New Legislation Would Require Airlines To Refund Tickets When Passengers Choose Not To Fly

Senators Edward Markey (D-MA), Elizabeth Warren (D-MA), Richard Blumenthal (D-CT), Chris Murphy (D-CT), and Kamala Harris (D-CA) introduced the “Cash Refunds for Coronavirus Cancellations Act of 2020.” The legislation isn’t going anywhere because it lacks a catchy acronym.

What they propose is requiring airlines and travel agencies to offer cash refunds during the coronavirus pandemic for all cancelled tickets, whether cancelled by the airline or voluntarily by the passenger.

There are two elements to this,

  • A legal requirement to provide refunds when the airline cancels a trip. That already exists and the Department of Transportation underscored the requirement literally just yesterday. So this part is pure grandstanding, jumping on the valid criticism that airlines have been reluctant to issue valid refunds.

  • A legal requirement to refund tickets when customers cancel, because customers should be cancelling during a pandemic. If that was true in mid-March and April, that’s perhaps less true today, so the legislation is.. late.

The rule would be retroactive to March 1, allowing customers to trade vouchers they accepted for a refund. It would last “until 180 days after the end of the nationwide COVID-19 emergency declarations” (emphasis mine) which seems odd. And it would require vouchers voluntarily accepted by consumers in lieu of a refund to have no expiration date.

The proponents argue that “[d]eciding not to fly is the right choice for public health.” Senator Markey adds that ““Americans need cash in their pockets to pay for food, housing, and prescriptions, not temporary credits toward future travel.” Elizabeth Warren agreed.

It seems to me that if “[d]eciding not to fly is the right choice for public health” then – since public health is a government responsibility – the Senators ought to be funding their proposal with government dollars, rather than imposing this on airlines. And if the reason for doing this is cash needs of families, that falls even further into the area of debating government’s role rather than the airlines’.

Moreover refunds for passengers who cancel their own trips, even when encouraged to do so by Dr. Fauci, wouldn’t be at the top of my list of things the government ought to be funding. I’d prioritize testing and tracing, covid research, unemployment coverage and backstopping states on that. Government can’t fund everything, so I probably wouldn’t push the button on this.

They make the familiar argument that airlines received bailouts, so have a responsibility to do what I want. I warned this would happen, and it’s counterproductive if the goal of bailouts was to ensure the financial viability of incumbent airlines. Of course the Senators make clear that airlines would not be permitted to actually use the payroll support grants they received in order to pay for this.

They get a Consumer Reports representative to say that vouchers might make sense in normal times but “in a crisis of this magnitude” only refunds are fair. That’s literally the opposite of what the airlines have argued, and what a surprising number of commenters on this blog have found persuasive.

Two years ago, in describing why his airline would never offer the flexibility that Southwest does, American Airlines CEO Doug Parker explained that change fees are fundamental to their model of charging different prices to different customers, and that if government decided to limit change fees then they wouldn’t offer refunds at all (making all except full fare tickets more like basic economy). However in this case the proposed legislation would require refunds not limit change fees.

Senator Markey for his part has been tilting at the windmill of airline fees long before the current pandemic. And coming from five Democratic Senators, including two potential Vice Presidential picks, in a majority Republican Senate I can confidently predict this legislation isn’t going anywhere.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. You are “En Fuego”. Could not agree more. Very well written. You are so far ahead of most of the crap that is “blogged” about: No use of the words “score”, “haul”. No insulting admonishments that “now is not the time to travel!!”. Posts not riddled with credit card links.

  2. I think it should be for scheduled travel from March 1 to Dec 31 provided travel was purchased before pandemic prior to March 10 when none of us knew what was coming our way and to what extent.
    But not for new ticket purchases where we now know what the new awful normal is business as usual

  3. “the Senators ought to be funding their proposal with government dollars, rather than imposing this on airlines”. Airline shill much? The right thing to do is cancel travel. BA has had my money for a year now – for a flight in July, to Gatwick. Which is closed, and unlikely to be open then. But the flight isn’t cancelled yet, so that BA can keep the money… They’ve had their free loan for long enough. They’ve had enough bailouts.

  4. Putting a requirement on cancellations doesn’t seem grandstanding to me given your reporting on United’s twisting the meaning of cancellation and the DOT’s refusal to define cancellations. Bravo to these Congresspeople for working for the people, but I do fully expect that it will be squashed by bribed (sorry, lobbied) congresspeople in the pocket of airlines.

    And while I agree with you that airline shareholders and bondholders should have been allowed to fail, but after such a failure no new entrants would have found financing to restart what are loss-making operations to “keep the economy open”, so we would have ended up with nationalized airline service one way or the other.

    But removing fees is a great public policy move; nowhere does it say that it’s a right of businesses that exist “to keep the economy open” to be able to implement business models based on screwing people. What Parker thinks it’s irrelevant as he’s proven to be the worse airline leader of the whole lot (should there be a major airline failure as the CEO of Boeing hints, AA has the highest likelihood to be the one to fail). You can easily add the over-reliance on fees to the ever growing pile of his team’s bad decision making.

    Bottom line is that morality should always trump profits: at the extreme, businesses would be far more profitable if slavery were re-introduced — you won’t find anyone arguing otherwise. Corruption will ensure that fees will stay, but it would be a far better world if they disappeared.

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