Why Airlines Shoot Themselves In The Foot Refusing To Provide Refunds For Cancelled Flights

Airlines are one of the least trusted industries in the country, even before they showed up to pick consumers pockets for nearly $60 billion (and it’s hardly the first airline bailout, American Airlines predecessors America West and US Airways both were kept alive with government subsidies after 9/11).

If there’s one thing consumers thought they could trust, though, it’s that if an airline flight doesn’t operate they can get their money back.

Airlines are so desperate to conserve cash that many around the world have made it as hard as possible to get refunds, misleading consumers into believing they aren’t entitled to one; hiding the ability to get a refund; taking the request for a refund and indefinitely round filing it; and simply refusing outright.

Needing money though isn’t an excuse to take money that belongs to someone else. And people don’t trust airlines to keep their promises to begin with, now they’re learning airlines may not even follow the law. (United Airlines has even been fined before for failing to properly process customer refunds.)

I should say though that I’ve actually had good experiences with refunds from American Airlines.

Airlines in Canada, prominently Air Canada and WestJet, are getting some relief from refunds (HT: One Mile at a Time). The Canadian government says that airlines can now keep customer money for cancelled flights as long as they provide a voucher valid for up to two years.

On the one hand, passengers who have no prospect of completing their planned itineraries with an airline’s assistance should not simply be out-of-pocket for the cost of cancelled flights. On the other hand, airlines facing huge drops in passenger volumes and revenues should not be expected to take steps that could threaten their economic viability.

While any specific situation brought before the CTA will be examined on its merits, the CTA believes that, generally speaking, an appropriate approach in the current context could be for airlines to provide affected passengers with vouchers or credits for future travel, as long as these vouchers or credits do not expire in an unreasonably short period of time (24 months would be considered reasonable in most cases).

There are airlines who are willing to sacrifice their future to survive today. They aren’t even thinking about a future beyond next week and next month.

However the actions they’re taking today make buying tickets really risky going forward. The idea of buying deals now for future travel is jeopardized because of the uncertainty of what schedules will look like months into the future.

A common tactic airlines are engaged in is waiving change fees on new tickets, trying to goose sales by reducing risk. At the same time, since there will be many changes to flight schedules going forward based on what countries are open for travel, and where there’s demand, any ticket purchased today is subject to the risk it won’t operate.

If you buy a new ticket, and the airline changes its plans (or is forced to do so), you now know you won’t get your money back. Why would you buy a ticket until you’re sure of a flight schedule? Why would you buy a ticket on an airline that has open union contracts or furloughing employees?

Airlines are willing to steal today to survive until tomorrow. The Canadian government is willing to support that, it seems. But it’s an odd business model, and not one that’s sustainable, to make money by taking someone’s money and not delivering what’s promised. The most difficult times are when people and businesses show their true colors. No airline that does this deserves to survive.

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. @ Gary — Yeah, they are totally shooting themselves in the foot. As an example, my household is a HUGE spender on airfare, having spent well over $500k (probably closer to $1M) on personal flights over the past 20 years. We will NEVER again purchase a ticket from ANY airline the screws us out of our hard-earned money. Multiply that by thousands of furious customers, and you’re talking many billions of dollars of lost future revenue. These business leaders are short-sighted idiots. This thinking (or lack thereof) is so typical of Americans these days — Me first, screw You. It’s this kinda of selfishness that results in our citizens electing the idiot in charge today with his America First policy of unbridled selfishness.

  2. Well said. The one-year hard expiration is just a non-starter for many of us. I only take a few leisure trips a year and it is difficult for me to predict which airline my family will fly because it depends on the route and fares. So for example I’m sitting on a bunch of AA e-gift cards that thankfully have no expiration because I haven’t found the right trip for them (i.e. other airlines had cheaper nonstop service).

    I’m definitely not buying any cash tickets until we know that normal travel will resume. By contrast, mileage tickets seem like a good play right now, though you don’t want to transfer Chase points and have them stuck in a program if your flight gets cancelled.

  3. Got fully refunded some AA awards tickets and no re-deposit fee, and I am hearing that AA is being pretty good with refunds and such. Like you said, give credit where credit is due

  4. You are right Gary. I proactively cancelled four award flights (significant surcharges–for relatives not me) and four cash refundable J flights for later this summer that I would have been willing to let ride to see how things played out but given the games they are playing I’d rather have most of my money now (minus cancellation/redeposit fees) vs none later. The euro airline I had the refundable J tickets with removed the cash refund option the day after I submitted my request. I fully expect to have to go the chargeback route on that one even so.

  5. If United had any real leaders, they’d say to customers:

    “It is a really difficult time for us as far as cashflow, as we know it is for you. Would you please consider accepting a voucher which is good for 110% of the fare you paid? Or a voucher, plus 5,000 miles? Or a voucher, plus one free upgrade to 1st Class? Ok, if not, here’s your refund. Please fly us when things get better”.

    Instead, they’ve resorted to thievery.

  6. D@mmit! I knew I should have stayed on the phone when I called AC a few days ago to get my refund! They implored callers to call back in a few days if their trip was not imminent (mine is mid-May) so that they could take care of the immediate and urgent travellers first. Boy, was I taken!

    Personally I also have an issue with the voucher balance being forfeit if the new ticket price is less. WTH? If my original Flt was Sfo-yyz and my new tkt is Sfo-yvr, there’s probably going to be a significant balance lost. This is just wrong!

  7. Last night American refunded my ticket when they had cancelled one flight segment out of four. Props to them.

  8. I said this on an earlier post when UA started screwing around with that 25 hour schedule change policy.

    If the airlines want consumers to book tickets, the number one thing consumers need is the confidence that the flight will fly as scheduled, plus or minus a couple of hours from what was booked. (Those who book way out are used to schedule changes, the 2 hour thing is baked into our awareness and behavior.)

    But by saying that the flight may not operate on the *day* you’ve bought that ticket, and there’s no refund for that? Heh, nobody in their right mind is going to book any further in advance than absolutely necessary. Doing so otherwise is just dumb.

    To get bookings going again, the airlines *may* have to make even the cheap fares refundable.

  9. @Susan since your flight touches US soil you should still be covered by DOT rules and thus covered for refund. Honestly if you are currently in a position to refund I would despite what the carriers are asking. Things are getting tougher to refund over time. I have made it under the wire several times in the last week when policies changed for the worse right after I asked for a refund.

  10. @TMF – what you suggest is actually less generous than what AA has already offered (20% voucher).

    I am (mostly) loyal to UA, but if they don’t offer up a credit soon, will insist on a refund since they are playing hardball.

  11. @ECM/Christian – have you seen $ back from AA, or gotten a “refund”? I’m in the latter camp…I get lip service, the PNR disappears, but nothing back to the CC…not holding my breath.

  12. I called just to ask my option for a r/t SFO-MAD flight that was to leave on April 8. The EWR-MAD leg on the outbound just disappeared from my itinerary and I called to see my options. You’d think they would cancel it since we know they are no longer operating EWR-MAD. I called and asked did I need to rebook a flight, and was told I didn’t and I could get a credit. I responded that I would call back and see if I wanted to cancel now and book later or just change the flight and I didn’t want to cancel just yet and made that very clear. Guess what – a couple hours later I got an email and the agent apparently went ahead and canceled the flight anyway. I suspect that if United canceled, they’d be obligated to refund, but since I canceled, I just get a credit, and thats what agents were told to do. I can’t believe United would be so dishonest with a 1K/Million Miler, but they were. Very annoyed but too tired to ry and fight the powers.

  13. Gary — keep track of what airline is doing what to screw people over. Once this is over and the economy / travel restarts, you can publish your findings and I am willing to bet that that post will be one of the ones with the highest readership levels ever.

  14. I just dealt with dealt with 3 different airlines today, all domestic travel. Delta canceled a flight and fully refunded it when I requested it. Alaska Air refunded a seat upgrade on an award ticket I had booked with American miles and needed to cancel. American refunded the miles on same ticket with no redeposit fees. Don’t know if it made a difference but I spoke with live people instead of trying to do this online. All were exemplary in my experience.

  15. @CW – I haven’t gotten the credit yet but it’s been one day and the website does say 7 days so I’m not pressing too hard yet. If nothing happens by Monday, I’ll recheck the status online.

  16. It is also illegal to do business where money taken for future services is needed to pay expenses today

    Air Canada has screwing people over for years. They are a terrible company.

    One shout out to Alaska Airlines who gave me a refund right away.

  17. Of US airlines, it seems to me that UA stands out most, in the worst way, during this crisis. The draconian 25 hour rule, refusing to waive award redeposit fees for even cancelled award tickets, among other things. The other US carriers aren’t perfect by any stretch, but when even AA is more customer friendly, some introspection is required. I know going forward, I’ll be doing my absolute best to avoid United.

  18. I called AA, was refunded in 2 minutes. No questions asked. I guess AA are taking the exact opposite approach to UA or did I just get lucky?

  19. @ Christian – “Props” to AA? What a joke. They chose to refund you because they are holding onto enough money belonging to other passengers whose flights they canceled just like yours.

  20. I had a good experience with UA this week. CXL award the DoD after 2 sked changes and d/g from F to Y on one leg. Agent was more than happy to do it, no questions asked!

    The interesting thing is she couldn’t get the refund to process. Had to call the MP desk and manually credit the miles. So presumably I won’t be getting my $6 back (and that PNR is probably available for reuse). So when agents say “I can’t do that” they are probably telling the truth. It would not surprise me if UA coded the system to disallow refunds on NONREF tickets!

  21. Hmmm. Not what I found. Had a flight scheduled from CVG to PIR RT on 3.31 Allegiant canceled the flight. I called and said this was for a one off meeting. Got refunded without a hassle.

    I know the big three would never consider doing this, which is why they seem to have so many problems ALL the time. If you do not want to serve your customers, get out of the business, someone will buy the assets.

    Going forward alot will change, mainly how will the airlines deal with the “social distancing” LOL that so many seem to fall for. Hike prices would be my guess.

  22. My cruise was canceled (4/1-4/8). I went online and canceled my AA round trip. Emailed AA and was answered “you will receive a credit-you can use withIn 12 months from date of purchase -I purchased the ticket 11/2019. I think I’m screwed because my cruise has not rescheduled. On The Blue- Any advice-Thank you
    PS my flight was for March 29-April 11,2020

  23. See if the flight is still happening. Lots of AA flights have been cancelled, if so you should get refund. Screw the credit.
    Also file a claim with the CC, let them battle it out with AA.

    Good luck

  24. Well after over 7 hours and a lot of disconnected calls with Chase Travel (twice they called back and kept me in the cue, once they didn’t), I received a refund for 3 flights going to Cancun tomorrow and points were redeposited. Delta cancelled the flights yesterday but Chase STILL refused to refund the points. Per Delta, since they canceled, I should be reimbursed. Chase said because they are a travel agency, they err with more restrictions, hence will only offer a voucher. I waited 2.5 hours to speak with a supervisor this morning (after an hour wait and disconnected call). Fortunately they had a tape recording of one of their agents saying I can get a refund. So they refunded me this morning, and redeposited the points. She said I got lucky.

  25. Thank you very much Jeff, will check and will file complaint with cc if no refund is issued
    Stay well!!

  26. Part of the reason why UA deserves zero government handout. Their poor business practices (by hoarding cash for UNdelivered services) is likely why their plans are even more empty than others. This is their own making.

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