Democrats Introduce Bill Expanding COVID Air Ticket Refunds

Advertisement:

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.

US, Travel Ban, Donald Trump
A new bill expanding refund obligations could mean bad news for the airline industry. Photo: Getty Images

The bill

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.
United planes SFO
Some airlines have tried hard to get out of their refund obligations. Photo: Getty Images

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.

Jetblue
The bill would require airlines to refund some passengers retroactively. Photo: Getty Images

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.

Alaska A320
Airlines would not be able to use money destined for payroll support to refund passengers. Photo: Getty Images

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.

Southwest Airlines plane
Southwest Airlines is one airline that is not charging change fees. Photo: Getty Images

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.

Advertisement:
Delta 777
Delta Air Lines and others have extended the validity of vouchers, but this bill would require vouchers to be valid for an indefinite period of time. Photo: Getty Images

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.

Getty TSA
The bill would allow passengers who are not comfortable with traveling due to the crisis to receive a refund. Photo: Getty Images

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.

Frontier Airlines covid-19 coronavirus
The last few years have been good for airlines. Photo: Getty Images

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.

Advertisement:
American Getty
American has had to issue $900 million in refunds in the first quarter of 2020 with more expected in the coming months. Photo: Getty Images

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.

Spirit airlines A321
Airlines would also have to refund ancillary fees. Photo: Getty Images

Overall

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.

Allegiant
Airlines will likely take a strong stand against this bill. Photo: Getty Images

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.

Advertisement:
A321neo
The bill would give flexibility for some passengers whose travels are impacted by state and local-mandated quarantines. Photo: Hawaiian Airlines

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!

Advertisement: