At the tail end of a summer that was often defined by air travel frustrations, the U.S. Department of Transportation (DOT) has proposed a federal rule change aimed at making it easier for airline passengers to receive a refund for significantly delayed or canceled flights.
And while much of the travel industry is applauding the government agency for working to strengthen consumer protections, many of those same tourism stakeholders are worried about who will end up paying out the flight refunds under the newly proposed regulations.
What Does the Proposed DOT Rule Do?
In a 115-page Notice of Proposed Rulemaking (NPRM), released Aug. 3, the DOT said it has for years required airlines and ticket agents to refund travelers if a flight is canceled or significantly changed. But the agency also noted the terms “significant change” and “cancellation” had never been fully defined.
The DOT now wants to define a significant change as a flight departure and/or arrival impacted by three hours or more (for a domestic flight), or six hours or more (for an international flight), according to the NPRM. A canceled flight, meanwhile, would be one published in the airline’s computer reservation system at the time of the ticket sale, but not actually operated by the airline.
The DOT’s proposed definition of significant changes requiring a refund also includes changes to the arrival or departure airports, changes increasing the number of connections in the flight itinerary and changes to the type of aircraft used (if it causes a significant downgrade for the customer in experience or amenities).
Although the DOT makes it clear throughout its NPRM that the agency is seeking input from the public about the suggested rule changes, the document describing the new proposals certainly doesn’t mince words about the role the DOT believes ticket agents should play in the refund process:
"The Department is proposing to require that ticket agents provide prompt refunds of airline ticket purchase prices, or the air transportation portion of tour packages, when an airline cancels or significantly changes a scheduled flight itinerary that the ticket agents sold directly to consumers, regardless of whether the ticket agent is in possession of the ticket purchase funds,” the DOT wrote in the NPRM.
How the DOT Ruling Could Affect Travel Agencies
However, for travelers who have booked their ticket through a travel agency, the lines are blurred when it comes to who should be issuing the refund, according to Eben Peck, executive vice president of advocacy for the American Society of Travel Advisors (ASTA).
He said there has been “an ambiguous regulation” on the DOT books for quite some time, implying that if a ticket is booked through a travel agency, the travel agency is responsible for the refund when a flight is significantly delayed or cancelled.
It's unfair to ask a small businessperson, which is the vast majority of our members, to pay out of pocket when the airline doesn't want to pay the refund or they're slow to pay the refund.
But the DOT has never before taken any action to enforce that rule, according to Peck, and he said the agency previously issued guidance explaining that while ticket agents are required to make a refund if a flight is delayed, that’s really only true in cases where the agent is actually in possession of the client's funds.
"So, we're a little bit mystified by what DOT is trying to do here,” Peck said, noting that it’s really unusual for a travel agency to hold client funds for booked flights or vacation packages, including air. "This is just the very start of this process, but this proposal is certainly much more explicit that the travel agency is on the hook for the refund, regardless of whether or not they hold the client funds,” Peck continued. “That would be very disruptive, to put it mildly. It's unfair to ask a small businessperson, which is the vast majority of our members, to pay out of pocket when the airline doesn't want to pay the refund, or they're slow to pay the refund.”
Peck said ASTA will start a campaign encouraging the DOT to reconsider during a virtual hearing the government agency is scheduled to hold Aug. 22 on the proposed air rule changes.
Peck was also quick to note that ASTA is supportive, however, of many of the consumer rights and protections suggested elsewhere in the Aug. 3 NPRM.
“There were plenty of times during COVID-19 when travel agency clients thought they should have been entitled to a refund, but weren't able to get one,” Peck said. “So, this broadens the universe of refund rights, and that's a good thing in our view.”
Peter Vlitas, executive vice president of partner relations at Internova Travel Group, agreed that many of the consumer rights protections proposed earlier this month by the DOT are especially positive.
"I applaud the government, because I think rules like these are important,” Vlitas said. “If an airline can't fulfill its contract and its obligation to get you where you have to go, then you should be entitled to a 100% refund. I like that, but the devil's in the detail.”
If an airline can't fulfill its contract and its obligation to get you where you have to go, then you should be entitled to a 100% refund.
Like ASTA’s Peck, Vlitas will be participating in the Aug. 22 hearing as part of a coalition of several large travel management companies, including Internova, American Express Global Business Travel, Carlson Wagonlit Travel, BCD Group and others.
“We need the government to understand that it's not us who's going to give back the money,” Vlitas said of Internova-affiliated travel advisors. “It's the airlines who are going to give back the money. Because we took the money and passed it onto the airlines. We're not sitting on millions of dollars that we have to pay back to the consumer.”
The 90-day period during which the public can submit comment on the proposed DOT rule changes hasn’t yet started, according to ASTA’s Peck, who said that clock starts ticking once notice is published in the Federal Register, which hadn’t happened by press time. Peck encouraged all interested travel advisors to comment and suggested they reach out to ASTA directly about how best to voice their opinions.
Both Peck and Internova’s Vlitas were optimistic, meanwhile, about the likelihood of successfully revising some of the language impacting travel advisors in the DOTs recently proposed rule changes.
“I have some decent confidence that when we give them the oral comments and the written comments, that the government will acquiesce and say, ‘Yes, these guys don't have the money, and it's the airlines who are sitting on the money, so it's the airlines who have to give back the money,’” Vlitas said. “I'm confident that the government won’t let us down.”
