The Department of Transportation (DOT) announced a new policy on April 24 that will make it easier for passengers to get refunds from airlines in case of cancellations, delays, or other inconveniences caused by the airline.
This policy shift comes after years of investigations by the DOT into how airlines handle reimbursements. In 2022, for example, Frontier Airlines was fined $2.2 million for failing to provide timely refunds for significantly changed flights.
Under the new rules, airlines will be required to issue automatic cash refunds within specific timeframes:
7 business days for credit card purchases if a flight is cancelled, significantly changed, or experiences a domestic delay exceeding 3 hours (or 6 hours internationally).
Passengers needing to make significant changes due to airline actions (e.g., airport changes, increased connections, downgrades) will also be entitled to full refunds.
The policy extends to baggage delays as well. Passengers will receive a refund for checked baggage fees if their bags don’t arrive within 12 hours (domestic) or 15-30 hours (international, depending on flight time).
Additional passenger protections include refunds for unused amenities like Wi-Fi or seat selection if unavailable during the flight.
“Passengers deserve to get their money back when an airline owes them — without headaches or haggling,” said U.S. Transportation Secretary Pete Buttigieg. “Our new rule sets a new standard to require airlines to promptly provide cash refunds to their passengers.”
Key features of the new policy:
Automatic Refunds: No more phone calls or paperwork! Refunds are triggered automatically.
Cash Refunds: Airlines must pay in cash or the original form of payment, not vouchers or travel miles (unless requested by the passenger).
Full Amount Minus Used Services: Passengers receive a full refund for unused portions of the trip.
Secretary Buttigieg signed the final rule on April 1st. The rule will go into effect 60 days after its publication in the Federal Register.
How ticket prices will be affected?
These changes are likely to increase airlines’ costs. Whether they pass those costs on to travelers depends on a few factors:
Competition: Airlines operating in competitive routes might absorb some of the cost to stay competitive on price.
Fuel Prices: If fuel prices remain high, airlines may be more likely to raise fares to offset the new refund requirements.
Demand: If passenger demand remains strong, airlines may be able to raise fares without significantly impacting sales.
It’s difficult to predict definitively, but here are some possibilities:
Airlines might raise the base price of tickets to account for the increased cost of refunds.
Airlines might adjust fees for checked baggage, seat selection, or other services to generate additional revenue.
A Combination of Both: Airlines could implement a combination of fare increases and fee adjustments.
Ultimately, the impact on travelers will depend on the specific airline and route. It’s always a good idea to compare prices across different airlines and consider the total cost, including baggage fees and other add-ons, before booking a flight.
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