Following the September 11 attacks, Congress enacted the Aviation and Transportation Security Act, requiring the Transportation Security Administration to impose a uniform fee on air passengers to fund security measures. While the fee is imposed on passengers, airlines are enlisted to collect it and must remit all collected amounts to the Administration by the end of the following month. The statute allows for refunds if a fee is paid by mistake or in excess, but the Administration has discretion to grant such refunds. Spirit Airlines collects the security fee when tickets are purchased. When customers cancel tickets, Spirit issues a travel credit for the remaining value, which expires 60 days after issuance. If a credit expires unused, Spirit retains the entire value, including the security fee portion, as revenue. A 2019 audit by U.S. Customs and Border Protection determined that Spirit had under-remitted security fees by retaining the fee amounts from expired credits. The Administration upheld this liability, calculating a debt of over $2.8 million, arguing that expired credits are not refunds and the fees must be remitted to the TSA.
Chief Judge Pryor, writing for the court, addressed two primary arguments. First, the court analyzed whether the statute requires remittance of fees collected from customers who do not travel. The court acknowledged that the fee is imposed on 'passengers' in 'air transportation,' but distinguished between the imposition of the fee and its collection. The statute explicitly states that 'all fees imposed and amounts collected' are payable to the Administration. The court reasoned that while the fee is only owed by those who travel, if an airline chooses to collect the fee earlier—such as at the time of ticket purchase—that collected amount becomes payable to the Administration regardless of whether travel occurs. The court rejected Spirit's argument that this reading overrides the 'heart' of the statute, noting that subsection (e) is an integral part of the statutory scheme. Furthermore, subsection (g) allows the Administration to refund fees paid 'by mistake or in excess,' implying that fees collected from non-travelers are initially payable to the Administration, with refunds being a discretionary exception. Second, the court addressed whether expired travel credits constitute a refund. Relying on 2002 agency guidance, the court held that a refund requires the fee to be returned to the ticket purchaser. Because an expired credit retains value for the airline rather than returning value to the customer, it does not satisfy the refund requirement. The court also rejected Spirit's argument that applying a credit to satisfy a cancellation fee constituted a refund, stating that a credit reclaimed immediately is no different from one reclaimed after expiration. Finally, the court found that Spirit had fair notice of these obligations through the plain text of the statute and the 2002 guidance, and that past administrative silence did not override the statutory default rule.
Spirit Airlines must remit millions of dollars in unrefunded security fees to the TSA as determined by the agency's audit. The decision clarifies that airlines cannot retain security fees from expired travel credits; they must either refund the fee to the passenger or remit it to the Administration. This ruling reinforces the Administration's discretionary authority under subsection (g) to grant refunds and establishes that expired credits do not satisfy the statutory refund requirement. The decision leaves open the question of whether the Administration will exercise its discretion to grant refunds in other scenarios, but confirms that the default rule is strict remittance.