Aviation

Democratic senators: Airlines sitting on $10 billion in ‘customer cash’

Leading domestic airlines are sitting on an estimated $10 billion in customer cash amid unprecedented flight cancellations as a result of the novel coronavirus pandemic, according to an investigation by Democratic senators.

Sens. Ed Markey (D-Mass), Elizabeth Warren (D-Mass.), Kamala Harris (D-Calif.) and Richard Blumenthal (D-Conn.) argued in a statement on Friday that the the pot of money collected by the airlines should be used to issue cash refunds for Americans who are struggling financially.

“The ongoing pandemic is placing enormous financial strain on millions of Americans,” the senators said in a joint statement. “In light of this pressing need, and the unprecedented multi-billion-dollar bailout that the airline industry just received from Congress, we are absolutely outraged that so few airlines are willing to offer real cash refunds to consumers who must cancel their tickets.”

Portions of the $25 billion aid package for airlines are to be used for payroll grants for employees and low-interest loans. The aid is negotiated on an individual basis between the Treasury Department and U.S. airlines. 

Flight trips have dropped off sharply as Americans comply with stay-at-home orders across the country in an effort to limit the spread of coronavirus.

While no domestic travel ban is in place, President Trump on March 16 urged Americans to avoid discretionary travel.

Airlines have dramatically reduced their commercial flights. American Airlines said it had 40 percent less flights operating in April compared to the same time last year, and Delta Air Lines said it canceled 25,000 flights over two weeks in March.

Airlines are required by law to issue cash refunds to travelers for flights the company cancels but is under no obligation to offer cash if a customer decides to cancel a flight. 

JetBlue, which covers about 5.5 percent of the domestic airline travel market, said March “told a stark story” for the airline and that it took in less than $4 million per day while issuing up to $20 million per day in travel credit for canceled flights.

“This is a stunning shift and clearly insufficient revenue to come anywhere close to covering our daily expenses,” the company wrote in a letter to the senators.

The senators said they came to the $10 billion estimate in customer cash based on data provided by JetBlue, which was the only airline to provide the dollar amount of travel credits related to coronavirus cancellations.

“Although most companies refused to say just how much money they are sitting on in the form of travel vouchers, we estimate that the airlines could be holding onto more than $10 billion of hard-earned money from American travelers,” the senators continued.

“If these companies released that money back to the public, it would provide a significant stimulus for struggling families. That’s why we once again urge the airlines to end their anti-consumer policies and offer real refunds during this emergency.”

The airlines singled out by the senators include American Airlines, Alaska Airlines, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, Southwest Airlines, Sun Country Airlines and United Airlines.

The senators said they welcome airlines to dispute the $10 billion figure.

Instead of cash refunds, most of these carriers said they have responded to coronavirus-related trip modifications by waiving fees associated with itinerary changes and cancellations and extended up until at least 2021 the time customers can use travel vouchers.

Only two domestic airlines, Allegiant and Spirit, said it is issuing cash refunds for travelers who canceled their flights.

“Under ‘normal’ circumstances, Allegiant airfares are non-refundable,” Allegiant CEO Maury Gallagher wrote in a letter. “However, we have waived our cancellation policy and are offering vouchers, rebooking, and refunds to customers that decide to initiate a cancellation or change.”

Airlines for America, a trade association representing 750,000 airline professionals, said individual airline policies are a reflection of the variety of business needs.

“No two airline companies are the same, and each carefully develops its own unique response to travel changes, cancellations and refunds, among other consumer questions,” Nicholas E. Calio, president and CEO of Airlines for America, wrote in a response to the senators.

“Each airline has crafted an approach it believes will best address the concerns and interests of its customers and crew, while ensuring compliance with federal rules.”

Tags Coronavirus Donald Trump Ed Markey Elizabeth Warren
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