Passengers on significantly delayed flights will receive automatic cash refunds under a new rule the Department of Transportation announced Wednesday.

The rule also requires airlines to be more transparent about fees for bags, select seats and other amenities before a ticket is booked.

What You Need To Know

  • Passengers on significantly delayed flights will receive automatic cash refunds under a new Department of Transportation rule

  • Airlines are alaso required to disclose upfront the fees they charge for bags, seats and changing or canceling a flight

  • The Biden administration estimates the fees disclosure rule will save consumers $500 million annually

  • The U.S. airline industry says they already offer transparency and vast choice to consumers

“Passengers deserve to know upfront what costs they are facing and should get their money back when an airline owes them, without having to ask,” Transportation Secretary Pete Buttigieg said in a statement.

The rule requiring automatic cash refunds applies to flights that are canceled or significantly changed, checked bags that are significantly delayed and services such as WiFi that are purchased but not provided, the DOT said in a fact sheet.

Refunds must be issued within seven business days of refunds being due on credit card purchases and within 20 calendar days if the ticket is purchased with a different method. The refund also must be issued in the same form used to purchase the tickets, whether by credit card or with airline miles.

The rules prohibit airlines from substituting vouchers, travel credits or other types of compensation for cash refunds unless the customer has selected that option. The refunds must be for the full ticket purchase price, including government-imposed taxes and fees and airline-imposed fees.

The DOT will also require airlines and ticketing agents to let consumers know up front what they will be charged for bags, select seats or for changing or canceling a reservation. The fees must be displayed along with the fare before a ticket is purchased and cannot be provided through a hyperlink.

The Biden administration estimates the new policy on upfront fees will save consumers more than $500 million every year.

The new policies stem from an Executive Order on Promoting Competition President Biden signed in 2021 that instructed the DOT to find ways to make markets more fair, transparent and competitive.

The new rules will take effect in six months.

“They don’t have to wait the number of months that it will take for this to go into effect,” Buttigieg said Wednesday at an event announcing the new rule. “They could and should be doing this right now.”

Passenger airlines that operate in the U.S. “offer transparency and vast choice to consumers from first search to touchdown,” a spokesperson for the trade group Airlines for America told Spectrum News. “U.S. airlines are committed to providing the highest quality of service, which includes clarity regarding prices, fees and ticket terms.”

The spokesperson said its members already offer fully refundable fares and “frequently exceed DOT regulations regarding consumer protections.”

Airlines for America said the 11 largest passenger airlines in the U.S. issued $43 billion in refunds to customers between January 2020 and December 2023.