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In the US and for US based airlines: How much do airlines pay out every year in retribution for flight delays/cancellations? Of the payout, what % are frequent flyer miles, what % are vouchers for future travel, and what % are cash? What is the average value of compensation given out by airlines to a passenger for a delayed/cancelled flight?
Hello, and thank you for your request for the costs of airline passenger payments for flight delays or cancellations and how those costs are broken out. The most useful sources were USAToday, the Department of Transportation, and CNBC.
After a thorough search of market research, industry publications, government databases and news reports, we found that the information you requested is not publicly available. I found overall cancellation statistics, but there is no indication as to the percentage of flights cancelled do to airline issues (for which passengers are compensated) or issues outside of the airlines' control, such as weather (situations where passengers are less likely to be compensated).
There is a similar issue when looking at delays - airlines compensate passengers based primarily on the length of the delay, and each set their own policies as to the amount of compensation. I found statistics on the overall number of delays, but even with the average time of delay, it is not possible to calculate the compensation paid out because it varies between carriers.
Lastly, I found overall costs to airlines due to delays and cancellations, but no break out as to costs of passenger compensation versus other costs, such as those related to the crew, maintenance and other associated costs.
In short, I found that delays and cancellations cost US airlines $6BN in 2014. Payouts to passengers depend on the circumstances of the delay or cancellation, length of delay, and other considerations such as a desire to avoid bad PR. Additionally, as this area is not regulated by the federal government, each airline sets its own policies when it comes to passenger compensation.
You'll find a deep dive of my research below.
AIRLINE POLICIES
There are no federal regulations regarding passenger compensation when an airline cancels a flight. Policies are set by each individual airline. USA Today reports that passengers do have two basic rights in the case of cancellation - "one, a seat on your original airline's next available flight, or two, a refund of the unused portion of your ticket."
USA Today also reports that "most airlines promise various forms of assistance if they cancel your flight for a reason within the line's control, but not when they cancel the flight because of bad weather or some other force majeure factor." If there are crew issues, plane changes, etc., most airlines offer meal vouchers or hotel accommodations depending on the length of the delay.
CANCELLATION AND DELAY COSTS AND STATISTICS
According to USA Today, in 2015 "only 1.59% of all U.S. domestic flights were canceled, and only about 0.3% were diverted to an airport other than the original destination." The Bureau of Transportation reports that in 2016, the percentage of canceled flights dropped to 1.17%, or just 65,861, the lowest rate since 1995. 964,239 or 17.16% of flights had arrival delays of 15 minutes or more in 2016.
In 2014, weather related cancelations cost the US airline industry $6BN when considering passenger payments, ground and flight crew compensation, other expenses and lost revenue. Considering all of these factors, CNBC reports that for cancelling "a short hop on a regional jet the cost might be as little as $1,000 per flight...[and] on average, weighted by size and distances flown, each canceled flight costs the airline $5,770." CNBC also says that "for a regional jet with a few dozen seats, the airline might hand out less than $500 on meals and other incidentals and about $1,300 for hotel rooms."
From December 2014 through February of 2015, CNBC reports that airlines lost $2.2BN due to weather delays and "most of that represents out-of-pocket costs for hotels, meals, alternative travel arrangements shelled out by the roughly 4.5 million stranded air travelers...along with the wider economic impact of lost productivity from canceled flights."
AIRLINE PAYOUTS TO CUSTOMERS
USA Today says that "the almost universal policy is that regardless of cause, when an airline cancels your flight, you have a right to a full refund of the remaining value of your ticket. Refunds are in the same form as ticket purchase: cash or credit to credit card." That being said, Airline policy on passenger compensation for delays and cancelations is often determined in part by their desire for good public relations. Or, perhaps more accurately, their desire to avoid bad PR.
For example, when Delta's computer system went down recently, each passenger who's flight was "canceled or delayed more than three hours received $200 travel vouchers," according to The Points Guy. JetBlue promises a full refund and $50 towards future travel on the airline in the event of an airline-controllable cancellation. JetBlue also offers other perks in the event of a delay - vouchers ranging from $20-$200 and free in-flight movies. Passengers who have taken to Twitter to express their displeasure with delays often receive compensation in the form of miles.
Not all airlines play fair when it comes to passenger compensation, however. In October of 2016, the Washington Post reported that Alaska and Southwest airlines were both fined $40,000 by the Department of Transportation for, among other things, presenting outdated denied boarding policies to DOT staff. These statements showed "compensation amounts which were, in some cases, as many as five years out of date," according to the Washington Post. Delta was fined $45,000 and United $35,000 for similar infractions around passenger compensation.
CONCLUSION
To sum it up, while the information you requested is not publicly available, nor can it be estimated with the available data, I did find that delays and cancellations cost US airlines $6BN in 2014. Payouts to passengers depend on the circumstances of the delay or cancellation, length of delay, and other considerations such as a desire to avoid bad PR. Additionally, as this area is not regulated by the federal government, each airline sets its own policies when it comes to passenger compensation.
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