Bills
| 3.23.22

Should Airlines be Required to Offer Cash Refunds to Customers for Flights Canceled Due to COVID-19? (S. 3727)

Do you support or oppose this bill?

What is S. 3727?

(Updated February 3, 2022)

This bill — the Cash Refunds for Coronavirus Cancellations Act — would require major airlines (defined as airlines with at least $1.5 billion in annual revenue) and third-party ticket sellers to offer full cash refunds for all canceled tickets during the coronavirus pandemic, no matter whether the airline canceled the overall flight or the passenger canceled their individual ticket. It would permit airlines and third-party ticket sellers to offer travel vouchers as an alternative to cash refunds as long as the vouchers are valid indefinitely and the offer included clear and conspicuous notice of the flyer’s right to a cash refund. 

The right to a cash refund would be retroactive, applying to any flight on or after March 1, 2020. This would allow passengers who previously received travel vouchers that they haven’t yet used to now ask for cash refunds instead.

Finally, this bill would mandate that cash refunds be available until 180 days after the end of the nationwide COVID-19 emergency declarations. This would give consumers six extra months of flexibility and peace of mind so that they don’t have to travel until they truly feel safe flying again.

Airlines would be allowed to pay for refunds using any of the financial assistance they received from federal COVID-19 relief funds, with the exception of funds that were designated for airline employees. This includes funds from the CARES Act, which set aside $50 billion for U.S. airlines.

Argument in favor

Customers deserve to receive refunds for flights they are unable to take during the COVID-19 pandemic, regardless of the reason for the cancellation. Returning customers’ cash to them during the economic crisis caused by COVID-19 should be a priority for airlines, which shouldn’t be allowed to treat their customers like piggy banks to help them ride out the COVID-19 pandemic.

Argument opposed

Requiring airlines to provide cash refunds to all passengers at a time when their business is sharply down could push many airlines into financial insolvency. This could, in turn, cause bankruptcies, layoffs, and other economic impacts that would hurt millions of workers and cause worse harm than airlines’ current policy of giving customers vouchers for future travel where possible.

Impact

Travelers; air travel; airlines; and refunds for travel canceled due to COVID-19.

Cost of S. 3727

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sponsoring Sen. Ed Markey (D-MA) introduced this legislation to require major airlines and third-party ticket sellers to offer full cash refunds for all cancelled tickets during the COVID-19 pandemic. Passengers would be eligible for the refund regardless of the circumstances surrounding the cancellation regardless of whether the airline cancelled an entire flight or the passenger themselves cancelled their individual tickets. In a May 13 press release, Sen. Markey argued that airlines have a  “moral responsibility” to give cash refunds for cancelled tickets during the COVID-19 pandemic:

“Americans need cash in their pockets to pay for food, housing, and prescriptions, not temporary credits toward future travel. In light of this pressing need, and an unprecedented multi-billion dollar bailout, it’s absolutely unconscionable that the airlines won’t give consumers their money back. Airlines already have a moral responsibility to give cash refunds for all cancelled tickets during the coronavirus pandemic. My new legislation will give them a legal responsibility, too.”

Original cosponsor Sen. Elizabeth Warren (D-MA) adds:

“Working families everywhere are being crushed under the weight of this pandemic, and they need cash returned to them now to help feed their loved ones, put a roof over their heads, and pay for their health care needs. I’m glad to partner with Senator Markey on a bill to require airlines to provide customers with full cash refunds—not travel vouchers—for flights canceled during this public health emergency and economic crisis.”

Rep. Steve Cohen (D-TN), sponsor of this bill’s House companion, says:

“At a time when Americans need cash to pay for food, housing and medical care, the airlines have a moral responsibility to return ticket money to consumers, especially after they received a multi-billion-dollar bailout from the American people.”

Anna Laitin, Director of Financial Fairness and Legislative Strategy at Consumer Reports, argues that offering refunds is the only fair policy in the current crisis:

“Offering vouchers might be a defensible policy in ordinary times, but in a crisis of this magnitude, it is simply unfair to deny refunds to customers who canceled their flights. The airlines should provide refunds to all customers whose travel plans were impacted by this unprecedented public health and economic crisis. With so many Americans out of work and facing financial hardship, a voucher for future travel is simply not appropriate or useful.  These consumers need their money back.”

Opponents of this legislation argue that it would hurt cash-strapped airlines that are teetering on the brink of insolvency due to a sharp decline in travel during the COVID-19 pandemic. In a blog post, International Air Transport Association (IATA) CEO Alexandre de Juniac wrote that requiring immediate cash refunds would bankrupt airlines, causing them to fold and leading to the loss of many jobs:

“Airlines cannot cut costs fast enough. And with the $35 billion owed to travelers for flights that could not or cannot take place, airlines face an imminent depletion of the cash they need, not just to maintain employment, but ensure that they will be around to support the economic revival when the COVID-19 crisis is over. Passengers have the right to get their money. They paid for a service that cannot be delivered. And in normal circumstances, repayment would not be an issue. But these are not normal circumstances. If airlines refund the $35 billion immediately, that will be the end of many airlines. And with that an enormous number of jobs will also disappear.”

As an alternative to immediate cash refunds, de Juniac defended the idea of offering vouchers for future travel once the COVID-19 crisis abates:

“So what’s to be done? The simple answer is that airlines need time. And that is why I am supporting airlines (and our partners in the travel and tourism sector) in their request for governments to delay the requirement for immediate refunds. We propose vouchers that could be used for future travel or refunded once we are out of this crisis period. This would buy the industry vital time to breathe—surviving the crisis so that they are ready to fly when better days arrive… Without this flexibility, airlines will collapse, and jobs will disappear. Accepting a voucher or delayed refund today will mean that the airlines will be around for when we have our freedom to travel restored.”

This legislation has five Democratic Senate cosponsors. Its House companion, sponsored by Rep. Steve Cohen (D-TN), has 36 Democratic House cosponsors. As of June 23, 2020, neither bill has received a committee vote.

The Consumer Federation of America, the National Consumers League, Consumer Reports, and the U.S. Public Interest Research Group (PIRG) support this legislation. The airline industry and air travel associations such as the International Air Transport Association (IATA) oppose this legislation.


Of Note: U.S. Public Interest Research Group (U.S. PIRG), which supports this legislation, reports that most airlines are only offering vouchers, not refunds, when passengers cancel their flights due to concerns about COVID-19. Additionally, according to U.S. PIRG, some carriers are offering vouchers as the default option when they themselves cancel flights and not letting customers know that they have the right to a full cash refund.

At present, customers are only protected for flights that were canceled or significantly delayed by airlines. They can also file consumer complaints with the U.S. Dept. of Transportation or dispute the charges with their credit card companies. Finally, airline customers who’d like to see this legislation passed can sign U.S. PIRG’s petition in support of this bill.

In mid-April, an investigation by Democratic legislators estimated that airlines could be holding billions of dollars’ worth of consumer money that they have refused to refund. Paul Hudson from FlyersRights.org, a nonprofit organization defending passenger interests, explains that this is because “the bottom line for many airlines is simple: Do whatever is possible to generate revenue and conserve cash now and worry about any consequences later.”


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / thomas-bethge)