Senators accuse airlines of holding billions in customer funds

The lawmakers chided carriers for inconsistent policies on which customers can receive refunds and the length of time they can claim lost airfares, and for "obfuscating" the rules to minimize how much they must pay. Airlines should be repaying people to help the struggling economy, they said.

"The ongoing pandemic is placing enormous financial strain on millions of Americans," Democratic senators Edward Markey and Elizabeth Warren of Massachusetts and Richard Blumenthal of Connecticut said in a press release.

"In light of this pressing need, and the unprecedented multibillion-dollar bailout that the airline industry just received from Congress, we are absolutely outraged that so few airlines are willing to offer real cash refunds to consumers who must cancel their tickets," they said.

The spread of covid-19 has prompted a near-total loss of demand for travel, prompting an unprecedented downturn that could continue for months. Airlines are burning $10 billion to $12 billion a month in cash, according to the trade group for large carriers, Airlines for America.

A bailout package finalized March 27 alloted more than $70 billion in loans and payroll assistance to airlines, airports and related businesses.

The Department of Transportation requires that airlines refund the full amount of a ticket if they cancel a flight or significantly disrupt a scheduled departure. The agency issued an unusual notice earlier this month reminding airlines of their responsibility after receiving complaints.

However, in many cases people hit with stay-at-home orders or travel restrictions opted to cancel tickets on their own. In those instances airlines are permitted to offer vouchers for future travel instead of refunds.

After complaining about the practice in a March 31 letter, the three senators joined by six colleagues demanded that airlines explain their policies.

The airlines' responses to that earlier letter make it clear they believe they have no choice as a result of the dire economic situation. The letters were provided by the lawmakers.

"The reality of the situation is, despite the prudent actions of our country's leadership, the airline industry is facing a fast-moving financial crisis unlike anything ever faced," JetBlue Airways Corp.'s Jeffrey Goodell, vice president for government affairs, wrote to the senators. "In fact, the financial impact of this crisis is much worse even than the dramatic downturn we saw in the aftermath of the 9/11 terrorist attacks."

JetBlue was the only carrier to give an estimate for how much it has been giving customers in credit, $20 million per day during the first weeks of March. Based on JetBlue's share of the market, the total across the industry exceeds $10 billion, the senators concluded.

"If these companies released that money back to the public, it would provide a significant stimulus for struggling families," the senators said. "That's why we once again urge the airlines to end their anti-consumer policies and offer real refunds during this emergency."

The industry has been inconsistent in its policies, the senators charged. Only Hawaiian Airlines Inc. has a policy to give customers a refund if they cancel a ticket and the airline later eliminates the flight, they said.

Companies also don't do enough to inform passengers of their rights, the senators said. "In some cases, only travelers who know to ask for a refund and not accept the default voucher are able to receive their cash back," they said in the release.

Airlines say they've taken numerous steps to be fair to passengers in trying times.

American Airlines Group Inc. said in its response to the Senators it isn't charging the normal fees for changing tickets and is allowing passengers to use the full value of unused fares until Dec. 31, 2021.

Delta Air Lines Inc. said it is allowing customers to rebook their travel through May 31, 2022, without fees.

Delta processed more than one million refunds totaling more than $500 million through March in cases where it eliminated the flight and customers requested their money back, it wrote to the senators. The airline canceled 25,000 flights during the last two weeks of March alone, it said.