The Government Should Make American Airlines Do What’s Best For Me (and Not What’s Best For You)

The Department of Transportation requires airlines to allow passengers to:

…hold a reservation without payment, or cancel a booking without penalty, for 24 hours after the reservation is made, if they make the reservation one week or more prior to a flight’s departure date.

Should 24 Hour Holds Be Illegal?

Christopher Elliott, though, believes offering 24 hours holds is deceptive.

He believes that the DOT imposing the requirement that airlines offer a 24 hour hold or fee-free refund was “accommodat[ing] the airline industry.” Even as he suggests that the American Airlines 24 hour hold policy is something the airline “doesn’t want to do…but it has no choice.”

  • Is the hold rule a concession to American, or something they don’t want? Pick a side, please!
  • More likely it is neither, Elliott apppears blissfully unaware that American offered holds for years before it was a DOT rule (their practice was friendlier than other airlines)

He wonders if he should “step up and ask the DOT to close this loophole permanently” and require all airlines to offer fee-free refunds for 24 hours (thus taking away the option to offer a 24 hour hold without purchase). He believes there are “perhaps tens of thousands, of American passengers who feel deceived” — because American’s policies are different than other airlines (gasp) and consumers may not understand this.

In my experience ‘most’ consumers do not know about the 24 hour refund rule. It’s possible some people assume they have the same thing at American; that that’s the Department of Transportation requirement. If that’s the case, though, it’s a failure of education by the government about it’s rule. And for many, 24 hour holds are better.

Aren’t 24 Hour Holds (at Least Sometimes) Better Than 24 Hour Cancel?

In fact you actually do have the best of both worlds with American. If you want you can put a ticket on hold instead of buying it when booking direct. But if you want a 24 hour refund of an American Airlines ticket instead of a hold prior to purchase, just buy from an online travel agency like Expedia or Orbitz instead of from AA.com.

Net net I think most customers prefer the 24 hour hold over purchase and refund, not having to put funds down on their credit card. There are downsides, but no one policy is going to be best for every customer every time.

As Pizza in Motion writes,

Reasonable people can disagree on which policy is better for a specific traveler.  But, neither is customer un-friendly.  And, from a basic economic sense, would you rather have an airline take your money and then have to ask them to return it, or would you rather they gave you an extra 24 hours to pay them?  Uh, yeah.

Why Is This Even a Thing?

It is crazy in a way that the government regulates the sale of airline tickets orders of magnitude more than most other products, and does so largely for historical reasons. The Department of Transportaiton was granted broad regulatory authority over airlines as part of de-regulation, to buy off concern that without the Civil Aeronautics Board setting routes and fares horrible things would happen.

Nearly every other product in other industries is simply regulated by the Federal Trade Commission. How many products do we have a legal right to put on layaway or return for 24 hours, and then separately still have a right to ‘store credit’ minus restocking fee (change fee) if we decide not to use the product and even inform the seller when it’s too late for them to re-sell?

Unfortunately FTC protection alone isn’t sufficient in a world where you can’t even sue airlines most of the time. But real consumer protection would involve modifying the liability shield contained in the Airline Deregulation Act that – as interpreted by the Supreme Court in Northwest vs. Ginsberg – which means that airlines cannot be sued under state common law (using claims such as those based on a covenant of good faith and fair dealing).

Consumer Advocates Should Want Airlines to Compete With Different Policies

I love the idea of different companies with different policies. That’s the basis of competition. If you’re the sort of consumer advocate who doesn’t like airline mergers, then you shouldn’t like – let alone call for – government policies which require every airline to be the same so no customer has to pay attention. Rather you should argue for, not against, product differentiation.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. It’s amazing how time and time again Elliott shows his utter lack of understanding of the airline industry. Anyone who even remotely considers him/herself a seasoned traveler knows this policy is better than the 24 refund rule. I’ve put itineraries on hold literally hundreds of times versus ZERO times where i mistakenly booked the wrong date/time etc. I bet if you took a poll of 100 Delta/United flyers the vast majority would take AA’s 24 hold policy over the 24 hour refund policy.

    When Elliott decided which cases to champion, he really needs to start differentiating between proprietorial business practices and stupid/ill-informed consumers.

  2. Unfortunately, Elliott closed the comments on that post, so I can’t weigh in. I honestly can’t recall a time when AA DIDN’T offer a 24 hour hold. It was certainly well before the DOT mandated the practice of offering customers some flexibility.
    I’m sure there are customers that miss it, but it’s not like a hotel gives you 24 hours to cancel when you book a prepaid room.

  3. My experience with Delta is that they don’t even charge your credit card until after the second midnight following the purchase of your ticket. That probably saves a lot of reverse charges if a customer chooses to cancel within 24 hours of purchase.

  4. It’s almost like Christopher Elliot sits down before he writes an article and thinks to himself. How can I make the most ridicules argument today? Maybe he never steps foot outside of the community he lives and his writing is based on anecdotes. I can’t think of any other reason for his ignorance.

  5. I have to disagree with your layaway/restocking fee analogy. What other items can you purchase where you don’t actually own what you purchase. Once you buy anything that is not a virtual good you have the right to do with it as you please even if the provider has a no return policy. If you go buy a BMW and don’t want it anymore you can go and sell it however you want. EBay Craigslist etc.

  6. I’m sorry, but I agree with Mr. Elliott on this one. While I think it’s great that AA offers a 24 hour hold option, they’re the only ones that do that at the expense of not allowing cancellations within 24 hours. For most average consumers (and most non AA flyers), they’ve become used to the fact that tickets can be cancelled up to 24 hours. By being the only ones to not offer that option, they end up inadvertently inconveniencing these flyers with the arguably friendlier hold policy. Perhaps it’s a generationally thing, but most people that I know (in their 20s-30s) have the expectation of being able to cancel within 24 hours because that’s what EVERY other airlines offers. Obviously, once familiar with the lack of a 24 hour cancel policy, people won’t make that mistake but there are still a significant amount of regular people who get screwed the first time they find out there’s only a hold policy. AA could just offer both and be done with it.

  7. I don’t agree with the last paragraph. In a case in which a regulation provides 100% upside for the customer, there’s no reason to wish for policy variation that offers less than that regulation provides (an airline could obviously differentiate by offering more than 24 hours). But what could be gained by wanting an option to offer less? I would only want that in a case where there was actually a trade-off (such as the policy causing a increased ticket price that wouldn’t occur without the policy, which I’m assuming isn’t happening with any significance in this case). Perhaps there is a trade-off that’s not obvious to me?

  8. Is there any reason for those both methods to be mutually exclusive? Why the heck can’t we hope AA would offer BOTH options?

  9. @SHAUN – I might’ve agreed with you a year or two ago, but now I find DL and UA policies to be much friendlier — no 7-day requirement, 24-hour cancellation is available even for tickets purchased the day before or same day. My travels, both personal and business, require a lot of flexibility and few days advance notice — I’ve even booked multiple DL/UA flights on the same day and then canceled all but one. Now, if UA allowed midnight of following day like DL does, that would be nice — wouldn’t have to set my alarm clock to remember the UA deadline 🙂

  10. Elliott also deleted comments that called out the misinformation (in the blog post) that AA “doesn’t want to” offer holds but is being obligated by the DOT. In fact, the poster pointed out, AA allowed holds before there was ever such a rule.

    Perfectly accurate and reasonable, yet Elliott deleted it. What does that tell you about this guy?

  11. Elliott comes out looking like a blithering idiot on this one. I have to admit that I’m not a fan to begin with, but he should stick to what he does well, advocating for other people that have clear cases of being wronged.

  12. If AA chooses to offer holds instead of 24 hour cancel than they need to do a better job of posting their policy. Not sure how letting customers tie up inventory is good practice but that is revenue management’s decision.

    Need to educate AA reps and ensure reps can see whether a Hold feature was available on a particular ticket purchase. Too many times pax are told no refund available even when Hold feature was not offered on an itinerary.

    Purchasing via an OTA creates it’s own problems ….

  13. > It is crazy in a way that the government regulates the sale of airline tickets orders of magnitude more than most other products, and does so largely for historical reasons.

    Really? Just how uninformed you are! Your neighboring store has to comply with more consumer protection regulations that airlines, since most citizen protections laws are at the State level and airlines are exempt to them.

    The Feds do a terrible job at doing what the States do pretty well, letting the airlines do whatever they want in screwing citizens (just witness the frequent flyer program changes).

    The reality is that airlines are NOT subject to the regulations that a normal business is, and the lack of regulation shows.

  14. the 24-hour hold is one of the absolute best things about American Airlines. It enables me to put something on hold late at night, often times the last seat in a fare bucket, and then decide after conferring with clients and family the next day if the trip is going to work.

    If I have to call and refund every time, it just takes more of my time and more of the airlines’ time, and the latter can’t possibly be “free” in the long run.

  15. American Airlines internet-based purchase skirts the DOT Consumer Protection guidelines by failing to offer the 24 hour hold if the flight commences within 7 days. In complaining to DOT, they responded that AA adheres to the DOT policy but I doubt neither an AA customer relations agent nor DOT have run through this ticketing scenario to discover the 24 hour hold is omitted in such bookings. I expect an untold number of consumers are losing their money and have no recourse with American Airline for lack of oversight & ignorance. The DOT’s response to me below does not accurately depict American Airlines internet choices in practice: ” Either offer consumers the opportunity to cancel their reservations within 24 hours for travel that begins 7 days out for a full refund, OR allow consumers to hold a reservation for 24 hours without payment. Airlines are not required to offer both options. American Airlines chose the second option to allow consumers to hold their reservation for 24 hours without payment” .

  16. I was just bitten here with AA offering no love at all and maintained a ‘you’re just an idiot for not understanding that a hold and a 24 hour refund aren’t the same but are the same’ line on the phone. I now understand the misleading nature (AA certainly is, now that I read it, correctly interpreting DOT policy); I was in process of changing affiliation from one airline to AA and now am rethinking my decision. They may have extracted change fees from me for this ‘error’ on my part to fully understand DOT and AA policy regarding the cancellation policy but in so doing they seem to have lost a customer. It’s a shame, really, and the phone agent and her supervisor’s responses were not at all customer friendly. Oh well, live and learn. I’d be silly, at this point, to stay with AA.

    I’d liken this to a store purchase. If a store has a NO RETURNS policy they tend to post it in huge letters at the cash registers. The store typically would want to retain customers and the store would not be customer friendly if they explained their policy in a pamphlet on the counter. Unless otherwise noted customers will enter that store expecting a return policy similar to other stores. AA.com doesn’t have those large signs and doesn’t explain what the Hold purchase option even means. That’s misleading. While others might find value in such a policy I’m not sure I do, and I think I’ll just take my business to a store that has policies that are clearly labeled.

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