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Transportation Department cracks down on airlines withholding refunds for canceled flights

By Ben Popken and Morgan Chesky

Airline passengers got hit with a one-two punch during the coronavirus pandemic, first having their flights canceled or rescheduled because of Covid disruptions and then having their money locked up by an airline that offered only vouchers. Now, the Transportation Department, under orders from the White House, is cracking down.

Complaints from airline passengers, which soared last year, are up by over 500 percent, according to a new report by the agency, with over 100,000 submitted. Passenger air travel was upended along with everything else in March 2020 as traffic plummeted to historic lows. Airlines, forced to cancel and reschedule flights, got billions of dollars from the government to keep making payroll. But to keep flying, they furloughed and laid off pilots and crew members.

After the vaccine rollouts, passenger travel demand shot back up — sooner than the airlines said they expected — so they ramped up schedules and expanded service. They have struggled at times to staff the flights they've sold, as bottlenecks in mandatory retraining have delayed the furloughed staff members from returning. Some have also chosen to hang back because of Covid concerns.

That means airlines have been even more exposed when outside events occur.

Early last month, Spirit and American airlines canceled hundreds of flights after a confluence of bad weather, technology outages, worker shortages and high summer demand. Hundreds of travelers were stranded, and piles of unclaimed luggage had to be roped off.

The scrambled schedules left some passengers high and dry.

Lenore Sek, 72, had booked a trip to Ghana to reunite with an old friend in the Peace Corps. When South African Airlines canceled her flight, it offered her only a credit for future travel.

"They were having a tough time, and I felt for them, but they are very big, and I'm very small, so $1,700 means an awful lot to me, and they can just send it to me," she said. For months, she tried calling and emailing the airline, to no avail.

"It makes you feel like this is crazy. I don't understand. Who am I supposed to talk to?" Sek said. "There's no one answering the phone. There isn't a person who puts their name to an email. I was very discouraged, but I kept trying."

Eventually she gave up on working with the airline directly and filed a complaint with the Transportation Department. Within two days, the refund was in her account.

The Transportation Department says that isn't the way it's supposed to go.

"With the Covid-19 pandemic, we saw a rash of flight cancellations by the airlines, and some of those airlines kept the consumers' money," said John Putnam, the Transportation Department's acting general counsel.

"It's clear-cut that if an airline cancels a flight, they need to pay a refund back," Putnam said. "It needs to be a cash refund, and it needs to be a prompt refund. And that hasn't been happening with all the airlines."

In July, the Biden administration directed several federal agencies to enhance competition and protect consumers. The Transportation Department says its actions on refunds are part of fulfilling that directive to save families money.

The Transportation Department is investigating the refund practices of 18 foreign and domestic airlines. It has filed a formal complaint against Air Canada over refund delays.

Nine airlines have updated their policies so passengers can get their refunds back faster, the Transportation Department.

Complaints can be filed directly at the agency's website. Passengers should include their flight information, receipts and copies or records of any communication with an airline.

This article originally appeared on CNBC

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