Airlines ‘should not make it hard’ to get a refund, Transportation Sec. Buttigieg says

U.S. Transportation Secretary Pete Buttigieg joins Yahoo Finance Live to discuss airlines making it difficult for passengers to get refunds, the U.S. levying penalties against airlines, consumer protections, and the outlook for airlines ahead of the holiday travel season.

Video Transcript

[AUDIO LOGO]

BRIAN SOZZI: The transportation department is out today, slapping airlines with stiff fines for withholding passenger refunds. US Secretary of Transportation Pete Buttigieg and I chatted about the enforcement actions. Take a listen.

PETE BUTTIGIEG: So this is about making sure consumers get their money back when they're owed a refund. Under the rules set by our department, when an airline cancels your flight or when you experience a very long delay, you're entitled to a refund. And it should be easy and it should be quick.

Unfortunately, we saw a number of airlines that did not make it easy and did not do it quickly. In some cases, we're refusing outright to provide passengers with the refunds they were owed.

That's where we come in with the enforcement actions. So to cover a lot of these situations that happened over the last two years with six airlines, we have announced around of enforcement actions and penalties. These are contributing to about $600 million in refunds going to hundreds of thousands of passengers, as well as penalties that were ordering in order to signal that airlines should not make it hard.

They shouldn't get to where it requires an enforcement action by our department to get people the money that they're owed. It should be quick and easy to get that refund.

BRIAN SOZZI: Are there now safeguards in place so this doesn't happen again?

PETE BUTTIGIEG: Yeah, we're watching very closely. We view ourselves as having a watchdog role. Not just setting the rules but making sure the rules are complied with. And these enforcement actions are designed to back that up.

I'm also looking at increasing the penalties, even though we've already this year done a record high amount in terms of the fines. More than we've ever done in the history of this Consumer Protection Office. I'm ready to ratchet them up until we see airlines not putting us in the position of having to go to these lengths just to get passengers their money back. In the meantime, again, just with these six airlines alone, $600 million plus dollars going back to passengers, which is where they belong.

BRIAN SOZZI: A huge number. And within that six is Frontier at $222 million in required funds. That is more than double-- about double Air India, which is in second place. What is it about Frontier that they got hit the hardest here?

PETE BUTTIGIEG: Well, in this case, part of the issue had to do with moving the goalposts. They actually changed their definition of a significant delay, which used to be three hours. Three hours or more, you're entitled to compensation. And they moved it in a way that was not consistent with how passengers ought to be treated.

So, you know, whether it's a US-based airline or an international airline, if you're operating in the US, we're gonna hold you to that same high standard. And that is backed up with enforcement.

We have a number of other investigations that are open right now. And we're always taking incidents, taking complaints through our website. We've gotten, I think, over 50,000 so far complaints this year. Our team goes through those.

And when they add up to a pattern or when a passenger just isn't getting results, we're ready to step in. We just don't think we should have to. We're calling on the airlines to make this easier so that we don't have to get involved.

BRIAN SOZZI: We've heard consistently, Mr. Secretary, from the airlines, notably in the third quarter, they're cutting back routes to save money. Now, this is, of course, coming before the holiday-- the peak holiday travel season. What do you think these cutbacks mean to the average consumer?

PETE BUTTIGIEG: Well, look, on one hand, we think it's important for airlines to have realistic scheduling. So if they're adjusting their scheduling and their routes to ensure that it's only routes that they can support, that could mean less cancellations. And that's good thing.

On the other hand, we also want to make sure that communities are served. We have an essential air service program that actually provides funding to help make sure that areas, like where I come from where there are often smaller airports in the Midwest and the West, really every part of the country has some example of this where it can be an economic lifeline to a community, that we're supporting that. And we'll actually work with the airlines on that.

Bottom line, you need to have realistic schedule and you need to have adequate staffing. And we're working on operational improvements, too. Areas where we can team up with airlines that want to cooperate on steps that might make a difference.

I'll just give you one example. I wrote to some airlines recently about making better use of the overwater routes into Florida. That airspace is very congested, very hard to manage. Lots of delays there.

And if more of the aircraft are equipped so that they can go over water instead of hugging the coastline, that can actually lead to efficiency improvements in terms of being able to use that scarce airspace and those routes in.

So whether we're talking about tactical operation-- operational steps or whether we're talking about big picture economic forces, we've got to make sure we continue pushing to create a better passenger experience. And let me say, it's definitely better now than it was six months ago. Early this summer, tons of problems. We're seeing lots of improvements but still a long way to go.

BRIAN SOZZI: Given the stresses on the system, do you expect a chaotic holiday travel season?

PETE BUTTIGIEG: So I am expecting it to be better than it was this summer. Right now, we're seeing cancellation rates around 1% to 2%. And that's more of what would have been typical prepandemic. Of course, you can never quite get to 0% just with weather and other issues that come up. But we never want to see them go back up to where they were early this summer.

So the improvements, I think, are making a difference. But candidly, as we go into this holiday season, I don't think we're out of the woods yet.

BRIAN SOZZI: You have a great pulse on the economy, just given where you sit in transportation, Mr. Secretary. Do you see a recession on the horizon? Should consumers expect that?

PETE BUTTIGIEG: Look, I'll leave macroeconomic forecasting to others. I'll tell you from the slices that we're looking at, something like air travel demand, very strong, very robust. It's part of why it's been so difficult to keep the system in good shape, as the supply catches up to demand.

On the other hand, you look at the glimpse as we get into the retail space, you know, last year after all of the anxiety about whether Christmas was supposedly gonna be canceled because of supply-chain issues, we actually saw an all-time record high in terms of the goods moving through our ports. That appears to be softer now in a way that hopefully will give supply chains a chance to catch up. But also indicates that there's not quite that kind of red-hot demand we saw a year ago.

So those are just two examples of things that we're tracking that provides some indication. But again, when it comes to the big picture macro forecasts, I'll leave that to colleagues with a little more economic training than me.