Five senators have joined together and announced a new bill on May 13th. The Cash Refunds for Coronavirus Cancellations Act of 2020 requires airlines and third-party ticket sellers to offer full cash refunds for tickets plus ancillary fees for cancellations regardless of whether the airline or a passenger cancels a ticket.
Democratic senators Ed Markey (Massachusetts), Elizabeth Warren (Massachusetts), Richard Blumenthal (Connecticut), Chris Murphy (Connecticut), and Kamala Harris (California) banded together in announcing this bill. The Cash Refunds for Coronavirus Cancellations Act of 2020 lays out strict requirements for airlines to refund canceled tickets. Below are the provisions:
- Airlines have to refund tickets for passengers whether the carrier or the passengers cancel the flight.
- Airlines can offer vouchers, credits, or other forms of compensation if the carrier provides a “clear and conspicuous notice” that a passenger can receive a refund.
- Alternate compensation forms must be valid and redeemable by the passenger for an indefinite period of time.
- Retroactive refunds who receive an alternate form of compensation without using it can request a private refund.
This also applies to ticket agents. The period this bill covers is March 1st, 2020, until 180 past the exploration of either the end of the public health emergency as the Secretary of Health and Human Services announced or else the end of the President’s national emergency.
Refunds cannot be processed using airline support that was given out for the express purpose of covering wages. However, airlines can pay for refunds using money from other sources, such as loans from the US treasury.
Currently, most airlines are allowing passengers to change existing reservations without charging change fees. Some are also extending the amount of time vouchers or credits are valid to give passengers additional flexibility. No airline, however, has announced full refunds for passengers who wish to cancel nonrefundable tickets.
Expand airline refund obligations
This bill would expand refund obligations for airlines. Most airfare purchased is nonrefundable. That means if a passenger cancels their ticket, airlines do not have to offer a full cash refund. However, per guidelines from the US Department of Transportation, an airline that cancels a flight has to provide a full refund for the passenger. But, some airlines have tried to wiggle themselves out of such an obligation.
The case for the bill
For passengers who canceled flights due to COVID-19 fears, this would be a major boon. Passengers who previously accepted credits could not ask an airline to process refunds. For those who are now facing economic hardship due to the economic downturn, this could be a significant relief.
Already, airlines have received billions of dollars in aid from the US federal government to help tide them over until the fall. In addition, the last few years have seen stellar profits at most major airlines.
The case against the bill
Airlines are definitely going to take a stake against this. Major US airlines have already processed hundreds of millions of dollars in refunds. American Airlines alone expects its total refund bills to hit $2 billion by July after processing $600 million in refunds in April. And, airlines just don’t have billions of dollars sitting in an account.
It is unclear exactly how much more money airlines would have to shell out to provide refunds. And, with some expecting not to have any net revenue until 2021, this would be a huge financial setback for airlines that could come with a multi-billion price tag and further put stress on airlines that are not in great financial shape as is.
This bill has a long way to go until it becomes law. And, as of writing, it is unclear if this bill will pass. However, there will be plenty of industry opposition to it. Most airlines are in no shape to provide additional billions of dollars worth of refunds. And, given that this bill would extend the time when airlines would have to give refunds, it could send more carriers into bankruptcy and risk hundreds of thousands of jobs.
But, airlines could work to make vouchers attractive. The bill would not ban that. This includes schemes that increase the credit’s value over time up to a certain amount, fewer ancillary fees when using a credit or some other incentive.
However, some passengers would greatly benefit from such a change. People who had planned honeymoons or weddings or a once-in-a-lifetime getaway may not be able to travel in a few months if states continue to maintain strict quarantine requirements. And, on more niche carriers, some passengers may not have the use of a voucher if they don’t fly the airline often.
Do you support this bill? Why or why not? Let us know in the comments!