Agent to Agent: Airline Travel Refunds

Dear Tammy: One of my clients asked if they could get a refund for their air travel bookings if something happens to come up and they aren't able to travel to their destination. Aren't airlines only offering credits or vouchers right now?

Tammy: Even though airlines are first offering travelers refunds via credits or vouchers, the law states that travelers are due a cash refund if that's what they request. Many airlines are doing this because they're limited in their travels, and they don't want to go out of business or file bankruptcy. Because the law states that travelers don't have to accept credits or vouchers, airline procedures are currently being investigated.

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While the beginning months of the pandemic had many travelers experiencing problems with airlines who were refusing to refund them for their canceled flights, as of today, most airlines are now complying with cash refund requests by refunding a traveler's money to the original form of payment.

The fact that a lot of airlines are still just giving credits and vouchers to travelers who either can't travel to the destination or have canceled their airline bookings, means that airlines are trying to hold on to as much money as possible during this crisis, which is understandable. But what happens if an airline happens to go out of business?

Is the government going to step in and bail them out so that travelers don't have to be out of their money? Is there any recourse that comes back to these travelers?

Right now, there's no guarantee that travelers will be reimbursed for their airfare if an airline happens to go out of business. There's a long line of people who would be paid back with any money an airline has, and travelers are at the bottom of that list. Even though the FAA requires that airlines have insurance in case of situations like this, payouts are still not guaranteed. If an airline is indeed able to refund travelers, it could take many years for travelers to receive their refunds.

So, what advice can you give to your clients? If they have a credit or voucher for an airline they think is going to go out of business, tell them to book their trip and then take out a travel insurance policy that covers them when an airline files for bankruptcy. Also tell them they can contact their credit card company in order to request a refund, which isn't guaranteed, but worth the try.