American Airlines Is Changing Its 40% Refund Rule For Downgrades After DOT Complaint

Published Aug 28, 2026, 3:00 PM EDT A graduate in German, Jake has a passion for history and regional aviation, and enjoys sampling new carriers and aircraft. He has visited OEM facilities as far and wide as Bristol, Toulouse, and Seattle, and recently enjoyed the milestone of flying his 150th sector as a passenger. Based in Norfolk, UK. While the modern aviation industry is little short of a wonder in places, it would be naive to say that it is anything close to perfect. Indeed, for various reasons, things can and do go wrong, and, with solutions in place to mitigate the impacts of such failings, they are all part and parcel of flying. Cancelations and delays aside, one of the more frustrating things to happen can be an involuntary downgrade. Such situations can occur when various factors force airlines to swap to an aircraft with less premium capacity, or if the higher-tier cabins are overbooked. In these instances, some unlucky flyers must travel in a lower class than planned, leaving them entitled to compensation. A recent Department of Transportation (DOT) complaint on this front has forced American Airlines to rethink its policy. The 40% Rule Sparked Criticism Credit: Shutterstock You might think that, in the case of, for example, a passenger who had booked a business class ticket having to instead fly in economy class due to an involuntary downgrade, the most logical amount of compensation to give them would be the difference in fare. However, American Airlines recently amended its policy to instead give affected passengers a refund equating to 40% of their original ticket price. Many passengers would likely accept this compensation without much further thought. However, research by Ben Edelman showed that the math of the new policy favored the airline, not the flyer, because premium-cabin tickets typically cost 4.2 times as much as economy tickets . However, American initially asserted that the policy was fair. "A refund of 40% for the affected segment returns a substantial portion of the consumer’s paid fare while recognizing that the consumer still received the principal air transportation service on the consumer’s selected flight." Time To Change Credit: Shutterstock Now, however, American has altered its policy on compensation for flyers affected by involuntary downgrades. Indeed, Inside Flyer notes that the Fort Worth-based US legacy carrier and oneworld founding member is instead compensating guests based on fare difference, specifically between what was originally paid and the average of the new cabin. This, Edelman argues, is evidence of American "conceding that its 40% does not measure passenger loss." As a result of the new policy, Inside Flyer notes that the refunds passengers now stand to get back from American Airlines when they are involuntarily downgraded better reflect the actual fare gap. This, the publication adds, could save impacted flyers hundreds or even thousands of dollars. However, for Edelman and his fellow complainant Mike Borsetti, the fight does not end there. In the pair's latest submission to the US Department of Transportation, they also advocated for retroactive financial relief for passengers who previously received sub-par refunds that do not reflect the scale and financial loss of their downgrade. They also want clearer refund rules going forward. Not The Carrier's Only Recent Refund Change Credit: Shutterstock This is not the first time in recent years American has been in the news for changes to its refund policy. Indeed, as reported last month by Simple Flying, the carrier has also scrapped a previous rule that allowed passengers to cancel and receive a full refund within 24 hours of purchase when buying flights as little as two days before departure. Now, however, this rule has been extended. Indeed, the carrier's passengers are now only entitled to the 24-hour refund window on flights booked at least seven days before flying. This switch brings the carrier in line with the DOT's minimum legally mandated window, which was rolled out in 2012. As a result, it has reduced consumer protection for passengers booking flights at shorter notice.