Spirit Airlines faced the liability after the Eleventh Circuit upheld a Transportation Security Administration determination that the airline improperly retained security fees from customers who received travel credits that later expired unused. The case centers on Spirit's practice of providing customers who cancel tickets with credits toward future travel that expire after 60 days, with Spirit keeping the full value—including the $5.60 security fee portion—as revenue when credits go unused.
Writing for a unanimous panel, Chief Judge William Pryor held that federal law requires airlines to remit all collected security fees to the TSA, regardless of whether customers actually travel. "Although only passengers owe the security fee, section 44940 contemplates the fee's collection from customers who later do not travel," Pryor wrote.
The court explained that while the statute distinguishes between "fees imposed" and "amounts collected," once an airline chooses to collect a fee—such as when selling a ticket—that "amount[] collected" becomes "payable to the . . . Administration" by the end of the following month.
The court firmly rejected Spirit's contention that expired credits qualify as refunds under TSA guidance, writing that "[e]xpired credits do not constitute a refund under the 2002 guidance." The opinion noted that "a credit that Spirit reclaims immediately is no more of a refund than a credit that Spirit reclaims after 60 days."
The dispute arose from a 2019 audit by U.S. Customs and Border Protection, which determined that Spirit "under-remitted . . . Security Fees" by retaining portions of expired credits. The audit calculated a liability of $2,838,849.11, which the TSA adopted.
The TSA had previously issued guidance in 2002 explaining that when passengers don't travel and tickets expire, airlines must either refund security fees to customers or remit them to the administration. Spirit challenged this interpretation, advancing two main defenses: that the TSA lacks statutory authority to collect fees from customers who don't actually fly, and that expired credits constitute proper refunds.
The airline also raised a due process challenge, claiming it lacked fair notice that expired credits wouldn't qualify as refunds under federal law. The court dismissed this argument, stating that "Spirit had fair notice that it could not retain the disputed funds" based on the plain text of the statute and 2002 TSA guidance.