New rules require airlines to issue automatic refunds for canceled flights

Airlines will now have to provide automatic refunds to travelers if their flights are canceled or significantly altered under new U.S. Department of Transportation rules.

The final regulations released Wednesday outline the circumstances in which passengers are entitled to refunds for travel to, from and within the U.S. The goal is to make it easier for people to get money back and to make refund policies more consistent from one airline to the next.

According to the department, complaints related to airlines and ticket agents rejecting or delaying refunds made up 87% of all air travel service complaints at the height of the COVID-19 pandemic in 2020.

”Passengers deserve to get their money back when an airline owes them — without headaches or haggling,” U.S. Transportation Secretary Pete Buttigieg said in a statement.

Under the new rule, passengers will be entitled to refunds if there is a “significant change” to their flights. These include:

Departure or arrival times that move by more than three hours domestically or six hours for international flights.
Being downgraded to a lower class than originally purchased, such as from first class to economy.
Change of departure or arrival airport.
Increase in number of connections.
Changes to connecting airports or planes flown if they are less accommodating for people with disabilities.

Travelers will also get refunds for checked bag fees if the bag is lost and not delivered within 12 hours of a domestic flight’s gate arrival. International flights will have from 15 to 30 hours to return a lost bag, depending on their length.

Anyone who pays for a service, such as in-flight Wi-Fi or entertainment, and doesn’t receive it is also entitled to get their money back.

In addition, the changes make it easier for passengers to receive money they’re owed by requiring prompt automatic refunds through the original form of payment, including cash.

Also Wednesday, the department released a final rule requiring airlines to clearly communicate their extra fees upfront for checked luggage and carry-on bags and for canceling or changing reservations. According to DOT, airlines’ revenue from baggage fees rose 30% from 2018 to 2022.

”Airlines should compete with one another to secure passengers’ business — not to see who can charge the most in surprise fees,” Buttigieg said in a statement, adding that the rule will save travelers more than half a billion dollars a year.

Allyson Versprille for Bloomberg