Callum Keown
Flight cancellations and delays will always be a source of great frustration for travelers, but at least the refund process looks set to drastically improve.
The Biden administration unveiled new Transportation Department rules Wednesday requiring airlines to issue automatic cash refunds to passengers if their flights are canceled or significantly changed -- by three hours for domestic routes and six hours for international. Automatic refunds also extend to a long delay with baggage reclaim or if paid-for ancillary services, such as Wi-Fi, aren't provided.
Consumers currently have to "navigate a patchwork of cumbersome processes" to request a refund, the White House said in a statement. But airlines will now have to issue refunds without passengers explicitly requesting them, and within seven business days for credit-card purchases.
Making it easier for consumers to get refunds could significantly add to airline's expenses, at a time when costs of maintenance, labor, and fuel are already elevated. As cost pressures mount, airlines will have a decision to make over whether to hike airfares.
The larger airlines, such as Delta Air Lines and United Airlines Holdings are better placed to absorb those costs but discount carriers, whose business models rely on lower fares, may see margins squeezed.
Perhaps unsurprisingly, airline stocks didn't respond well to the announcement. The U.S. Global JETS exchange-traded fund fell 1% as all major airlines were in the red early Wednesday. Low-cost carrier JetBlue Airways was among the worst performers, falling 2.8%.
The White House also unveiled rules to protect consumers against what the Biden administration describes as "airline junk fees," or any subsequent charges travelers may face beyond the cost of their ticket.
"DOT is requiring airlines and ticket agents to tell consumers upfront what fees they charge for checked bags, a carry-on bag, for changing a reservation, or canceling a reservation," it added.
Airlines will be required to disclose all hidden fees and explain their policies before a ticket is purchased. They won't be allowed to advertise a discount with a low base fare that doesn't include all mandatory extra fees. It's designed to end the "bait-and-switch tactic" the Biden administration said is used by some airlines to disguise the true cost of discounted flights. Again, that's going to be a more of a problem for low-cost carriers.
There are more proposals in the pipeline, too. The DOT wants to ban extra fees for families to sit together, and include a guarantee that parents can sit next to their children for no extra cost.
It's good news for consumers but adds to the pressure facing the nation's airlines.
Write to Callum Keown at callum.keown@barrons.com
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(END) Dow Jones Newswires
April 24, 2024 11:38 ET (15:38 GMT)
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