The U.S. Airlines' New Refund Policy: Everything Travellers Need to Know

As the holiday travel season approaches, a new rule from the U.S. Department of Transportation (DOT) now requires airlines to automatically issue cash refunds for "significantly" delayed or cancelled flights, even without a request from passengers. This recent measure, effective Monday, promises a smoother experience for travellers and seeks to eliminate the hassle of navigating refund policies.

What travellers need to know about the U.S. airlines’ new refund policy

Transportation Secretary Pete Buttigieg, who proposed the rule in April, emphasised the importance of this initiative in a statement on X (formerly Twitter): “Passengers deserve to get their money back when an airline owes them—without headaches or haggling.” This policy promises automatic refunds when a flight is cancelled or significantly altered, giving passengers a full refund if they decline rebooking or other compensation options.

The rule covers not only flight cancellations but also other disruptions. For instance, travellers are now eligible for a refund on checked baggage fees if their bags are "significantly" delayed. For domestic flights, this applies if baggage isn’t delivered within 12 hours after the flight lands, while for international flights, the timeframe is between 15 and 30 hours, depending on flight duration. To claim this refund, passengers must file a mishandled baggage report and follow the DOT’s delivery windows for the refund to be triggered.

Additionally, if an airline fails to provide paid extra services, such as WiFi, seat selection, or in-flight entertainment, they must refund passengers for these unfulfilled purchases. This aspect of the rule aims to ensure that travellers receive full value for the services they pay for onboard.

In terms of refund processing, the DOT has specified that refunds should be processed swiftly: credit card payments are refunded within seven business days, and other payment methods within 20 calendar days. Furthermore, refunds must be provided in the original payment method, with the new rule banning the use of vouchers or credits in place of cash returns.

Also read: The Man Who Cost American Airlines $21 Million with a $250K Lifetime Ticket

For U.S. travellers, this rule represents a significant shift in favour of passenger rights, as airlines have long relied on complex refund processes and rebooking offers to mitigate refund payouts. With these changes, the DOT aims to bring transparency and fairness to the travel industry, giving passengers the confidence that, when issues arise, their travel expenses will be promptly returned.

Featured image credit: Reuters | Official Website