Airlines still owe billions in refunds for canceled flights

Although COVID-19 added a new level of stress to flying, the biggest source of traveler gripes these days is the flights that people didn’t take.

In 2020, the U.S. Department of Transportation received nearly 90,000 complaints about ticket refunds, up more than 5,000% from less than 1,600 in 2019. Airlines still owe customers upwards of $20 billion in refunds for flights that were canceled last year, experts say.

“There has never been a year like last year for complaints about refunds,” Bill McGee, aviation adviser at Consumer Reports Advocacy, told CBS MoneyWatch. “The airlines obviously made some conscious decisions not to do the right thing and give refunds — even when they were required to by law.”

Refunds remain a major source of contention after erupting early on in the pandemic as airlines cut flights, governments enacted travel restrictions and would-be travelers canceled trips.

Hemorrhaging cash, many airlines opted to preserve capital by not reimbursing consumers for canceled flights as air travel came to a virtual stop. Under U.S. law, airlines are required to offer refunds to passengers when a flight is canceled or the schedule is significantly changed. Still, there are no such guarantees for those who willingly opt not to fly, even due to a global pandemic.

“If they can keep you from demanding a cash refund and hold onto all that working capital, that was the objective during most of 2020 and even into 2021 in some cases,” said Robert Mann, a former airline executive and now industry analyst based in Port Washington, New York.

The surge in refund complaints is “clearly a widespread, chronic problem, and it continues to this day,” McGee added.

As highlighted in an analysis of publicly available information released Thursday by the consumer advocacy group U.S. PIRG, complaints to the DOT hit a peak of 22,000 in May 2020, and nearly 21,000 were from consumers who have had difficulty getting reimbursed for canceled flights last year.

“In March, April and May of 2020, airlines were in a really precarious position. To preserve liquidity, they decided to make it harder than ever to get refunds for canceled flights,” recalled Zach Griff, an analyst at The Points Guy, a travel website. “It’s against DOT policy, but it’s still something we’ve seen over time.”

In the five years before the pandemic, the DOT received an average of roughly 17,000 aviation consumer complaints annually, with refund issues accounting for about 8% of the total. In 2020, the agency received a record-high 102,561 consumer complaints, up 568% from the previous year.

Complaints continuing into 2021

The outcry has continued into 2021, with people filing more than 22,000 complaints with the DOT. Of the grievances received over an 18-month period going back to early 2020, 84% concerned refunds, federal data show.

The volume of complaints remains higher than pre-pandemic levels “because airlines continue to put up roadblocks for consumers seeking refunds,” PIRG stated in its report.

Still, DOT numbers show improvement. In July, the agency received just over 5,000 complaints from consumers, with more than half concerning refunds. The overall tally is down nearly 55% from the roughly 11,000 filed in July 2020, according to the DOT.

Carriers have largely rebuffed calls from advocates and lawmakers that they offer cash refunds to customers who canceled flights during the COVID-19 crisis. And those whose flights were canceled in many cases were offered vouchers for future travel with varying expiration dates.

“The uptick in travel during Memorial Day weekend clearly shows that the airline industry is in recovery mode, yet these companies continue to sit on more than $10 billion in unused flight credits and are still refusing to return consumers’ hard-earned money, more than a year after the pandemic began,” Senators Edward Markey (D.-Massachusetts) and Richard Blumenthal (D.-Connecticut) stated in June.

The $10 billion cited by the lawmakers is likely closer to $15 billion to $20 billion, according to Mann and McGee.

As refund complaints poured into the DOT, other government entities also heard grievances on the topic.

Colorado’s attorney general last fall called for a federal investigation into Denver-based Frontier Airlines, saying he’d heard from consumers in 30 states with complaints of denied refunds or unredeemable travel credits.

“During the COVID-19 pandemic, we received more complaints about Frontier’s conduct — failing to honor its commitment to provide refunds — than any other company,” Phil Weiser, the state AG, stated in his appeal to then-U.S. Secretary of Transportation Elaine Chao.

A year later and with Pete Buttigieg at its helm, the Transportation Department launched investigations into 20 airlines for allegedly failing to provide timely refunds, with 18 still pending.

The DOT in late September reported that “thousands of passengers who had initially been denied refunds have received or are receiving the required refunds.” At least nine airlines have changed their policies to make clear people are entitled to a refund when their flight is canceled, rather than the vouchers or credits initially offered, according to the agency.

The DOT is considering whether to create a rule that would broaden the terms for when an airline would give a refund, but the agency does not have the authority to make it retroactive. “So we continue to fight this on all fronts,” said McGee, among those scheduled to speak Thursday at a public meeting on the issue by the DOT’s Aviation Consumer Protection Advisory Committee.

“The DOT, during 2020, they did nothing — that may correspond to the then-DOT view of policy on the matter — and hope the problem goes away,” Mann said. “The new administration’s DOT has stated the policy several times and is, I think, seen as a shot across the bow for U.S. carriers.”

But the agency so far has limited its enforcement to an airline based outside the U.S. Air Canada last week agreed to pay $4.5 million to resolve a DOT probe into what the agency termed “extreme delays in providing refunds to thousands of consumers for flights to or from the United States that the carrier canceled or significantly changed.”

The proposed settlement comes after the department in June said it was seeking a $25.5 million fine against Air Canada, alleging the carrier kept a no-refund policy in place in violation of U.S. law for more than a year. More than 6,000 complaints were lodged against Air Canada over its refusal to refund consumers for flights canceled or significantly changed between March of 2020 and mid-2021, according to the agency.

The reluctance or outright refusal to reimburse people for canceled flights was in widespread practice at the outset of the pandemic, but some airlines were more blatant in their refusal than others, according to The Points Guy’s Griff. “It was a very big issue with United [Airlines], which made a strategic decision to drag its feet with refunds.”

United Airlines has been the subject of the most refund complaints during the pandemic, according to data from the DOT and Consumer Reports, experts told CBS MoneyWatch. On a per passenger basis, Frontier Airlines tops the list.

“Those two airlines had a chronic problem with not paying refunds,” McGee said.

Neither United nor Frontier responded to requests for comment.

Airlines for America, or A4A, a trade group representing seven U.S. carriers said its members comply with all federal laws and regulations.

“Since the onset of the pandemic, carriers have issued approximately $20 billion in cash refunds. In 2020, U.S. passenger airlines issued $12.8 billion in cash refunds, up 72% from 2019. For A4A carriers, cash refunds issued in 2020 accounted for 25% of passenger revenues versus 4.4% in 2019. Additionally, in the first three quarters of 2021, U.S. carriers have issued 3.5% more cash refunds than they did in the same period of 2019 despite generating 46% less passenger revenue. In turn, cash refunds in 2021 are running at 8.2% of passenger revenue, nearly double the 4.4% of passenger revenue in 2019,” the trade association, which represents Alaska, American, Delta, Hawaiian, JetBlue, Southwest and United, stated in an email.

In recent months, most of the complaints to Consumer Reports have been about vouchers, as their expiration dates are coming due, McGee said. He advises persistence, saying that people report eventually getting refunds after calling, emailing, texting or shaming carriers on social media multiple times.

Those who purchased tickets with a credit card can also file a complaint under the Fair Credit Billing Act, which allows people to dispute charges for goods or services that were not received. “The bank gives you a refund and fights it out with the other entity.”

Airlines ultimately received billions from the government to keep paying their employees, yet pilots and flight attendants were furloughed and laid off as carriers strived to remain aloft, leaving them understaffed and overbooked as a mostly vaccinated nation returns to air travel.

Spirit Airlines cast bad weather and labor shortages as the main culprits behind travel chaos that led to the low-cost carrier canceling more than 1,700 flights in August. The scenario replayed in September, when Southwest canceled hundreds of flights during the course of a weekend, and again in October when thousands of fliers were grounded after American shelved more than 1,800 flights nationwide over a three-day period.

“We the taxpayers gave the airlines $58 billion,” McGee said. “The airlines did as well as any industry in terms of taxpayer bailout, yet they continue to hold onto our money.”