Germany doesn't want you to pay for a flight until the day you fly. It could cure the nightmare of trying to get refunds on cancelled travel.
- Americans are struggling to receive refunds following flight delays and cancellations amid a summer of travel chaos.
- The Department of Transportation is working to improve the refund experience.
While the US is working to make it easier for customers to receive flight refunds, Germany is trying to eliminate the need for refunds altogether.
In August, the German state of Lower Saxony called for the abolishment of advance payment for flight bookings — and the implementation of a "pay as you fly" model in which customers' payments aren't processed until they check in at the airport.
When a passenger's flight is canceled, there's no need for a refund if they haven't paid for it yet.
"It makes intuitive sense," Scott Keyes, founder of Scott's Cheap Flights, told Insider. "You don't pay for your hotel until you check out. Ditto with your car rental. There's certainly some elegance in having the same setup with the other major part of travel—flights."
Under the current model, some have argued customers are effectively making airlines "interest-free loans" — loans many have had a difficult time collecting on.
Over Labor Day weekend, thousands of Americans faced flight delays or cancellations, and since Memorial Day, there have been over 50,000 cancellations and over 500,000 delays. Many fliers have sought reimbursement and had a hard time receiving it — the Department of Transportation received over 1,400 complaints in June related to refunds. While the DOT is pushing airlines to make the refund experience more palatable, Germany's proposal could provide an alternative moving forward.
Keyes says the "pay as you fly" model has a lot of appeal but that he has one main concern.
"Airlines would have to grapple with far more canceled reservations than exist today," he said. "And they would almost certainly respond by raising fares en masse. How much and how quickly is hard to determine, and that's why I'd be glad to see this tested out in foreign markets."
He adds, however, that airlines have "long resisted change to their business model, only to find that it worked out fine when they do." Pre-pandemic, most US airlines charged significant fees when customers changed or canceled their flights. But while many of these fees were dropped in 2020 to entice customers, airlines have still managed to generate "major profits" this year.
"The sky didn't fall," said Keyes. "And that's why I'm not entirely convinced a 'pay as you fly' method would necessarily result in more expensive flights."
The US Department of Transportation is pushing for other reforms
While a "pay as you fly" system may not come to the US anytime soon, the Department of Transportation has taken some steps to combat the refund crisis.
Last November, the Department of Transportation agreed to a $4.5 million settlement with Air Canada following "extreme delays" in refunds for thousands of US customers.
In July, US Transportation Secretary Pete Buttigieg said the department had completed 10 investigations into delayed or withheld flight refunds, adding that an additional 10 investigations were still ongoing.
In August, the Department of Transportation announced a proposed rule that would aim to strengthen protections for US fliers seeking refunds. If enacted, customers would become eligible for a refund when they experience changes to their departure or arrival time by three hours or more, changes to their departure or arrival airport, or changes to their number of connections.
"This new proposed rule would protect the rights of travelers and help ensure they get the timely refunds they deserve from the airlines," Secretary Buttigieg said in a department release.
While the rule is just a proposal and has not been signed into law, travel industry analyst Henry Harteveldt, told Select that the proposal has a "decent chance" of getting enacted, though it could see modifications.
On September 1st, the DOT launched a customer service dashboard to help fliers decipher what services and amenities they are entitled to when they experience delays and cancellations.
Per the Department's release, none of the 10 largest US airlines have historically guaranteed meal vouchers or hotels to passengers experiencing cancellation or delays. Today, however — following a department push to improve these accommodations — nearly all major airlines have made these guarantees.
Moving forward, Keyes expects airlines to begin offering more vouchers to incentivize people on crowded flights to switch to less crowded ones.
"Right now, airplanes are more full than they were pre-pandemic, and airlines are increasingly trying to entice people to switch to less crowded flights days before the trip will actually begin," he said, citing a $55 voucher he was offered in recent weeks to modify his trip.
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