New DOT Proposed Refund Rules Are Worthwhile But Don’t Add Much Value for Travelers

Government Regulation

Transportation Secretary Pete Buttigieg has been talking tough over the last few months, telling airlines to get their acts together or risk the government taking action. The Department of Transportation (DOT) has taken its first step at forcing the airlines’ hands, but all this does is clarify existing rules and in most cases, it doesn’t have a practical impact for travelers.

The proposed rule — Airline Ticket Refunds and Consumer Protections — was announced previously, but yesterday it was published in the Federal Register. It has several goals, but the primary one is to require airlines refund travelers if there are cancellations or “significant changes of flight itinerary.” What exactly does that mean? I’m glad you asked.

See, up until now, the federal rules simply say that airlines have to provide prompt refunds “when ticket refunds are due” and that ticketing agents “make proper refunds promptly when service cannot be performed as contracted.” There are a lot of ways to interpret that, so DOT is getting very specific.

A canceled flight would be one that “was published in a carrier’s Computer Reservation System (CRS) at the time of the ticket sale but was not operated by the carrier.” I’d say this should require some further clarification, but we’ll see if that happens. Specifically, what if the airline changes the flight number in a schedule change but the times don’t move? That happens a lot. Would it be considered a canceled flight? It might be under the current proposal, but it shouldn’t be.

The bigger question is around what constitutes a significant change in itinerary. This is what DOT is proposing.

  • The departure moves earlier by 3 hours (domestic) or 6 hours (international)
  • The arrival moves back by 3 hours (domestic) or 6 hours (international)
  • The airline moves the origin or destination to a different airport
  • The airline adds connections compared to what was originally booked
  • The travelers is downgraded to a lower class of service
  • The aircraft is changed and that results in a “significant downgrade of the available amenities and travel experiences”

All of these are straightforward with the exception of the last one. The reason that one is vague is because DOT is asking for comment on how to define it in the final rulemaking. It gives an example of a person traveling with a wheelchair and a new aircraft doesn’t have the room to properly store the wheelchair as the original aircraft did. But it’s unclear what else should fall under that. That’s why it’s asking for comments.

Codifying these rules is not a bad thing at all, but I think it’s important to note that this won’t have much of a practical impact. Here’s a look at how several airlines operate today. Is a refund allowed?

AirlineTime change for refundAirport changeAdd StopDowngrade
Air Canada3 hoursYesYesNo
Alaska1 hourNot StatedYesNot Stated
American4 hoursYesYesYes
British Airways4 hoursNot StatedNot StatedFirst Class only
Delta2 hoursNot StatedYesNot Stated
JetBlue2 hoursNot StatedYesNot Stated
SouthwestNo minimumYesYesN/A
United2 hoursNot StatedYesNot Stated

This is just a sampling from published policies that are out there. In most cases where it says “Not Stated,” that just means that it’s not in the official policy, but I’ve found that it is generally allowed for a refund. Something like an airport change is so rare for an airline that it’s not really something they feel the need to point out.

Where consumers will benefit here is on domestic schedule changes on American. Today American sets that at a 4 hour change required to allow a refund, but the new rule would force them down to 3 hours. And I guess it would also force British Airways and Air Canada to allow refunds in downgauges.

You’ll notice I didn’t include ultra low cost carriers in here, and that’s because they don’t really have public-facing travel agent policies that I can find. But in most cases I’ve seen, they do refund for any even half-significant change. It’s often much easier to get a refund on them than it is to get them to put you on another airline.

Of course, these policies are out there now, but during COVID, they were changing a lot. Air Canada has been the posterchild for bad behavior. That airline refused all refunds even though it was specifically against US law. It only changed when the Canadian government finally bailed them out. But I imagine Air Canada’s bad behavior — the airline was fined heavily — has led to the government feeling the need to clarify. United and JetBlue also changed their rules on the fly during the pandemic, so this is certainly aimed at them as well.

My only real concern here is… will the airlines all coalesce around the DOT rules? That would be bad, because it would result in policies become worse than they are today. I don’t think any of us would be surprised to see airlines like United and Delta slip down from 2 hours to 3 hours if DOT says it’s ok. Let’s hope that doesn’t happen.

26 comments on “New DOT Proposed Refund Rules Are Worthwhile But Don’t Add Much Value for Travelers

  1. Since this is only a notice and not a final rule, let’s not lose sight that DOT still needs to evaluate and dispose of the public comments it receives, and those comments are all over the map. I don’t have confidence that we’ll see a final rule for another 18 months or so. It’s interesting that DOT is including language pertaining to travel prohibitions as a result of future stay at home orders, entry restrictions, or border closures, specific due to a serious communicable disease. That ship has sailed, so to speak. Yet, let’s spend DOT resources “just in case there’s another one.”

    Additionally, I find the requirement to “provide refunds if the carrier or ticket agent received significant financial assistance from the government as a result of a public health emergency” interesting, because this has nothing to do with those carriers who received funds in 2020. This NPRM and potential final rule would apply to future public health emergencies. So basically, anything that happened in the past is meaningless.

    1. It’s interesting that DOT is including language pertaining to travel prohibitions as a result of future stay at home orders, entry restrictions, or border closures, specific due to a serious communicable disease. That ship has sailed, so to speak. Yet, let’s spend DOT resources “just in case there’s another one.”

      You think this will be the last pandemic we will face in our lifetime? As the climate changes & there’s further deforestation, viruses that were once inactive or were only found in the wild now become an even greater threat as we’ve never had zero exposure to such viruses.

      1. It’s interesting that DOT is including language pertaining to travel prohibitions as a result of future stay at home orders, entry restrictions, or border closures, specific due to a serious communicable disease. That ship has sailed, so to speak. Yet, let’s spend DOT resources “just in case there’s another one.”

        You think this will be the last pandemic we will face in our lifetime? As the climate changes & there’s further deforestation, viruses that were once inactive or were only found in the wild now become an even greater threat as we’ve never had exposure to such viruses.

  2. Cranky, what’s the source of the data from your chart? I can tell you from personal experience that what’s listed for Air Canada in your chart is not how they operate: I had a one-stop IAD-YVR-HND itinerary changed to a two-stop IAD-DEN-YVR-HND itinerary, with the DEN-YYZ leg scheduled to depart before the IAD-DEN leg arrived, and they refused to refund me until I filed a complaint with USDOT.

  3. What happens if you booked via a foreign carrier (example Lufthansa) bit you’re flying from ORD to DEN?

  4. Why does the airline get to cancel the flight and give me back what I paid months ago? I can’t do the same and get my money back.

    My contract was to get me there. A refund should give me the market value for the trip on cancellation date.

    1. I like this idea. It’s too easy for airlines to just say “sorry here’s your money back” when they don’t want to bother reaccomodating you on another airline. It would incentivize them to re-establish or start using those agreements again, since it could be mutually beneficial for the airlines to offer each other a discounted rate rather than just having to pay out market value to the passenger.

    2. The contract was to get you there under the terms of their sale whenever you bought the ticket. If you want them to refund the price as it is when you travel, then would you be okay with them raising ticket prices after you buy, and making you pay more when you get the gate?

      It works both ways. Or it doesn’t, as the case may be.

      1. It doesn’t work both ways if they can cancel at last second and leave me stranded but I can’t do the same. They can resell my seat… I’ve been burned by this and missed a graduation.

        Since it’s a named sale and not a seat reservation, they raising prices at departure would be same as me asking a discount because they didn’t fill the plane over 85%.

      2. Of course it could work both ways: the proposed reg could simply state that the airline must give the traveller the option of a refund of their ticket price, a refund of the current price for that seat, a voucher good for future travel priced at or above either option, or accommodation on another carrier (if agreed to by the traveller).

        1. Just saw someone in a Cranky t shirt walking through the terminal at DCA. People out here representing.

  5. I can’t even picture how to specify what comprises a “downgrade” without leaving grey areas. Some things are easy: business or first -> coach? Refund. International flatbed -> domestic first? Refund. But then… What if you lose your exit row? Lose extra-legroom coach? Downgrade from a business seat with a door to one without? Mainline to a CRJ? Move from a coach seat in a 767 to a 10-abreast 777? What’s significant vs trivial?

    1. Mainline to CRJ (or vice versa) is already covered under existing rules because that’s a change of operating carrier.

  6. Do these rules include technical stops? I know Southwest sometimes has to add fuel stops when flying out of airports like Burbank and Midway during the right weather conditions,

    1. Dan – This is more about schedule changes before travel, tech stops would be issues during travel so it wouldn’t be covered under this.

  7. The rule should give the customer a choice of a full refund or to be accommodated with the same or better class of service on any other airline that will get the customer to their destination as close as possible to the original scheduled arrival at no additional charge.

  8. One wonders if this would have a negative effect on reaccommodations. While airport changes are rare, this did happen to me once, on a flight to Heathrow that was changed at the last minute to Stansted. The airline arranged for buses to get all the passengers to Heathrow, and even worked with other airlines so that passengers with connections would be reaccommodated on later flights. If the airline would now be required to offer a refund, why should they bother with all the reaccommodation effort? Just dump the passengers at Stansted. Almost all of them would take the flight anyway.

  9. If a buy a travel insurance, what’s going to happen if my flight is cancelled? I will be covered twice?

    1. Patty – If the airline refunds you, travel insurance usually won’t give you more money. They just cover costs you can’t get back.

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