JetBlue Keeps TSA Fees It Must Refund After Award Tickets Are Canceled — Judge Lets Passengers Sue

JetBlue has been keeping taxes when a customer cancels their award ticket. Passengers are suing. The airline tried to get the case thrown out of court – but a judge ruled against them on Monday.

When you buy an airline ticket, some taxes are owed right away, and the airline has to send the money to the government whether you travel or not. That includes,

• The 7.5 % excise tax on domestic airfare
  
• $5.20 domestic segment tax
  
• $22.90 international arrival/departure tax
  
• Airport Passenger Facility Charges of up to $4.50 per segment

However you are legally entitled to a refund of TSA security fees and customs and immigration inspection fees on unused nonrefundable tickets on request.

Most airlines refund TSA fees automatically when you cancel an award ticket. When I cancel an American AAdvantage or Alaska Airlines Mileage Plan award ticket, I get the taxes back. JetBlue keeps the $5.60 TSA taxes when you cancel an award ticket.

• You get a travel credit for it, not a cash refund.
  
• That travel credit can expire if unused (and then they keep the money rather than giving it to TSA – something TSA has successfully sued Southwest Airlines and Frontier over).
  
• They will only let you use the travel credit from those TSA taxes to pay the taxes on a new award when they cover the full amount of those taxes. So if you have a $5.60 credit from a one-way award, you cannot use it towards $11.20 in taxes on a roundtrip, and you can’t use it for an international award ticket where there are also airport taxes.

A lawsuit against JetBlue challenges the airline’s refusal to refund the $5.60 September 11th Security Fee when passengers cancel non-refundable tickets – because the practice violates both federal regulations and the airline’s own promises in its contract of carriage, which states taxes and fees “will not be refunded except when required by applicable law” (emphasis mine) and 49 C.F.R. § 1510.9(b) requires airlines to refund the security fee if the ticket is canceled and no travel occurs.

JetBlue really doesn’t have a substantive defense here. But they were arguing that customers can’t sue them for it, because the Airline Deregulation Act preempts state law claims regarding ‘prices, schedules and service’ and this is a lawsuit over prices.

• JetBlue argued that ticket refunds, cancellation terms and charges relate to an airline’s prices and services. They also argued that the court has to interpret federal TSA regulations outside the contract itself. So this isn’t just a contract claim that’s allowed under federal law.

• However, the Airline Deregulation Act doesn’t preempt breach of contract suits that enforce an airline’s own self-imposed promises. JetBlue’s contract itself says they will refund taxes when required by law. So the lawsuit just seeks to enforce that commitment.

According to the judge, that’s why the case doesn’t get thrown out. This isn’t an airline’s fare. It’s a TSA fee, which is a uniform federal charge. Enforcing a promise to refund it doesn’t regulate JetBlue’s fares, routes, or services.

Right now, the lawsuit remains live but it’s just individual passengers suing for their $5.60 back, because the courts haven’t allowed this to proceed as a class action. JetBlue’s terms, which customers ostensibly agree to, forbid class actions.

• It’s ultimately irrational for any customer to pursue $5.60 in court when a filing fee alone costs hundreds of dollars and if you don’t represent yourself (which is costly in terms of time!) you’ve got legal fees. No lawyer will want to take this on a contingency!

• That means it’s practically impossible to pursue a case like this, means also means that the airline can improperly keep this money with impunity. The class action waiver creates a waiver of statutory rights. The customer doesn’t have refund rights if they can’t pursue those rights when denied.

• That’s a reason to trump the class action waiver, but American Express v. Italian Colors (2013) says litigation costs alone do not create a prospective waiver of rights. Litigation can still theoretically be pursued even if it’s irrational to do so.

There’s a lot of class action abuse, but this seems like the most obvious sort of case where you want one: the harm to each individual consumer is too small for them to enforce their rights in court, but the gain to the company aggregating all of the individual thefts from customers is large.

Without the ability to pursue a class action over bad faith behaviors like JetBlue illegally keeping customer money, our best hope is TSA itself which has successfully sued other airlines including Southwest, Frontier and Spirit over similar tactics.