Travel Advisor Group Tells Transportation Department Agents Can’t Issue Flight Refunds

As the U.S. Department of Transportation tries to speed refunds for wayward flight bookings by making both airlines and travel agencies responsible, the American Society of Travel Advisors responded it would be almost impossible in most cases for travel agents because they don’t handle the money.

After all, when travel agents book flights for customers, the travel agents are middlemen and agents of the airlines, and don’t get their hands on the passenger funds. Instead, the passenger monies flow through the airline-owned Airline Reporting Corp. in the U.S. or the Billing and Settlement Plan outside the U.S. For traditional travel agencies, it is very rare for them to be the merchants of record, and the keeper of client monies for flight bookings.

In testimony provided Monday to the Department of Transportation’s Aviation Consumer Protection Advisory Committee, Zane Kerby, president and CEO of the travel agency group, said: “It is exceedingly rare for an agency to handle client funds in air transactions and thus are not in a position to issue a refund.”

The Transportation Department is likewise trying to ensure that travelers get refund if they are displeased with proposed alternative transportation choices in the event of flight cancellations or delays.

“We question both the fairness and the practicality of this provision, because (i) it is exceedingly rare for an agency to handle client funds in air transactions and thus are not in a position to issue a refund and (ii) agencies have no control over the alternative transportation offered to the consumer,” Kerby said.

In July, travel agencies in the U.S. sold more than 640,000 airline tickets per day, Kerby said, but most of these agents are independent contractors or are employed in small businesses, and the strain on the businesses would be overwhelming if they were forced to issue refunds.

“The prospect of being ‘on the hook’ for refunds regardless of whether the agency has access to the funds in question could disrupt the airline distribution system in unknowable and unpleasant ways,” Kerby said. “It could also prove to be such a financial risk that many agencies elect to no longer sell air tickets, depriving consumers of valuable consultatory services and comparative shopping options.”

Many travel agents stopped selling airline tickets years ago because airlines eliminated commissions to all but the largest travel agencies.

The Airline Reporting Corp., which settles travel agency-airline flight transactions, bars travel agencies from holding customers’ funds in airline ticket bookings, Kerby said.

“Based on the Department’s earlier presentation, we don’t think the Department’s intent is truly to insist that these overwhelmingly small businesses pay out of pocket when the refund due to the consumer is delayed or unobtainable from the airline/travel provider, who is actually holding the disputed funds,” Kerby said.

Pointing to the Department of Transportation’s seeming misunderstanding of how travel agents sell airline tickets when the airlines — and not the travel agencies — are the merchant of record, Henry Harteveldt of Atmosphere Research said: “This is embarrassing for the DOT, but not fatal.”

Harteveldt hopes it all will get sorted out as the rulemaking process proceeds.

It all gets more complicated, however, when travel agencies — both online and offline — sell flights as parts of tours and packages, he said, adding that the agencies might not even know how much the flights cost because they were unpublished fares bundled into packages.

It appears as though the Transportation Department is looking to make airlines and travel agencies jointly responsible for getting refunds to passengers, but it is the airlines — and not travel agents — that exert control over these funds.

“Sounds like mass confusion to me,” wrote travel attorney Mark Pestronk in a Travel Weekly column about the issue.