British Airways and Ryanair are under investigation over whether they breached consumer laws during the pandemic.
It concerns flights that were operating but customers could not take because they were not legally allowed to fly.
The watchdog has launched enforcement action into BA and Ryanair – and is concerned people have been left unfairly out of pocket because they were not given refunds.
During the pandemic BA offered vouchers or rebookings, while Ryanair provided the option to rebook on flights that operated but should only have been used for essential travel.
BA said it offered refunds for all flights that were cancelled and said this is an attempt by the government to punish an industry “on it’s knees.”
Legally, customers are entitled to a cash refund within 14 days.
‘Out of pocket’
The watchdog said: “The CMA is concerned that, by failing to offer people their money back, both firms may have breached consumer law and left people unfairly out of pocket.
“It is now seeking to resolve these concerns with the companies, which may include seeking refunds, or other redress, for affected customers.”
CMA chief executive Andrea Coscelli added: “While we understand that airlines have had a tough time during the pandemic, people should not be left unfairly out of pocket for following the law.
“Customers booked these flights in good faith and were legally unable to take them due to circumstances entirely outside of their control. We believe these people should have been offered their money back.”
The agency added that it should not be assumed either airline has broken the law.
‘Action will only destabilise industry’
A spokeswoman for British Airways said the company has issued more than three million refunds.
She added: “We continue to offer highly flexible booking policies at the same time as operating a vastly reduced schedule due to government-imposed travel restrictions, and we have acted lawfully at all times.
“It is incredible that the Government is seeking to punish further an industry that is on its knees, after prohibiting airlines from meaningful flying for well over a year now.
“Any action taken against our industry will only serve to destabilise it, with potential consequences for jobs, business, connectivity and the UK economy. ”
It comes after the CMA launched enforcement action against several package holiday firms, forcing them to agree to offer cash refunds to customers.
Last month, package holiday firms Teletext Holidays and Alpharooms agreed to hand back £7 million to customers who saw their holidays cancelled due to the pandemic.
It follows similar agreements made by LoveHolidays, Lastminute.com, Virgin Holidays and Tui UK, after thousands of customers complained that the companies had failed to refund them for cancelled trips.
The travel sector has been one of the hardest hit during the pandemic and has faced the most scrutiny from the CMA, which wrote to more than 100 firms reminding them of their responsibility to process all refunds within 14 days by law for any cancellations.
Additional reporting by PA.