US mandates automatic refunds for canceled flights and services

• A new U.S. Department of Transportation rule requires airlines to issue automatic cash refunds for canceled or significantly changed flights.
• Passengers will receive refunds if they do not accept alternative transportation or travel credits.
• Significant flight changes are defined by specific criteria, including time shifts, airport changes, and service downgrades.
• Refunds are also mandated for checked baggage significantly delayed or for ancillary services not provided.
• The rule aims to streamline the refund process and prevent airlines from defaulting to travel credits over cash refunds.

The Biden-Harris Administration has announced a final rule from the U.S. Department of Transportation (DOT) that mandates airlines to provide automatic cash refunds to passengers when they are owed money. This new regulation aims to simplify the process for consumers seeking refunds for canceled or significantly altered flights, as well as for services they paid for but did not receive.

Under the rule, passengers are entitled to a refund if their flight is canceled or significantly changed, and they choose not to accept alternative transportation or travel credits offered by the airline. The DOT has defined what constitutes a "significant change," including departure or arrival times shifting by more than three hours domestically or six hours internationally, changes in departure or arrival airports, an increase in the number of connections, or a downgrade in the class of service.

Furthermore, the rule extends refund eligibility to situations involving significantly delayed checked baggage. Passengers who file a mishandled baggage report will be entitled to a refund of their checked bag fee if the baggage is not delivered within 12 hours of a domestic flight's arrival or 15-30 hours for an international flight, depending on the flight duration. Refunds are also required for ancillary services such as Wi-Fi, seat selection, or in-flight entertainment if these services are not provided by the airline.

This final rule seeks to establish clear standards and eliminate the previous ambiguity where airlines set their own refund policies, which often varied and were less consumer-friendly, especially during periods of high cancellation rates. The DOT's initiative is designed to ensure passengers receive cash back promptly, rather than being defaulted to travel credits or vouchers, allowing them greater flexibility in rebooking.