Biden: Airlines Must Provide Automatic Cash Refunds, More Transparency

24.04.2024 - 20:49 / forbes.com / Pete Buttigieg / Airlines

On Wednesday, the Biden administration announced two new rules for airlines in its years-long war on so-called “junk fees.” The White House says the new rules will help consumers save over half a billion dollars every year that they are currently overpaying in airline fees.

The first new regulation mandates that carriers issue full cash refunds automatically instead of in response to customer requests when flights are canceled or significantly changed, when baggage return is significantly delayed and when ancillary services like inflight Wi-Fi are not provided to passengers who purchased them.

“The 11 largest U.S. passenger airlines issued $43 billion in customer refunds, $900 million per month, between January 2020 and December 2023, in addition to issuing other forms of compensation,” Airlines for America (A4A), the lobby group for the North American airline industry, said in a statement.

But currently, it’s common for airlines to issue a travel credit or voucher by default instead of a cash refund, making it more cumbersome for passengers to rebook on another airline. To get a refund, travelers typically have to jump through a series of hoops on the airlines’ website or app or spend lengthy sessions waiting on the phone.

“It sounds technical, but the fact that by default, without having to ask, you will automatically get money back on whatever form of payment you used to buy the ticket in the first place, if you have a cancellation or a significant delay—that’s actually a big difference from what happens now,” Transportation Secretary Pete Buttigieg told MSNBC’s “Morning Joe” on Wednesday.

“Up until now, even though technically you’re already supposed to be able to get your money back for a cancellation, you have to really fight for it,” Buttigieg said, noting that airlines will often offer mileage points instead of a refund. “That might sound great if you’re not aware that that 5,000 Miles is worth, I don't know, 50 bucks, and you’re actually entitled to 400 bucks in a ticket refund.”

Over the past several decades, airlines have charged ancillary fees for all sorts of additional amenities, including inflight Wi-Fi, checked bags, priority boarding, premium seat selection and so on. Over the past decade, the global airline industry’s haul from these fees has ballooned from $42.6 billion in 2013 to over $102 billion in 2022, accounting for 15% of global airline revenue, according to a report from OAG Aviation .

The second new rule aims to squash so-called “surprise junk fees.” Buttigieg said the airlines “really developed this business model, especially over the last 10 or 20 years where there are all kinds of little charges of charges—and the worst thing is when it’s a surprise charge.”

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