DOT Airline Refund Rule for Cancellations, Significant Changes, Checked Baggage and Ancillary Services
On June 25, 2024, a United States Department of Transportation (DOT) consumer protection rule goes into effect requiring certain US and foreign air carrier refunds for (1) airline cancellation or significant changes to a flight; (2) checked baggage fees when bags are significantly delayed; and (3) ancillary service fees for services not provided (the “Refund Rule”).
A copy of the DOT’s final rule can be found at: https://www.regulations.gov/document/DOT-OST-2022-0089-5343.
I. Scope of the Refund Rule
The Refund Rule applies to all certified or commuter and foreign air carriers operating scheduled passenger service to, within, and from the United States using aircraft of any size. The rule applies even for flights subject to consumer protection rules of other jurisdictions and applies to all consumers, regardless of whether they reside in the United States.
The Refund Rule applies to certain flight segments between two points outside the United States if those segments “are on a single ticket/itinerary to or from the United States without a break in the journey.” As a bright-line rule, the DOT considers “any deliberate interruption of a journey at a point between the origin and destination that is scheduled to exceed 24 hours on an international itinerary to be a break in the journey.” Aside from the above rule, the DOT will look to other factors in determining whether a stopover outside the US is a break in the journey, including: (1) “whether the whole itinerary was purchased in one single transaction”; (2) “whether the segment between two foreign points is operated or marketed by a carrier that has no codeshare or interline agreement with the carrier operating or marketing the segment to or from the United States; and (3) “whether the stopover at a foreign point involves the passenger picking up checked baggage, leaving the airport, and continuing the next segment after a substantial amount of time.”
II. Refunds for Cancellation and Significant Changes to Scheduled Flights
a. Applicable Events
The Refund Rule applies to cancellations and significant changes in flight itineraries with flights to, from, or within the United States. The Refund Rule defines “canceled flights” and “significant changes of a flight itinerary” to protect against inconsistencies in airline refund policies.
Canceled Flights. A “canceled flight” is “published in a carrier’s Computer Reservation System at the time of the ticket sale but not operated by the carrier.”
Significant Change of a Flight Itinerary. A “significant change of a flight itinerary” includes:
1. Certain changes to a passenger’s scheduled departure from an origination airport or scheduled arrival at a destination airport;
2. Changes to a passenger’s origination or destination airport;
3. Connections added to a passenger’s original itinerary;
4. Downgrades in classes of service;
5. Changes to a passenger’s original scheduled connecting airport for passengers with disabilities; and
6. Substitutions of aircraft on a disabled passenger’s original itinerary resulting in the unavailability of certain accessibility features required by the passenger.
Changes to a passenger’s scheduled departure or arrival. The Refund Rule applies to the following scheduled departure and arrival changes:
1. Departures: A change in the scheduled departure from an origination airport to at least three hours earlier than the scheduled time for domestic flight itineraries and at least six hours earlier than the scheduled time for international flight itineraries;
2. Arrivals: A change in the scheduled arrival at a destination airport to at least three hours later than the scheduled time for domestic flight itineraries and six hours later for international flight itineraries.
This rule does not apply to changes in the departure or arrival time of connecting flights so long as there is no significant change in the departure time of the first flight segment or the arrival time of the final flight segment.
Changes to airports within the same metropolitan area. The Refund Rule applies to changes in origination and destination airports, even if the change is to an airport within the same city.
Classes of Service. The DOT defines a class of service as “seating in the same cabin class such as First, Business, Premium Economy, or Economy class, based on seat location in the aircraft and seat characteristics such as width, seat recline angles, or pitch (including the amount of legroom).” Thus, according to the DOT, while Premium Economy is a different class of service from standard Economy, Basic Economy is not because “Basic Economy seats do not differ in pitch, size, or legroom from standard Economy.”
Passengers with Disabilities. The DOT requires refunds to passengers with disabilities as well as other passengers traveling on the same reservation if a passenger with a disability does not accept a change in aircraft or class of service because of the unavailability of needed accessibility features or if the person with a disability does not accept a change in a scheduled connecting airport.
Accessibility features include, but are not limited to, in-cabin stowage of assistive devices, movable armrests, accessible lavatories, on-board wheelchairs, and cargo stowage of mobility aids. When inquiring how the change in accessibility features impacts a passenger’s needs, air carriers must be cognizant of DOT Air Carrier Access Act regulations and not ask about the nature or extent of a passenger’s disability.
b. How and When to Issue Refunds
Who Issues the Refunds. The DOT requires the “merchant of record” to provide prompt refunds. The DOT defines “merchant of record” as “an airline that processes consumer payments for airfare or airline ancillary service fees and whose name appears on the consumer’s bank or similar transaction statement.”
Retail ticket agents of all sizes transacting directly with consumers as the merchant of record for a ticket sale are required to promptly refund the consumer even if the ticket agent no longer possesses funds from the transaction. The DOT requires airlines to timely confirm and communicate a consumer’s refund eligibility to a ticket agent upon request. The DOT, however, will not require that airlines promptly return consumer funds to refunding ticket agents with the expectation that airlines and ticket agents “both have the interest to negotiate, form, and adhere to standard procedure in handling consumer funds to ensure that ticket transactions and refunds are processed smoothly to the benefit of consumers, as well as the businesses involved.”
The DOT generally requires the marketing carrier for a codeshare or interline itinerary to issue refunds to consumers as the merchants of record.
Timing of the Refunds. The DOT defines “prompt” as within 7 business days of refunds becoming due for credit card purchases and within 20 calendar days for all other forms of payment, including debit card purchases.
A refund becomes due when a carrier cancels or significantly changes a flight and either:
1. The carrier does not offer alternative transportation, travel credits, vouchers, or other compensation;
2. The consumer rejects offered alternative transportation, travel credits, vouchers, or other compensation;
3. The carrier offers alternative transportation, but the consumer neither responds by a reasonably set response deadline set by the carrier, nor accepts travel credits, vouchers, or other compensation, and the carrier’s policy is to treat lack of response as a rejection of the offered alternative transportation;
4. The carrier offers only travel credits, vouchers, or other compensation, but the consumer does not respond to the offer before a reasonably set response date; or
5. The carrier offers alternative transportation, travel credits, vouchers, and other compensation, the carrier does not set a response deadline and the consumer neither responds nor takes the alternative flight.
For ticket agents, refunds are due once the agents receive confirmation from the airline as to a consumer’s eligibility for a refund.
Notice to Consumers. Carriers and ticket agents must provide consumers with timely notice of their rights to a refund before they offer alternative transportation, travel credits, vouchers, or other compensation for the cancellation or significantly changed flight itinerary. The DOT will require carriers to disclose relevant refund and cancellation parties in their Customer Services under 14 CFR 259.9.
Consumer Response Deadlines to Offers. Airlines offering consumers the option of accepting an itinerary with a significant change or alternative transportation for a canceled flight may set a deadline to respond so long as it provides the consumer with a reasonable time to decide.
In determining what is a reasonable amount of time, the DOT will look at factors including: (1) “when the cancellation or significant change occurred”; (2) “how soon after the carrier became aware of the flight cancellation or significant change that the carrier notified affected consumers of this event and made an offer of alternative transportation”; and (3) “how close the consumer notification is to the scheduled departure date.”
Refund Amounts. Refunds are for the full ticket purchase price, including taxes and fees, less the value of transportation already used by the consumer, if any. Refunds are to be in the original form of ticket purchase; however, airlines and ticket agents may offer consumers the choice of other cash-equivalent payments in addition to the original form of payment.
Booking/Service/Processing Fees. Airlines are not allowed to retain a fee when processing refunds. On the other hand, ticket agents may charge a service fee or processing fee so long as the fee is clearly and prominently disclosed to the consumer at the time of ticket purchase.
III. Refunds for Significantly Delayed Bags
a. Applicable Events
US and foreign airlines will be required to automatically refund baggage fees to consumers where the consumer files a mishandled baggage report and:
1. Domestic itineraries: The airline does not deliver a checked bag to a consumer within 12 hours of flight arrival at the gate;
2. International itineraries (where US-foreign country segment is 12 hours or less): The airline does not deliver a checked bag to a consumer within 15 hours of flight arrival at the gate; and
3. International itineraries (where US-foreign country segment exceeds 12 hours): The airline does not deliver a checked bag to a consumer within 30 hours of flight arrival at the gate. However, the 15-hour rule applies if the passenger’s flight itinerary includes a segment between two foreign points exceeding 12 hours, but the segment between the US and foreign point is less than 12 hours.
Delay Time Calculation. The delay starts at the time a passenger arrives at his/he destination and can deplane from the last flight segment. The delay ends when the carrier delivers the bag to a mutually agreed upon location or the passenger or an individual authorized by the passenger picks up the bag at the airport.
b. How and When to Issue Refunds
Who Issues the Refund. The airline issues the refund. When an itinerary involves multiple carriers, the merchant of record carrier (the carrier collecting the baggage fee) issues the refund. If, however, a ticket agent is the merchant of record, the carrier operating the last flight segment issues the refund.
Inter-Airline Communications. If a carrier other than the carrier operating the last flight segment is the merchant of record, the carrier operating the final flight segment must timely provide the merchant of record carrier with information as to significantly delayed baggage and passenger missing baggage reports.
Consumer Notice to Carriers. Consumers must file a missing baggage report with a carrier to receive a refund.
When Must the Refund be Issued. The refund must be provided within seven business days of the expiration of the baggage delivery deadline for credit card purchases and within 20 days of the expiration of the baggage delivery deadline for all other forms of payment.
c. Exemptions/Waivers
Exemptions. Under certain specified circumstances, carriers are exempted from the refund requirement due to passenger negligence. A carrier is exempted from the refund rule where, for instance: (1) passengers fail to pick up and recheck baggage at international entry points; (2) passengers fail to pick up checked baggage before taking a flight on a separate ticket; or (3) passengers are not present to pick up a checked bag that arrived on time for “any other reason that is due to the fault of the passenger if documented by the carrier.”
Waiver. If passengers voluntarily agree to travel without their checked baggage on the same flight because they had checked in late or are flying as stand-by passengers, carriers transporting passengers on a separate flight may be exempted from refund obligations and may require passengers to sign a limited waiver to their right to a refund. The DOT instructs that such waiver should include an estimated delivery time and agreed-upon delivery location. Passengers cannot waive their right to a refund for lost, damaged, or stolen bags or their right to incidental expenses arising from the delay beyond the agreed delivery time.
IV. Refunds of Fees for Ancillary Services Not Provided
a. Applicable Events
US and foreign airlines will be required to refund ancillary service fees paid for, but not received, by a consumer because the carrier failed to fulfill its obligation to provide the service.
An “ancillary service” means an optional service related to air travel provided by a covered carrier, for a fee, beyond passenger air transportation. Ancillary service examples include checked or carry-on baggage, advance seat selection, access to in-flight entertainment systems, in-flight food and beverages, pillows and blankets, and seat upgrades. Such a service is optional, meaning that the passenger purchases the service at his/her discretion, and the service is not automatically included in the fare or provided to passengers without a separate fee.
b. How and When to Issue Refunds
Who Issues the Refund. The airline issues the refund. When an itinerary involves multiple carriers, the merchant of record carrier (the carrier collecting the baggage fee) issues the refund. If, however, a ticket agent is the merchant of record, the operating carrier that failed to fulfill its obligation to provide ancillary services issues the refund.
Inter-Airline Communications. When an itinerary involves multiple carriers and the ancillary service is provided on a carrier that was not the merchant of record, the carrier that did not provide the ancillary service must timely inform the merchant of record carrier of the failure to provide the service.
Automatic Refunds. Where it is undisputed that consumers did not receive ancillary services, such as where all passengers who paid for a service did not receive it, a refund is due to consumers without consumer notice to the carrier.
Consumer Notice to Carriers. Consumer notice to carriers is required when a service is unavailable to an individual passenger or group of passengers. The DOT does not specify as to how consumers are to provide notice, instead, the DOT advises that carriers “should make information available on their website on the different avenues available to customers to report such problems.”
When Must the Refund be Issued. The refund must be issued within seven business days of the event triggering an automatic refund or consumer notice and within 20 days of the event triggering an automatic refund or consumer notice for all other forms of payment.
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The above is not intended as legal advice.
If you have any questions regarding the above Refund Rules or any other DOT consumer protection regulations, please do not hesitate to contact the firm at philip@weissmanpllc.com.
