United States: Airlines, including Air India, forced to pay $600 million in refunds

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The US Department of Transportation said this week that the airlines have paid more than $600 million in refunds to hundreds of thousands of passengers for cancelled or changed flights since the start of the Covid-19 pandemic. The development comes as airlines continue to struggle to keep up with a rapid rise in demand for travel via air.

For “extreme delays in providing refunds to passengers”, the department is also issuing $7.25 million against six airlines, including Air India. The Tata-owned airline paid $121.5 million in required funds and a $1.4 million penalty.

In addition to the more than $600 million in refunds that the airlines have paid back, the Department of Transportation is also assessing more than $7.25 million in civil penalties against six airlines for extreme delays in providing refunds.

Majority fines on foreign carriers

Except for Denver-based Frontier Airlines, all other airlines facing the grunt of fines are not headquartered in the US. They include Air India, TAP Portugal, Aeromexico, El Al and Avianca.

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“The department’s expectation that when Americans buy a ticket on an airline, we expect to get to our destination safely reliably and affordably. And our job at DOT is to hold airlines accountable for these expectations, many of which are a matter of law and regulation,” Transport Secretary Pete Buttigieg told a group of reporters.

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“When a flight gets cancelled, passengers seeking refunds should be paid back promptly. Whenever that doesn’t happen, we will act to hold airlines accountable on behalf of American travellers and get passengers their money back,” Buttigieg said in another official statement. 

Why such hefty fines?

Under U.S. law, airlines and ticket agents have a legal obligation to refund consumers if the airline cancels or significantly changes a flight to, from and within the United States, and the passenger does not wish to accept the alternative offered. It is unlawful for an airline to refuse refunds and instead provide vouchers to such consumers.  

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