DOT Rulemaking Part II: Consumer-Initiated Changes

In my prior article about the new DOT rulemaking, I addressed the proposals related to refunds for airline changes in booked flights.

The second part of the NPRM proposes new rules governing (1) travel vouchers or credits to passengers who are unable or choose not to travel due to concerns about serious communicable diseases and (2) refund requirements for airlines and ticket agents accepting “significant government financial assistance” related to a public health emergency. These proposals are as concerning as those covered in the prior report.

I caution again that this report is a short summary of a few of the many issues raised by the rulemaking as they affect travel advisors.

DOT notes early that “approximately 20% of the refund complaints that the Department received from January 1, 2020, to June 30, 2021, involved instances in which passengers with non-refundable tickets chose to not travel because of considerations related to the COVID-19 pandemic.” Given the duration of the COVID pandemic, many were dissatisfied with the validity periods of the vouchers for future travel that airlines provided. DOD also stated that “Some complainants” had “experienced great difficulties: in receiving and redeeming travel vouchers issued by or through ticket agents. Nowhere does the NPRM explain how many complaints asserted this. Neither does it describe the exact nature of the “great difficulties” or the distinction between receiving or redeeming “by or through” agents.

Three situations typically create the problems described: public health measures indicate travel should be foregone to (1) protect the traveler from exposure by other infected travelers, (2) protect others from exposure to an infected traveler, and (3) government directives that prevent or limit travel. DOT proposes to add a fourth category that will require airline/travel agent action: the carrier or ticket agent receives “significant government financial assistance,” as a result of a public health emergency. Among the concerns driving this approach is that travelers will make high-risk decisions with potentially major public impact if they fear the loss of the travel value they purchased.

In the fourth class of cases, DOT proposes to mandate that the airlines and advisors who were beneficiaries of government assistance must provide refunds rather than vouchers/credits to travelers who cancel their trips. I will return to that fourth class in a bit.

The requirement to issue non-expiring vouchers/credits would apply, if, after the consumers purchased airline tickets, a government order was issued to prohibit a passenger from leaving the place of origination or entering into the place of transition of destination or if the government order renders the passenger’s travel meaningless.

An example would be a quarantine order at the destination that covered the period of visit.

DOT notes, however, that a purchaser’s failure of due diligence would eliminate the obligation to provide a voucher/credit. The example given is a passenger who failed to obtain a negative test result for a communicable disease within 48-hour of departure if required by the government of destination would not be eligible for a travel credit or voucher under this proposal.

The rule would not apply to a closed border where closure was for security reasons.

These concepts, simple enough to state, create a host of difficult, perhaps impenetrable, problems of implementation. How, for example, is a travel advisor, faced with possibly dozens of demands for vouchers to determine the precise reasons for the inability to travel? Is the burden on the passenger to establish that and, if so, how is that to be done?

DOT found that it was “it is fundamentally unfair to allow airlines and ticket agents to enforce the non-refundability of tickets on consumers under these types of circumstances, which are out of the consumers’ control.” Perhaps so, but it seems at least equally unfair to impose a requirement on travel advisors to issue vouchers/credits on airlines whose policies and conduct they do not control.

How, for example, is a travel advisor going to be empowered by an airline to issue non-expiring vouchers on its flights? DOT cannot presume that imposing an obligation on travel advisors by regulation will automatically require airlines to cooperate.  What happens is an airline does not cooperate? Many airlines had no difficulty, and indeed some still have no apparent difficulty, stonewalling DOT, travel advisors, and their customers on refunds for airline-canceled flights. Will the airlines and GDSs be required to create new types of documents, physical or automated, to accommodate these requirements? If travel advisors are to have an independent obligation to issue such vouchers/credits, are they empowered to establish all the terms and conditions governing them? If the vouchers/credits are non-expiring, are they literally valid indefinitely? Later in the NPRM, DOT makes clear that it would regard restrictions on residual value on vouchers to be unreasonable. Are vouchers non-transferable? If they are transferable, how many times? Can residual values be aggregated from multiple vouchers?

DOT has asked for comments on those questions and more. Travel advisors will no doubt think of many overlooked in the NPRM. As suggested in my earlier report on this NPRM, it would have been better to pose many of those questions in an Advance Notice of Proposed Rulemaking and then craft proposals for final rules with that information in hand. Instead, it appears DOT intends to go straight to the final rules at the conclusion of the current process.

Another major element of the NPRM is the obligation to provide non-expiring vouchers/credits to, non-refundable ticket holders who are advised by a medical professional or determine consistent with public health guidance issued by the CDC, comparable agencies, or [the World Health Organization] not to travel by air to protect themselves from a serious communicable disease.

The NPRM goes further by requiring non-expiring vouchers/credits to be issued by airlines and travel advisors when, passengers who are advised not to travel because they have or may have contracted a serious communicable disease and, to protect the health of others, passengers do not take their scheduled flight. These incidents may occur regardless of whether there is a public health emergency.

This refers only to, passengers who have or are likely to have contracted a serious communicable disease, as determined by current medical knowledge (e.g., directives issued by public health authorities such as CDC) or a medical professional treating the consumer.

The question of whether a situation presented a serious communicable disease would be decided by the airlines on a, presumably, case-by-case basis:

carriers would consider the significance of the consequences of communicable disease and the degree to which it can be readily transmitted by casual contact in an aircraft cabin environment.

There are literally dozens of issues raised by these proposals, many of which are set out in the NPRM. The complexity of the processes that must be adopted to implement the DOT proposals cannot be overstated.

Travel advisors will be permitted to charge fees for issuing non-expiring vouchers/credits under the proposed rules, but as noted in the earlier report, the fee must be “clearly and conspicuously disclosed to consumers at the time of ticket sale.” This will add to the complexity and negative vibe around every air ticket transaction.

Note that the NPRM proposes an additional rule, for prospective applications, to require U.S. and foreign airlines to issue refunds instead of travel credits or vouchers to qualified passengers holding non-refundable tickets for flights that operated without a significant change if the airlines receive a significant amount of government financial assistance related to that public health emergency.

This raises an entire complex set of questions about which type of financial assistance would qualify. Even worse, the NPRM says, the Department proposes to consider relevant factors, on a case-by-case basis, to determine what amount of government financial assistance provided to an airline would be considered “significant.”

Further, the Department seeks comment on a process in which, upon the occurrence of a public health emergency and the provision of government financial assistance to the industry, the Department would apply the relevant factors and seek public comments on what it tentatively views as being “significant” financial assistance that would trigger the refund requirement.

The complexity and time required for that process beggars the imagination. This article cannot hold all the issues raised. It is fair to say that this is the most complex rulemaking governing the subject of ticket refunds ever contemplated. In addition to the 116 pages of the NPRM, there are 26 pages of Regulatory Impact Analysis and 10 pages of Initial Regulatory Flexibility Analysis (impacts on small businesses) replete with negative implications of the proposed rules.

The combined effect of all the new rules, if adopted as proposed, is likely to be unimaginably complex and expensive. As suggested in the prior report, the industry must rally behind ASTA and any other entities willing and able to engage.

On August 22, DOT’s Aviation Consumer Protection Advisory Committee will hold a virtual public meeting on the NPRM. No doubt many interesting comments will be exchanged. If you’re interested in watching or even participating, go to this site where registration may still be possible.