A rule by the Department of Transportation requiring airlines to provide customers with automatic cash refunds for canceled or significantly delayed service went into effect Monday.
Issued in April, the final rule clarifies airlines must provide the refunds for canceled or significantly delayed flights, significantly delayed baggage and purchased ancillary services like Wi-Fi or seat selection that went unprovided. The rule was further codified in the latest Federal Aviation Administration legislation signed by President Joe Biden in May.
These regulations look to improve the process for customers to receive refunds — and could improve customer trust in airlines in the process, experts told CX Dive when the rule was announced.
“Passengers deserve to get their money back when an airline owes them — without headaches or haggling,” Transportation Secretary Pete Buttigieg said in a prepared statement at the time.
“We hear again and again from passengers who describe how hard they have to push just to get the refunds that are owed them — and often our Consumer Protection team has had to impose multimillion-dollar penalties on airlines just to get them to do what should already be required,” Buttigeig said when he announced the rules at Ronald Reagan Washington National Airport.
An existing rule already stated that passengers are entitled to cash refunds for major delays and cancellations, but the rule lacked specificity, according to William McGee, a senior fellow for aviation and travel at the American Economic Liberties Project. As a result, some airlines found ways to skirt the requirements, providing vouchers instead of cash refunds or putting the onus on customers to request refunds.
“Imagine that you ordered something on Amazon, and you pay, and you swipe your credit card, and the money is taken out of your account,” McGee said. “And they're like, ‘Oh, sorry, it's not in stock. … We're going to hold on to [your money].’ It's unfathomable in any other industry.”
The new rules require airlines to refund customers directly within seven business days if purchased by credit card or 20 days for other forms of payment.
Canceling or delaying flights can have a major impact on customers’ trust in an airline, according to Ashley Reichheld, principal at Deloitte Digital and the customer and marketing practice leader for the consumer industry. But fixing the situation can actually grow trust.
“If you're canceling a flight, then it's akin to not keeping your promise,” Reichheld said. “What we have seen is that in moments where there's a customer service error, it's an opportunity to actually earn more trust or earn better customer experience than you might have, had everything gone smoothly — assuming that you address the problem appropriately.”
Deloitte conducted a study with an airline in 2023 that found that when customers trusted the airline, delays had relatively no impact on its trust scores. But when customers did not trust the airline, those delays damaged customers' trust in the airline.
“The higher your trust scores, the more willing a customer is to forgive you to begin with,” Reichheld said.
