Airlines plead tech failure after government orders automatic refunds for wronged travelers

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Some CEOs are already raising questions about how airlines will comply with new Biden administration rules requiring refunds for canceled or excessively delayed flights.

On a Thursday call with analysts, Frontier CEO Barry Biffle said airlines in the U.S. may not be equipped to handle the changes, which include disclosing fees and issuing refunds for customers in certain situations. He pointed the finger at the industry’s tech incompetence.

“I think the reason why some of the industry is having a challenge is because I think there’s not the technology in place today to do exactly what they’re looking for,” Biffle said. “But hopefully we can all get there.”

Last week the Department of Transportation, led by Biden appointee Pete Buttigieg, published new rules that make refund policies more friendly to customers and more uniform across airlines. Among the changes, the new rules would force airlines to provide refunds if a flight is delayed for three hours or six hours for international flights, if a customer is downgraded to coach from first class, or if a flight changes to add more connections than expected.

Frontier Airlines did not immediately respond to Fortune’s request for comment.

Biffle’s hesitations echoed those of American Airlines CEO Robert Isom, who on the carrier’s earnings call last week said the revised mandates had some areas that were “fairly gray.”

Isom, who runs one of the biggest U.S. airlines that brought in $52 billion in operating revenue last year, seemed ambivalent. He said that if the new rules were meant to make sure airlines don’t overschedule and to help avoid meltdowns, that was fine, but depending on their scope, the carrier may have some questions.

This includes how the new rules will factor in bad weather and problems with air traffic control (which is the responsibility of the Federal Aviation Administration), as well as diversions for medical emergencies, he said. Isom added that the carrier refunded about $2 billion of customer ticket fares in 2023.  

“We don’t want to end up in a situation where we end up not serving the customers in the way they want to be serviced, just to avoid penalties,” he said.

A spokesperson for American Airlines when asked for comment redirected Fortune to Isom’s remarks on last week’s earnings call.

The DOT rules are likely to bring additional costs for airlines, and some analysts believe low-cost carriers could be especially hit. On the Thursday call, Biffle added that the new rules shouldn’t have any negative impact on the carrier’s bottom line.

“We refunded over $300 million last year, all in the same categories, we believe largely in compliance with what they’re looking for,” Biffle said on the call. “We don’t see any financial impact from this.”

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