Earlier this year, the Department of Transportation (DOT) finalized a new rule that requires airlines to automatically provide a cash refund to passengers when airlines cancel or significantly change their flights, significantly delay their checked bags, or fail to provide the extra services they purchased such as in-flight Wi-Fi. While there are mixed feelings across the industry on the new regulation, here are three key takeaways to be aware of:
- Implementation might be bumpy. The final rule was issued in April 2024 and went into effect earlier this summer in late June. Airlines and other travel industry players like small business travel agencies are having to align their policies and practices – for example, augmenting tech capabilities to notify passengers and issue refunds – with the new requirements.
- Standardization will provide clarity. Until this rule, what constituted a “significantly” delayed flight was left up to airlines to define as well as any corresponding compensation. Now, the DOT has established clear criteria: when departure or arrival is delayed by three hours for domestic flights and six hours for international flights. This standardization ensures that passengers have a clear understanding of their rights and the compensation they are entitled to.
- Travel agencies should review certain policies and procedures. The new rule, per the DOT, “stipulates that airlines and ticket agents must issue refunds within seven business days of refunds becoming due for credit card purchases and 20 calendar days for other payment methods.” The American Society of Travel Advisors (ASTA) has issued a statement saying that requiring travel agencies, many of which are small businesses, to issue refunds indicates a lack of understanding from the DOT about merchant of record sales and could ultimately put these agencies in a precarious financial position. Agencies should ensure they are well-informed about the specifics of the rule and update their policies and procedures where necessary.
The Aon Travel Takeaway
“This new DOT rule represents a significant shift in airline passengers’ rights, aiming to enhance consumer protection and establish guidelines for both the travel industry and passengers,” said Beth Godlin, president of Aon Affinity Travel Practice. “As the industry adapts to these changes, it is important for passengers to understand their rights and critical for travel professionals to recognize how these changes will impact their businesses.”