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U.S. says six airlines issue $622 million in refunds
Global Banking & Finance Review®
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By David Shepardson
WASHINGTON (Reuters) – The U.S. Transportation Department said Monday that six airlines were slapped with $7.25 million in penalties and agreed to issue $622 million in passenger refunds as the agency vows to aggressively enforce consumer protections.
The actions helped ensure the carriers paid required refunds “to hundreds of thousands of passengers who had their flights canceled or significantly changed,” Transportation Secretary Pete Buttigieg told reporters. “It shouldn’t take enforcement action from (USDOT) to get airlines to pay the funds that they’re required to pay.”
Many of the refunds involved flights delayed or canceled during the COVID-19 pandemic, and many travelers waited months or even years for refunds.
Buttigieg said under the settlements ultra-low-cost carrier Frontier Airlines was required to pay $222 million in refunds and will pay a $2.2 million penalty, while Tata Group-owned Air India will pay $121.5 million in required refunds and a $1.4 million fine.
Frontier said it issued $92 million in refunds and redeemed credits and vouchers to customers who voluntarily canceled non-refundable tickets during COVID and were not entitled to refunds. It said the refunds “demonstrate Frontier’s commitment to treating our customers with fairness and flexibility.”
State-owned TAP Portugal will issue $126.5 million in required refunds and pay a $1.1 million penalty, and Colombia’s Avianca will pay $76.8 million in required refunds and pay a $750,000 penalty.
El Al Israel Airlines will issue $61.9 million in required refunds and pay a $900,000 penalty, and Mexico’s Aeromexico will pay $13.6 million in required refunds and a $900,000 fine.
El Al told USDOT it had no policy of denying refunds and “prioritized refunds for U.S. passengers,” but said it had been unable to meet the department’s timeframe because of the pressure the “COVID-19 public health emergency had on its personnel and its finances.”
Avianca told USDOT it had no policy to deny refunds but “had to process approximately seven-years’ worth of refund requests in one year with reduced staffing.”
Aeromexico in 2020 and 2021 determined that refunds would be processed 12 months after receipt, USDOT said, resulting in thousands of U.S. passengers not getting timely refunds. Aeromexico told USDOT “as it faced the possibility that it would need to cease operations, it made the difficult decision to limit how passengers holding nonrefundable tickets could recover the value of those tickets.”
USDOT said Air India did not provide timely refunds. The airline said it received a “flood of refund requests from March 2020 through September 2021 because of its “liberal refund-on-demand policy.”
TAP said it had faced “an avalanche of refund requests and its call center was quickly overwhelmed.”
USDOT said it is investigating other carriers.
USDOT credited airlines with some payments for nonrefundable tickets against the penalties: Frontier got a $1.2 million credit, TAP Portugal $550,000, El Al $450,000 and Avianca $375,000.
(Reporting by David Shepardson; Editing by Leslie Adler)
A refund is the return of money to a customer for a product or service that was not satisfactory or was canceled. In the airline industry, refunds are often issued for canceled or significantly changed flights.
Consumer protection refers to laws and regulations designed to ensure the rights of consumers are upheld and that they are treated fairly in the marketplace.
An airline penalty is a financial charge imposed on an airline for failing to comply with regulations, such as not providing timely refunds to passengers.
The U.S. Transportation Department (USDOT) oversees and regulates the transportation industry, ensuring compliance with laws and protecting consumer rights.
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