Why airlines don't refund customers after canceled flights - Business Insider

Some airlines are being less than forthcoming with refunds despite a record number of cancellations during the COVID-19 pandemic. Dwindling cash reserves and decreased revenues have made airlines more conservative in how they handle money, putting the burden on the consumer to fight for their money back, in some cases. The US Department of Transportation ruled that if a flight that touches the US is canceled, customers are entitled to refunds. Customers can request refunds via phone or, in some cases, social media or text. Visit Business Insider's homepage for more stories.

Airlines have lost billions since the beginning of March as they've been forced to cancel flights and largely suspend operations while still incurring the astronomic expenses associated with the operation. Lufthansa, one of the world's largest airlines, is reporting losses of around $1 million per hour as it prepares to accept a government bailout and US airlines are no different. United Airlines reported losses of around $100 million per day in March, Forbes reported.Rapidly declining incoming cash flow combined with dwindling coffers have made airliners more conservative with how they distribute funds, even when consumers are entitled to their money back. Just because a flight is canceled, airlines aren't jumping to hit the refund button and it will often take a phone call or other customer-initiated procedure to secure the funds. Here's why airlines aren't automatically refunding passengers and what you can do to resolve potential issues.

Airlines in the US are required to issue refunds when a flight a canceled.

A flight departure board with canceled flights.

REUTERS/Mike Segar

The US Department of Transportation has said that customers with a canceled flight are entitled to refunds, even with the current situation surrounding the airline industry. The government felt the need to remind airlines of the policy after it received complaints from passengers not getting their money back after a flight cancellation. Every country is different but if the flight touched a US point, it's subject to Department of Transportation rules. Foreign airlines with canceled flights to the US may try to claim otherwise but they can be held to account by filing a claim with the federal department.A flight also doesn't have to be canceled in order to get a refund.

A Delta boarding gate in Raleigh.

Thomas Pallini/Business Insider

If the airline makes a change to a booking before the flight departs, not including day of departure delays, a passenger can request a refund for what's known as a schedule change. Every airline is different but if the delay is severe enough, they can make the case for a refund.Here's a list of requirements for a schedule change refund at some airlines:

American Airlines (for tickets issued after April 8, 2020): More than four hours.Delta Air Lines: “An arrival delay of 90 minutes or more.”United Airlines: “The scheduled departure or arrival time changes significantly.”JetBlue Airways: 120 minutes or more.Airlines are continually changing their schedule change policies as the coronavirus pandemic has caused many to rethink their flying plans as demand hasn't justified their typical number of routes and frequencies. United Airlines has made multiple changes to its policy since the start of the pandemic, generating a backlash among customers with flights delayed by hours.

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Even if a flight is canceled, the burden is on the customer to retrieve the refund from an airline.

A Delta Air Lines ticket counter in Boston, Massachusetts.

David L. Ryan/The Boston Globe/Getty Images

While it may seem obvious in the current pandemic that customers with canceled flights would want a refund, the customer is still required to actually request the funds be returned. f an airline was to automatically issue a refund for every canceled flight without passenger input, they'd be doing a disservice to those who would prefer to rebook instead of receiving a refund.

Whether it be essential workers or stranded travelers, there still is some demand for travel and not everybody with a canceled flight wants a refund. Immediately issuing a refund would deplete the booking of any value that could be transferred to a new flight and trap funds in a refund process that typically takes a few business days. This process can be done over the phone for most airlines, with some of the more technologically advanced allowing the process to be done on a website or on social media.

A Delta Air Lines customer service representative.

Reuters

The era of multi-hour hold times for airlines is no more as the influx of cancellation requests has subsided. Once a customer manages to get through to an agent, the process only lasts a few minutes for most. Some airlines will also allow passengers to make the request over social media channels including Twitter and others, including Spirit Airlines, which will let you do it over text with WhatsApp. Airlines have had to process so many refunds in recent months that it's become mundane. So, why the headache just to get a refund when most planes are grounded？

Grounded Lufthansa aircraft in Germany.

Kai Pfaffenbach/Reuters

Airline tickets are basically interest-free loans passengers give to airlines that are only repaid at the time of the actual flight.

The money brought in by the pre-purchase of tickets helps keep an airline's business going by funding payroll, aircraft purchases, day-to-day operations, and expansion. March 2020 not only saw the tap turn off with no new bookings but customers wanting all their money back at once. “The airlines are trying to preserve their cash flow,” Henry Harteveldt, airline industry analyst and co-founder of Atmosphere Research Group, said in a March interview with Business Insider when asked why airlines might not be quick to offer refunds.Instead of being generous with refunds, airlines are hoping that customers will take a voucher, the equivalent of store credit, instead. Offering a voucher allows airlines to keep the money that's been paid while extending the repayment date on their end. “[The airlines are] hoping that once conditions normalize or return closer to normal, people will take the trip that they are planning,” Harteveldt explained.

For those airlines still refusing refunds for canceled flights, there are two avenues for resolution.

Secretary of Transportation Elaine Chao.

Bill Pugliano/Getty

The Department of Transportation allows for consumers to file a complaint if they feel the airline is violating federal rules. The process is lengthy and requires a manual review process in which the airline can present evidence in its defense but can help customers get the desired outcome and may result in the airline being issued a violation.Another option is for the customer to dispute the charge with their credit card company.

Credit cards.

Joe Raedle/Getty Images

Another option is for the customer to dispute the charge with their credit card company. In that case, both parties submit evidence to support a claim and if the airline doesn't respond within the allotted time period, usually 60 days, the cardholder wins by default, and the credit is made permanent. While the claim is being investigated, most credit card companies will also issue a credit that can be used in the interim. If the case is lost by the cardholder, the credit is reversed.