatic refunds to travelers if flights are canceled or significantly altered under new US Department of Transportation rules, a significant change for consumers that could drive up costs across the industry.
The final regulations released Wednesday outline the circumstances where passengers are entitled to refunds for all travel to, from and within the US. The goal is to make it easier for people to get money back and to make refund policies more consistent from one airline to the next.Â
According to the department, complaints related to airlines and ticket agents rejecting or delaying refunds made up 87% of all air-travel service complaints at the height of the Covid-19 pandemic in 2020.
“Passengers deserve to get their money back when an airline owes them – without headaches or haggling,” Transportation Secretary Pete Buttigieg said in a statement.
Under the new rule, passengers will be entitled to refunds if there is a “significant change” to their flights. These include:
Departure or arrival time that moves by more than three hours domestically or six hours for international flightsBeing downgraded to a lower class than originally purchased, as from first class to economyChange of departure or arrival airportIncrease in number of connectionsChanges to connecting airports or planes flown if they are less accommodating for people with disabilities
Travelers will also get refunds for checked bag fees if the bag is lost and not delivered within 12 hours of a domestic flight’s gate arrival. International flights will have from 15 to 30 hours to return a lost bag, depending on their length.Â
Anyone who pays for a service, such as in-flight Wi-Fi or entertainment, and doesn’t receive it will also get their money back.
In addition, DOT made changes to make it easier for the passengers to receive the money they’re owed by requiring prompt automatic refunds in cash or through the original form of payment. Buttigieg said during a news conference at Ronald Reagan Washington National Airport Wednesday that the bulk of the new requirements will go into effect in about six months.
The refund changes are poised to add significant costs across the airline industry, which could have a disproportionate impact on low-cost carriers, according to Seaport Research analyst Daniel McKenzie. “To the extent low cost carriers have to add costs to comply, reduce growth and/or downsize, they become less competitive,” McKenzie said in a note.
The Airlines for America trade group said in a statement that its member carriers already abide by and often exceed regulation on consumer protection.Â
“US airlines are providing more options and better services while ticket prices, including ancillary revenues, are at historic lows,” the group said in a release.
Also on Wednesday, the department released a final rule requiring airlines to clearly communicate their extra fees upfront for checked luggage, carry-on bags or for canceling or changing reservations. According to DOT, airlines saw a 30% increase in revenue from baggage fees between 2018 and 2022.Â
“Airlines should compete with one another to secure passengers’ business – not to see who can charge the most in surprise fees,” Buttigieg said in a separate statement, adding that the rule will save travelers more than half a billion dollars a year. Â
Buttigieg told reporters at the news conference that more rules are on the way, including to expand rights for passengers who use wheelchairs and to allow parents to sit with their children on flights without being charged a fee.Â
DOT will also continue to pursue more aggressive enforcement when airlines violate rules, he said, pointing to the department’s $140 million record fine against Southwest Airlines Co. for a meltdown in its operations that left more than 2 million passengers stranded in December 2022.Â
“The level of toughness reflected in the Southwest enforcement is not an exception, but the new standard,” Buttigieg said.Â
