A group of senators estimates airlines are holding about $10 billion from customers whose travel plans changed due to the coronavirus pandemic.
Four Senate Democrats on Friday revealed that major domestic airlines are holding on to roughly $10 billion in customers’ cash following dramatic spikes in flight cancellations caused by the COVID-19 pandemic.
In a joint statement outlining the results of their recent investigation into the matter, Sens. Ed Markey, D-Mass., Elizabeth Warren, D-Mass., Richard Blumenthal, D-Conn., and Kamala Harris, D-Calif., also pressed the companies to release customers’ money via full cash refunds—not solely as travel vouchers—to all who cancel flights during the worldwide public health emergency.
“The ongoing pandemic is placing enormous financial strain on millions of Americans,” the senators wrote. “If these companies released that money back to the public, it would provide a significant stimulus for struggling families.”
President Trump and others began to urge the American public to avoid discretionary travel and limit in-person contact to help slow the spread of COVID-19 in early to mid-March. The subsequent travel reductions have already profoundly impacted relevant companies’ revenue. To help mitigate this, the airline industry received $25 billion in coronavirus aid in Congress’ $2 trillion stimulus bill. With that “multi-billion-dollar bailout” in mind, the senators said they “are absolutely outraged that so few airlines are willing to offer real cash refunds to consumers who must cancel their tickets.”
Under federal law, airlines must offer customers full refunds if the companies themselves are behind the flights’ cancellations. When people cancel trips on their own due to the ongoing crisis, the majority are only receiving refunds in the form of credits, which can only be used for future travel. “Unfortunately, these travel vouchers do the public little good in this time of emergency, when Americans need money now to pay for basic necessities such as food, housing, and medical care,” the senators said.
The latest statement from Markey and team follows letters they and other colleagues sent to 11 major domestic airlines in late March, initially urging the companies to offer cash refunds to travelers during the health emergency, and outlining a series of related questions on their actions and coronavirus-related flight cancellation statistics. In their analysis of the carriers’ responses, the senators note that “many airlines are now cancelling between 60-80% of their flights.” While passengers should be reimbursed in cash for company-led cancellations, the lawmakers said “many airlines have been obfuscating this right by offering travel vouchers as the default option, requiring passengers to take burdensome steps to request refunds instead.”
Most airlines did not disclose the total value of travel vouchers and credits they issued during the pandemic in their responses, so the senators extrapolated their estimate of $10 billion from information JetBlue provided that it had released more than $20 million per day of travel credits to customers in the first few weeks of March.
“Based on JetBlue’s 5.5 percent share of the domestic market, and assuming a similar trend throughout the industry over the last month, this figure could mean that the airlines are sitting on more than $10 billion in customer cash, instead of returning this significant sum of money to the American public,” they wrote. “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 note that only two airlines—Allegiant and Spirit—are providing full cash refunds to passengers who opt to cancel their flights amid the pandemic. At the same time, “none of the biggest carriers with the most revenue including United, American, Delta, and Southwest” are offering to return the cash, which the senators said ultimately forces “many consumers into a waiting game, where they have no choice but to either accept a travel voucher or hope the airline eventually cancels the entire flight so they can” receive their money.
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.”
But Bill McGee, a former airline employee and Consumer Reports’ aviation adviser, called the argument that major airlines don’t have the means to reimburse customers in cash “bogus,” noting that the airline industry has made “record profits” in the U.S. in recent years.
“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,” McGee told Nextgov Monday. “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 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.
As the issue started to come to light, Consumer Reports launched a petition for people to sign, pushing the airlines to provide cash refunds instead of only credits and McGee noted that the platform also invited its reader base to share their own stories about what they were personally dealing with in terms of flight cancellation reimbursements.
“So we wanted to get a handle on this, and I have to tell you—we were blown away,” he explained. “I think, in fact, we may have set some records internally for how many responses we got so quickly.”
McGee—whose family can no longer attend his son’s graduation in May in person and therefore faced their own set of pandemic-related flight cancellations recently—explained that the public’s responses demonstrate how in some cases, vouchers are simply not a good option for certain travelers. For example, COVID-19 may have caused the reasons for travel (such as graduation in his family’s case, or conferences and weddings) to be canceled altogether and not warrant a future flight.
“We're also hearing from a lot of people that are saying that they may be older, they may have some sort of health condition, and their family is advising that they not get on an airplane anytime in the near future,” he said. “So they're not looking for a voucher.”
McGee added that “the biggest reason of all” is that in the current national emergency, people may be in dire need for those refunds to be able to pay rent or put food on their tables.
It’s unclear if the senators are going to continue the informal measures to compel the airlines to reimburse people or take formal actions like legislation under consideration. But McGee said he and his team plan to make use of the thousands of stories they’re collecting on the issue. He said it’s still up in the air exactly what the plan will be, but insiders will likely be forwarding the information and complaints to Congress, Transportation Department, and airlines in the near future.
“I'm going to be very blunt—we're not walking away from this issue,” he said. “We're going to continue to bring a lot of attention to it—as much as we can—because we just think it's unacceptable.”