When Airlines Refuse Refunds, There Will Be Consequences

Fares, Government Regulation

It started with a schedule change policy. United — looking ahead and realizing that it was about to be bleeding cash when it canceled more than half of its flights due to this coronavirus — decided to suddenly scrap its rule allowing refunds when flights changed more than two hours. This trend has now blown up into something much bigger with airlines around the globe outright refusing to give refunds in a variety of creative, though potentially illegal, ways. This may save cash from going out the door now, but it’s going to hurt the airlines in the medium term.

United has switched its schedule change policy in the last couple weeks more often than Alitalia has lost money. In the end, it settled on allowing refunds on any international schedule change over six hours… but only upon the expiration of ticket validity one year after the date of purchase. The only way to access that money earlier is to use the existing credit for future travel.

Other airlines jumped on the bandwagon quickly, including JetBlue. Emirates denied refunds outright, but it did extend ticket validity by more than a year. Air Canada has refused refunds as well, as has Air New Zealand and LATAM. There are plenty more. As schedule changes rained down, travelers were all stuck holding on to reservations for flights that would not operate. And they couldn’t get their money back.

Some airlines decided to get very sneaky. Lufthansa Group didn’t change its refund policy, but instead it just inhibited system functionality that actually allowed refunds to be processed until some unspecified future date. Air France/KLM still allows refunds, but it won’t allow third parties to process them anymore. This requires submitting directly to the airline for a refund, and presumably that won’t be processed quickly.

United took things a step further last week when it went beyond schedule changes. In a note from the sales team that was broadcast widely, United said this.

In the event one of your customers experiences a flight delay or cancelation on the day of travel and rebooking is needed, please contact United.

If your customer would prefer not to travel at this time, their ticket value may be applied to a new ticket, without fee, for up to 12 months from the date of purchase.

In other words, if your flight is canceled for any old reason like a mechanical or crew delay… it looks like you can’t get a refund at all.

I understand what United is trying to do. It’s really just making an effort to flatten the curve. No, not that curve. The cash curve.

This is not in any way grounded in actual numbers. It’s just a crudely-drawn concept. (I think you can appreciate in times like these, we all need to tighten our belts and use MS Paint.) The point being made is that United and others are now preventing cash from flying out the door and preventing that deep dip on the left side. But incoming cash will stay low when the recovery happens. People will wait longer before buying tickets, and when they do, they’ll have to navigate their way around all those people trying to burn their old credits.

Some will argue that it’s better to do this than to go out of business, but I have a hard time imagining United being allowed to fail. It already has billions of dollars coming in through the bailout. Instead, United should be worrying about its future.

There are really two things at risk. The first is most obvious. The Department of Transportation says if your flight is canceled, you can get a refund. United says… nah. I expect that United is going to find itself in trouble here. This isn’t a time to be angering governmental agencies, since it’s the government that is likely the only hope United has of getting through this crisis intact.

The other issue, however, is more about the future, as I briefly mentioned above. The problem is much more than just limited cash flow once bookings pick back up. We’ve increasingly heard from people who are wondering when to start booking flights again. Nobody knows what’s happening, but people are feeling slightly more confident about fall travel. (Keep in mind, this is from a baseline of zero confidence in booking any travel, so it could only go up.)

The issue is that people who are willing to buy tickets want to know that if they guess wrong and things are still bad, they can get their money back. Some airlines will allow this, but it’s the increasing number like United that don’t that ruin it for everyone through all the negative media coverage. That message only makes people more gunshy about purchasing new travel, and that’s going to slow the recovery once we’re on the other side of this.

I can tell you that I wouldn’t personally book an international United flight right now. I’m not willing to take a gamble that I won’t get my money back for a year, if ever, if the flight doesn’t operate. I would buy a ticket on American and Delta, and I would hope others would support them. American has actually gone above and beyond here by giving travelers the option of a refund or a credit with a 20 percent bonus above the original amount. It’s a great way to try to keep cash while also giving customers a choice. United should take lessons.

The problem is… it only takes one bad actor to hurt the entire airline industry. People are already nervous. The idea that your money may not come back to you even if a flight cancels just creates another unecessary roadblock preventing people from buying tickets. I know right now it’s hard to see beyond the present, but once that other curve starts trending down, air travel is going to be slower to pick up because of actions like these.

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47 comments on “When Airlines Refuse Refunds, There Will Be Consequences

  1. CrankyFlier, thank you. Finally someone is picking up on that. I am experiencing this problem with British Airways. Up to recently, you could apply for a full refund online if your flight was cancelled. Now the website has changed to offer you a “future travel voucher”, but for a full refund you have to call them. I know the law is on our side to get a full refund, however it is impossible to get through on the phone to them. I am appalled how they are treating their customers in this way.

    1. Chris, you can still get a full refund. You need to do something weird like turn off javascript. Have a look at the headforpoints blog for the methodology.

      Given this sneakiness, you should probably be even more appalled than you are now…

      1. thanks, Simon. Yes, I found the headforpoints article. BA will be replaced by AA as my favorite coming out of this!

  2. Even airlines that do offer refunds are playing games with cancellations to push the customer into taking a travel credit. For example, I have a non-stop flight booked CUN-RDU for a Saturday in April. I won’t be taking this trip and would accept a travel credit if the flight were operating.
    The airline (one of the good ones you mentioned) no longer offers these Saturday nonstops in April or May, but still shows the flight in the MyTrips section of their website. They know the flight is cancelled, and I know the flight is cancelled…but the flight is not yet cancelled (technically). I cannot get a refund for this flight, and am encouraged to accept a travel credit.

    I will wait, but many less informed users would quickly cancel their booking and be stuck with a voucher.

    1. I also have a trip in May that I know will be cancelled so I am just waiting for the notification (the notification says “Schedule Change, your flight changed. Please check back soon to see what changed.–and it has been like that for a week). It is silly if I can now I get a voucher so I’m content to wait it out for the cash.

      I do want to travel in October to Maui, and if they would allow me to use the value of the voucher (which is in my name only) to purchase tickets for the husband and I, it would be easy but not allowed.

  3. We’ve all heard of people who’ve had a bad experience with missed connections or lost luggage with an airline & “swore to never fly them again”. A few people stick to this but most are soon lose their resolution after seeing a cheap fare or realizing that these sorts of things can happen on any airline. I hope United realizes that this is something entirely different. My parents have $3300 worth of tickets booked to Milan in early May. There’s a 0% chance that flight operates. If United holds that $ hostage for an entire year I can promise you my parents will never fly them again. Thousands of people will do the same. It’s not the same as bad service, it feels like outright theft. Throw in a gov’t bailout we’re all about to pay for and it rubs self in that would. United isn’t shooting themselves in the foot here, they’re shooting themselves in the face.

    1. One can hope that after the government bailout funds are received, all US based airlines will revert their policies on cancellations. Once funding is in place and company survival is guaranteed, why not help the customer.
      I suspect these policy edits are in progress as we speak.

      1. That won’t happen unless the bailout money is chained to a specific list of consumer-friendly change to airline policy. We wouldn’t all be ululating for refunds if we could park our flight credit for at least three years from purchase. Most people operate on an annual vacation cycle; if I can’t make my dream trip to Milan this May, can I go next may? It’s my money, and you canceled, not me.

    2. +1 Mike P. This sucks. Our agency has lots of customers booked to Italy on UA, once-a-year travelers who are screwed.

      NathanP you know that saying “when someone shows you who they are, believe them?” Kirby and Oscar and their merry band of cynical clowns have shown us who they are, we should believe them.

      It’s been a while since I said this, but I’m way more impressed by AA’s behavior here than UA’s.

  4. In situations like those mentioned in this post, where the airline changes its policy or doesn’t allow a refund, has anyone had success in challenging the charge with their credit card company (chargeback, etc)?

    I agree that the regulators should be all over this issue, though unless the Democrats insist on making it a requirement for airline bailouts I doubt there will be much of a regulatory push on this, at least not in the next month or two.

    I’m not sure if there is a legal argument to be made, and I know many courts in the US are limited to emergency proceedings only, but it seems like this issue is one bored/angry lawyer or Congressman away from blowing up in the airlines’ faces. Even if the threats/lawsuits were without merit, it’d be a great way for someone to get their mug on CNN and win future clients/votes.

  5. Why is United Airlines hated? By Company Man.

    [youtube https://www.youtube.com/watch?v=N-FV2akzUg8&w=560&h=315%5D

    This refusal to issue refunds is actually going to be a long-term problem as people will question the necessity of air travel. The days of overcrowded flights & terminals are going to be a thing of the past as most people will travel by some other means if possible or won’t travel at all as staying employed will become first in mind rather than a jaunt to Disney or Vegas.

    It’s also Galling to see the airlines playing games with refunds as they get bailed out or as actress Rachel McAdams put it in “Wedding Crashers,” “suckling at the peratete.”

  6. Deduct the total amount of refunds owing from any government bail out package….then force the airlines to give back that money BEFORE they get any bail out. Then ensure that the first tranche of bail out money tops up what employees are owed for lost wages. No airline that has done a share buy back in the last year gets money. No money until it is clear the airline has used up its own on and off book capital first. People first airline corporations a distant second…”too big to fail” worked once…now is the time for people “too little to survive” to get the needed money.

  7. I think a little bit of up-front honesty would go a long way…

    “Dear Customer. As you might expect, these are challenging times for CrappyAir; we’ve had to make many flight cancellations, and uncertainty in the travel industry has led to dramatic drops in bookings.

    As your valued partner in your travels, and to help ensure that we can preserve our financial condition in order to provide you excellent service in the future, we respectfully request that you select a credit for travel on a future date in lieu of requesting a refund. To that end, we are extending the validity period for ticket credits to two years from the original date of travel, and will award you with a 100% CrappyPoints Bonus upon eventual completion of your trip. If your original fare(s) add up to over $1,000, you will be awarded instant Silver Status through the end of the calendar year following your trip. To our valued customers that have already achieved that status, we will instead award an additional bonus of 10,000 CrappyPoints. We also guarantee that if you select the same itinerary, your replacement trip will cost no more than the original, provided you meet the advance-booking and overnight-stay requirements of your original fare, and your travels do not fall during special-event periods for your destination. (Click [here] for this information.)

    If you do request a refund, that remains your choice, but processing times may be delayed, and requests will be processed on a first-come, first-serve basis as available.”

    Something like that would certainly be more-likely to achieve regulatory mercy for not meeting statutory refund timeliness guidelines, and also help smooth the way with customers. This back-door “We will make getting a refund as difficult as possible” serves nobody.

  8. If I were desperate for a refund and only offered a voucher and the airline canceled my flight I would definitely file a complaint with the Department of Transportation https://www.transportation.gov/airconsumer/file-consumer-complaint.

    I did this back in January when we were involuntarily denied boarding on an American Airlines plane and and the agents in South Bend didn’t follow proper protocol and immediately give us the paperwork and assumed we wanted a travel voucher only until I demanded the cash for our IDB (one other passenger was all set to accept the voucher until he heard me). The agents panicked since none of them had been trained on how to write a check but we got the checks were were entitled to by mail a few days later. After a few weeks someone from American Airlines sent us a non-form letter apology and said they would make sure to alert the South Bend Station manager and retrain the employees. At the end of the letter they did request that we contact them directly and not reach out through the DOT next time but I thought it was important to have the DOT aware of our issue, since this was such a blatant violation.

    I have a feeling that if you submitted a DOT complaint the airline would (eventually) issue you a refund since a clear violation file with the Federal Government (these complaints are tabulated quarterly for the public) gives more teeth to your issue.

    Personally, I have zero trips booked at the moment, we did book a trip we ended up canceling a few weeks ago and accepted the $120 voucher from American Airlines since the flights were still operating as scheduled.

  9. A tale of two airlines: I had TX on both AA and DL before the C19 stop. DL refunded every cent, no fee, didn’t even have to ask. AA kept the money as a future credit, albeit without a fee. Seventeen years an EXP on AA but now DL gets my business going forward.

  10. I agree 1000% with SirWired. Just be honest and don’t play games. Oh, wait, we’re talking about the airlines!

  11. Will there be a (Gawd, I hate to use this phrase) QUID PRO QUO

    For the bailout like

    Doing away with onerous (sp?) fees

    Stop reducing seat sizes

    FULL DISCLOSURE..PERIOD!

  12. yes everyone let’s all take travel purchase advice from the guy who told us just 3 weeks ago we’re being hysterical and chicken little.

  13. Right, just like all those people stopped booking with United that time they assaulted one of their passengers? 99.99% of people don’t pay enough attention to distinguish between good and bad actors in the airline industry (which is one of the biggest reasons there are so many bad actors — because there’s so little return to going out of your way to be a good actor).

    I do think there is an underappreciated issue of the airlines having a ton of unused ticket credits on their books and having to fly a bunch of passengers when things start picking up again effectively for free. But, enough people will probably forget to use their credits, or will be forced to use them inefficiently (because if they were paying cash at that point they would choose a different airline with a cheaper option), that it may all work out.

    1. There’s nothing “for free” about those unused flight credits. They represent cash paid before service, and being able to use the funds for a rebooking in another year means the carrier gets a year of free use of that money before providing service. They should be content with that windfall, not looking for ways of stealing it.

  14. Perhaps I read carelessly, but I didn’t note in your comments about long-term cash flow an acknowledgement that “around the time nice airline starts making money again, *everyone will be flying – but in addition to people waiting to buy, Mean Airline will be be flying people on vouchers, while Nice Airline is selling new tickets.” So everyone is flying again – but only one of them is actually taking in new funds for doing so while the other is operating on funds gathered as much as a year earlier, rather than gathering new revenue…

    1. That may be true, but Mean airline will have earned money on the “float” for having kept the dollars while Nice airline lost money as they refunded all of those tickets.

      1. Earning money on the ‘float’ would be through interest or investments, both of which are giving close to zero returns right now.

  15. I had one award flight to Europe that Delta agreed to refund without miles redeposit fee a day before the EU “travel ban” was announced (wouldn’t technically have affected me, but it illustrated the seriousness of the situation at the time; there was just no point for me to go to Europe at the time). The actual flights I was booked on were cancelled later on, but at the time I canceled Delta went above and beyond what they were required to do.

    I had one domestic round trip for my wife leaving last week on AS. I cancelled it online and gladly accepted the travel credit for future use as the flights were not cancelled and AS was offering cancellation above and beyond the fare rules.

    If I had a revenue ticket on a cancelled flight, especially to a level 4 travel warning destination like Europe, and the airline wanted to keep the money, I would file a chargeback with my credit card company (paid-for product/service was not delivered) and on top of it a complaint with the DOT.

    I am probably going to book some travel for the fall before the end of March on AS with my travel bank credit and expiring companion pass. I might also make a speculative booking to Europe, with miles if possible, but I will stay away from airlines that hold people’s money hostage.

  16. While some people have shorter memories some of us have longer memories. I was very fortunate not to be harmed badly by the economic mess in 2008 and went out to visit Vegas. Instead of feeling appreciated by supporting the local economy by paying for my room, food, gambling, etc. (I wasn’t looking for freebies), a cabbie tried to take me for a “ride”, BJ dealers were constantly looking for tips, etc. Except for a road trip that happened to pass through Vegas, I haven’t been back.

    Companies tend to believe the government won’t hold them accountable and they can have it both ways.

  17. While companies have responded differently to the crisis – largely within their own capabilities to manage their own finances, some of which were in questionable shape before – the global airline industry is in an enormous liquidity crisis.

    The economy worldwide other than for groceries and toilet paper is shut down.

    If you were taking a major trip, your budget was not built around your abililty to buy groceries and paper products.

    Yes, airlines need to provide refunds when asked but let’s keep in mind that much of the western virus crisis has developed in less than the time of a credit card cycle.

    I get that people will make decisions based on short-term response but let’s not forget how quickly this whole situation has developed.

    The bigger yardstick will be what airlines do with customers that still want refunds for travel that they were refused a month ago. It is not the consumer world’s job to provide indefinite cash flow for any company – but it also might be a little premature to expect full refunds until there is more clarity about how this whole situation will shake out including with government aid.

    1. I don’t think it’s premature to expect a refund when the airline literally cannot give you what it sold you – a flight from A to B that it then canceled, even if you still wanted to travel.

      1. Cranky’s separate blog (noted in yesterday’s CF and a nice extra addition) says that Canada has said that airlines there don’t need to give refunds right now.

        Again, I’m not saying that airlines should never be required to issue refunds but it is impossible from a cash standpoint for most airlines to give refunds for all of the tickets that are out there now.

        1. What happened to Canadians being nice?

          Forcing travelers to become unsecured lenders to airlines seems utterly unfair. If an airline wants funding from me to secure its survival, offer me a proper bond with interest.

    2. > but it also might be a little premature to expect full refunds until there is more
      > clarity about how this whole situation will shake out including with government aid.

      If my flight didn’t happen as planned, it is not premature for me to expect my money back. Right now. A flight in six to the same destination or some other destination isn’t what I bought.

      1. btw, I had tickets to a sporting event that was cancelled several weeks ago; I don’t have a refund for that either.

            1. Right, but that’s quite different than waiting for over a year as United are doing.

  18. To me it seems if the airline is going to keep your money for a flight they cancelled they should provide more time to use the credit. An extra additional year is needed for most people to feel close to safe to plan and rebook hotels, VRBO, or timeshare accommodations. If you still have a job you’ll definitely be holding onto it. Parents have to work around school schedules when they restart next year. I would much prefer an additional year to rebook beyond any 10 or 20% bonus credit.

  19. My experience is the opposite of what Cranky (and some others) have commented on above.

    In early March I booked a vacation trip for late June to Greece (and some of the Greek Islands) on United and Star Alliance partners using United.com (a 016 ticket number).

    On March 18 I cancelled my ticket so I could book a different itinerary later.

    I was told my ticket would be refunded back to my credit card.

    My refund (of $4K) was processed on March 24 and I expect to see the credit on my credit card within a week.

    I am very happy with United’s response and the speed of their refund process.

    I realize that everyone’s situation is different, but from my perspective, making broad assumptions about the “mean airlines” keeping your money because they are greedy, is not true.

    1. Keith – United has changed its rules rapidly and frequently. What you did on March 18 doesn’t apply any longer, so anyone who didn’t take advantage will not be able to get a refund per current rules, at least for international.

  20. Hi Cranky Flyer. Have you thought that perhaps it should not be a problem in the future since UA will be in a better financial position which will make them switch back to the old refund policy? It sounds clear that the only reason for the current one of flight voucher or 12 months refund is because their only objective now is to survive, don’t you think?

    1. Treck – Of course that’s what they’ll say, but ultimately, if this was going to be the difference between saving the company and not, I might bend a little more. But obviously that’s not the case with government money coming in. My biggest issue since the beginning was that they just kept changing the policy time and time again with no notice.

  21. FWIW, United seems in the last couple days to have waived redeposit fees for some affected reservations: a previously-canceled award reservation that had miles held in suspension I have now been able to reinstate the mileswithout charge. It was domestic award travel 28Mar-04Apr that I had to cancel that was ticketed 24Jan2020, for those interested, and I was able to do so myself online and get the miles posted back immediately to my MileagePlus account.

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