Domestic airlines received a $25 billion bailout in Congress’ “Phase 3” coronavirus relief package — and they’re asking for more. To be sure, airlines have taken a serious hit during these times of social distancing and lockdowns. But what about their customers?
A group of senators revealed Friday that most major U.S. airlines that received coronavirus aid “still refuse” to refund about $10 billion to customers whose travel plans changed or were canceled due to the pandemic. Instead, those airlines are holding on to customers’ cash and issuing credits instead, Nextgov reported.
What are the details?
Federal law requires that airlines offer full refunds if the company cancels a flight, but travelers who cancel their own flights receive airline credits.
That includes customers who cancel because of the coronavirus crisis.
Democratic Sens. Ed Markey (Mass.), Elizabeth Warren (Mass.), Richard Blumenthal (Conn.), and Kamala Harris (Calif.) sent letters on March 31 to 11 major domestic airlines and demanded that those companies issue cash refunds to all customers who cancel their flights during the pandemic.
The letters were sent to Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, Southwest Airlines, Spirit Airlines, Sun Country Airlines, and United Airlines, and asked the airlines to respond to the following questions:
- What is the estimated total value of all travel vouchers and credits you have issued during the coronavirus pandemic?
- What is the estimated total number of flights that your airline cancelled during the COVID-19 crisis, including flights cancelled due to travel restrictions implemented by countries globally?
- Will your airline commit to providing full cash refunds to travelers who cancel their flights during the coronavirus outbreak, including refunds in lieu of travel credits to those who have already received but not used those credits during this pandemic?
- Will your airline commit to providing full cash refunds to any travelers who experienced flight cancellations due to COVID-19 travel restrictions implemented globally?
- Will your airline commit to working with the State Department to expedite commercial flights – at an affordable price – for all Americans who remain stranded abroad?
According to the senators, only two airlines — Allegiant and Spirit — said they were offering refunds to customers who canceled their own flights due to the coronavirus.
Of the other nine airlines, only JetBlue revealed the total value of travel credits and vouchers it had issued during the pandemic. The airline said that it issued more than $20 million per day of travel credits during the early weeks of March.
In their response letters to the lawmakers, most companies outlined how the pandemic is depleting their funds. JetBlue, for example, said in March 2019 a typical day would have meant about $22 million made from booking and fees, but this March the company was “taking in an average of less than $4 million per day while also issuing over $20 million per day of credits to customers.” The company called it a “stunning shift and clearly insufficient revenue to come anywhere close to covering [its] daily expenses.”
Using the data from JetBlue and “[b]ased on JetBlue’s 5.5 percent share of the domestic market, and assuming a similar trend throughout the industry over the last month,” the senators extrapolated that “this figure could mean that the airlines are sitting on more than $10 billion in customer cash.”
“If airlines dispute this exact figure, the Senators welcome more information from each company, which know exactly how much of their customers’ money they are currently holding onto in the form of travel vouchers. Most airlines have refused to share this information to date,” the lawmakers said.
‘Bogus’ claim by the airlines
Consumer Reports’ aviation adviser Bill McGee said airlines’ claim that they don’t have the funds to issue cash refunds is “bogus,” Nextgov reported, adding that the domestic airline industry has scored “record profits” in recent years.
McGee told the outlet:
We’re not ignoring the fact that the airlines are, you know, in bad financial shape right now because so many people are not flying. We get that. But the fact is, the answer to their financial problems is not to withhold funds from consumers who should be getting refunds. They need to find another way.
McGee also said it’s “unacceptable” that the airlines are taking tax dollars for the crisis but refusing to offer refunds and noted that the airlines could have purchased pandemic insurance but none of them did so. More from Nextgov (emphasis added):
McGee said that the current voucher vs. cash refund debacle has been an issue for years now, but it’s become “chronic” in the national emergency over the last six or so weeks. “We were not happy with airline refund policies before, but this is just unacceptable,” he said. Regarding the companies’ recent bailout, he also called it unacceptable that airlines are “accepting money from taxpayers and on the other hand, they’re withholding refunds.” Further, McGee also made it a point to note that before the latest health crisis, “none of the U.S. airlines invested in” pandemic insurance, though such products have been on the market.
Consumer Reports launched a petition urging airlines to give cash refunds “to any customer who had a flight cancelled, or elected to cancel a flight, due to COVID-19. Vouchers for future flights are insufficient since no one knows when regular travel will resume, and some consumers will not be flying at all.”
The petition currently has more than 43,000 signatures.