Airlines will Have to Pay Cancellation Refunds Under New Federal Law

Under the new federal law, airlines are required to give cash refunds for canceled or seriously delayed flights.  Transportation Secretary Pete Buttigieg said, “Passengers deserve to get their money back when an airline owes them — without headaches or haggling.”

This means that under the new federal law, passengers who refuse travel credits and other types of reimbursements get cash refunds from the airlines. 

The Biden administration said that this new rule applies to flights that have undergone a “significant change.” The term “significant change” is characterized by both departure and arrival that are three or more hours delayed for domestic flights. And for international flights, it is characterized by at least six hours if you add connecting flights. 

And the new federal law doesn’t just cover delayed flights. It also includes refunds for baggage that is delivered 12 hours late for domestic flights. 

Holding Airlines Accountable

The new federal law is a result of major disruptions that made the travel experience difficult for passengers. This includes the 2022 Southwest Airlines meltdown that affected almost 17,000 passengers with significantly delayed or canceled flights. 

The Transportation Department clarified that this new rule means that  “airlines must automatically issue refunds without passengers having to explicitly request them or jump through hoops.”

Apart from the new federal law, there is another rule that requires transparency on the part of airlines. Here, airlines need to disclose the so-called junk fees upfront. This includes the baggage and other fees. 

To what extent does it benefit travelers? It is expected that this could help flyers collectively save up to $500 million annually. 

Airlines for America said that their member airlines “offer transparency” and provide cash refunds. It said, “U.S. airlines are providing more options and better services while ticket prices, including ancillary revenues, are at historic lows.”

Last year, the 11 largest US airlines refunded fliers $10.9 billion in cash. That’s equivalent to more than $7.5 billion compared to 2019. However, it’s lower than the $11.2 billion cash refund issued in 2022.