Writing for the panel, Chief Judge William Pryor held that 49 U.S.C. § 44940 requires airlines to remit any collected fees to the TSA unless the agency grants a refund, and that expired credits do not qualify as refunds under the agency's 2002 guidance.
"We agree with the Administration that the fee statute requires all collected fees to be remitted to the Administration, and expired credits do not count as refunds," Pryor wrote. "So we deny the petition for review."
Spirit collects the $5.60 one-way security fee when customers buy tickets. When a customer cancels, Spirit imposes a cancellation fee of the lesser of $100 or the ticket price and issues a credit for any remaining value, which expires in 60 days. If the credit goes unused, Spirit "recognizes the amount of the unused credit . . . as revenue," including the security fee portion, the opinion said.
A 2019 audit by U.S. Customs and Border Protection found Spirit "under-remitted . . . Security Fees" by retaining the fee portion of expired credits and calculated the resulting liability at roughly $2.84 million. The TSA adopted the audit's findings.
Spirit argued the TSA lacked authority to collect the fee from customers who never flew, citing statutory language imposing the fee on "passengers of air carriers . . . in air transportation." The panel partly agreed with that reading but said it did not resolve the petition.
"Although only passengers owe the security fee, section 44940 contemplates the fee's collection from customers who later do not travel," Pryor wrote. Subsection (e)(1) makes "[a]ll fees imposed and amounts collected under this section . . . payable to the . . . Administration" by the end of the following month, the court explained, and amounts collected remain payable regardless of whether the passenger flies.
The panel pointed to subsection (g), which allows the TSA to "refund any fee paid by mistake or any amount paid in excess of that required." Pryor wrote that the statutory "may" "plainly confers a discretionary authority" on the agency to decide whether and on what terms to refund remitted fees.
On the refund question, the court said the 2002 guidance — issued in response to an industry trade group inquiry — required airlines to refund security fees when tickets expired unused, and that an expired travel credit is not itself a refund. "A ticket that retains some value after cancellation is a credit by another name," Pryor wrote. "Because the guidance requires a refund after a credit has expired, an expired credit itself is not a refund."
Spirit also argued that when it applied a customer's credit against its cancellation fee, it had effectively refunded the security fee. The panel rejected that theory. "But a credit that Spirit reclaims immediately is no more of a refund than a credit that Spirit reclaims after 60 days," the opinion said.
On Spirit's due process argument that it lacked fair notice, the panel said the statute's plain text and the 2002 guidance provided sufficient notice. Spirit said it was unaware of the 2002 guidance before the audit, but Pryor wrote that in that case "Spirit should have assumed that the statutory default rule applied and that it had to remit any collected funds to the Administration."
Spirit also pointed to prior audits in which the TSA did not object to its practice and to similar petitions from other carriers. "[T]he Administration's past silence does not override the plain text of section 44940," Pryor wrote, adding that "many airlines managed to comply with the statute."
Circuit Judges Brasher and Abudu joined the opinion.