US mandates new airline refund rules, fee disclosures

By David Shepardson

ARLINGTON, Virginia (Reuters) -The U.S. Transportation Department finalized new rules Wednesday requiring upfront disclosure of airline fees and mandates quick cash refunds for canceled flights, as well as for delayed baggage or inoperative services like onboard Wi-Fi.

The rules, which were nearly three years in the works, will require airlines and ticket agents to tell consumers upfront about baggage or change and cancellation fees. The department said consumers are expected to save $543 million annually in excess airline fees.

President Joe Biden has repeatedly heaped criticism on the airline industry over the last two years.

"Too often, airlines drag their feet on refunds or rip folks off with junk fees," Biden said Wednesday, arguing the new mandate will ensure "automatic refunds to passengers when they're owed, and protect them from surprise fees."

The new rules require airlines and ticket agents to disclose extra service fees alongside the full fare, the first time fare and schedule information is displayed online.

The refund rules apply to cancelled flights by carriers regardless of the reason including if it is because of weather. But passengers are not entitled to refunds if they are rebooked and travel on another flight

The government will also require airlines to refund baggage fees if bags are not delivered within 12 hours of domestic flights arriving or 15 to 30 hours of their international flight arrivals, as well as for services that do not work or are not provided. Airlines must promptly and automatically issue refunds if flights are canceled.

Transportation Secretary Pete Buttigieg said passengers are supposed to get refunds for canceled flights but the new rules make clear they must get cash within seven days -- not vouchers. "No more defaulting to vouchers or credits," Buttigieg said at an event at Reagan National Airport outside Washington.

Airlines for America, a trade group representing major carriers including American Airlines, Delta Air Lines and United Airlines, said carriers "offer transparency and vast choice to consumers from first search to touchdown. U.S. airlines are committed to providing the highest quality of service, which includes clarity regarding prices, fees and ticket terms."

In May, Biden said USDOT was writing new rules to require airlines to compensate passengers with cash for significant flight delays or cancellations when the carriers are responsible. But almost a year later, USDOT has still not issued a formal proposal.

Under the new rules, airlines will be required to tell consumers seats are guaranteed and passengers need not pay seat selection fees. Carriers are prohibited from advertising promotional discounts that do not include mandatory carrier-imposed fees.

USDOT is also requiring airlines to issue vouchers or credits to consumers restricted from travel due to a serious communicable disease.

(Reporting by David Shepardson; editing by Miral Fahmy and Aurora Ellis)