Lawmakers are calling for airlines to refund customers for coronavirus-related cancellations. Atmosphere Research Travel Industry Analyst and President Henry Harteveldt joins Yahoo Finance’s Zack Guzman to discuss.

Video Transcript

ZACK GUZMAN: Today, airlines are facing more pressure over refusing to give passengers cash refunds instead of just travel credits as a result of canceled flights amid the rise of coronavirus cases around the globe. Of course, there are laws in place to regulate some of this. The transportation department requires giving customers an option to take a full refund if the airline cancels a flight, for example. But many airline companies are arguing it's not them canceling flights at this point, but rather the lockdown policies being instituted by state governments around the US that's more of an issue here.

Now senators, including senators Elizabeth Warren, Bernie Sanders, Ed Markey, and Kamala Harris are pressuring those airline companies and CEOs to shift to providing cash refunds, especially pointing to the fact that they're slated to receive up to $25 billion in terms of what they say is an unprecedented bailout for the industry. So for more on this, I want to bring on our next guest, Henry Harteveldt, the Atmosphere Research travel industry analyst and president joins us now on the phone. And, Henry, when we look at this, I mean, how much leeway do you think airlines have to resist the pressure to actually give cash refunds? I myself just settled for a travel credit just last week for a canceled flight, so who's in the wrong here?

HENRY HARTEVELDT: Well, you know, a lot really depends, Zack, on the airlines contract of carriage, which is the legal agreement that frames all of our travel with different airlines. If the contract of carriage says that they're obliged to give you a refund, then they need to give you a refund. What I'd like to do-- or what I'd like to see, excuse me, is to see airlines be far more supportive and understanding of the traveler.

I think everybody understands that airlines have expenses that have to be paid. But those travelers have individual expenses that have to be paid. And the person who bought that ticket may actually now be trying to figure out, how do I pay my rent if I've lost my job? Airlines that treat their customers well during this crisis will, I hope, see that good behavior rewarded in the future. What I like is what American Airlines is doing-- it's offering people a choice of either a travel refund where the flights have been canceled, or they're saying if you take a credit, we'll give you a 20% bonus on top of that.

And so if you have, let's say, a $100 travel credit-- $100 ticket, you would get $120 in travel credit. So be creative, but put the customer first. Put the customer first.

KRISTIN MYERS: Hey, Henry, it's Kristin here. So most of the signatories of that letter, they were pretty much all Democrats. Do you at all imagine that Republicans will also join their Democratic counterparts in trying to pressure the airline industry to really start being a little bit more lenient to those customers and giving them back cash refunds or more flexible cancellation policies?

HENRY HARTEVELDT: I would say that it's a function of who's up for re-election, and do they have an airline headquartered or based in their state or not. If they have an airline headquartered in their state, they're probably going to take the airline's side. But if they are not up for re-election and don't have an airline, they are probably going to side with the consumer. You know, Republicans generally don't always side with consumers on many business issues.

ZACK GUZMAN: And I'm just curious-- I mean, when we look at this, there is-- you know, when you look at the excuse here, that they are saying that it's the government's shutting them down, not them, and they say that passengers would want to fly if there weren't these stay-at-home orders in place, I'm not sure how realistic that actually is. Because, you know, I canceled a flight-- it wasn't because I was staying home, it's because no one really wants to get on a plane right now. I mean, does that really come into whether or not they can afford to do this?

Because there is some serious financial constraints for these companies. You mentioned the individuals have similar financial constraints, but for airlines trying to navigate this, are you surprised that they actually would be trying to go the travel credit route over giving cash back to customers?

HENRY HARTEVELDT: No, I'm not surprised that the airlines would opt to try to get travel credit. And in fact, United Airlines has been changing its policies constantly. And basically what they're saying is if we cancel your flight, we're going to give you a travel credit. And if you want a refund, you have to wait for a year, which means their passengers are acting as banks and giving the airline an interest-free loan for a year. I think that's wrong.

You have a health pandemic that is trapping millions of people in their homes. I believe that at least 75% of the US, for example, is now living in a city or state where there is a shelter-in-place or stay-at-home order in effect. For an airline-- for an airline to say this isn't our fault is absolutely wrong. This is something that is affecting everybody. This isn't a voluntary choice by the traveler.

We have the president and the head of the CDC saying do not take nonessential trips. And the president's task force-- coronavirus task force-- discusses, according to Dr. Fauci, on a daily basis whether they should ground airlines or not, whether they should prohibit nonessential travel.

ZACK GUZMAN: It's a very good point. I mean, you think about the checks-- the size of the checks that some Americans are going to get, likely dwarfed by if they had booked a family vacation and now not getting that cash refund-- very good point. But for now, Henry Harteveldt, thank you so much for joining us. Appreciate you taking the time.