The Civil Aviation Authority (CAA) has found major airlines owe “substantial backlogs” of consumer refunds and warned it “won’t hesitate to take enforcement action”.

The CAA reported the initial conclusions of a review of airline refund policies, launched in May, today.

The review followed a surge in consumer complaints at carriers’ failure to pay refunds for flights cancelled due to Covid-19.

The CAA said: “We do not expect airlines to systematically deny consumers their right to a refund and our review is considering whether further action needs to be taken.”

It concluded only “a minority” of airlines had paid refunds to consumers “in an acceptable timeframe during the Covid-19 suspension of travel.

However, the CAA noted “a marked improvement across most airlines” since commencing the review and said: “We expect this direction of travel to be maintained.”

Passengers are entitled to a refund for a cancelled flight within seven days of the cancellation.

The CAA reported it reviewed the refund policies of 18 airlines, including all UK carriers and a number of international airlines operating to and from the UK.

It divided the airlines into three groups according to their performance – those considered to be acting acceptably on consumer refunds, those needing to improve transparency and those needing to improve “processing time”.

The CAA gave no details of which airlines fell in each category, but said all the airlines had “confirmed to us they are now paying refunds”.

The second group, requiring greater transparency, “did not appear to be providing refunds at all”, the CAA reported.

But it said that, following its engagement with these carriers: “These airlines are all paying refunds [and] a number have introduced new systems for processing refunds.”

The CAA said of this group: “More work remains to be done to make clear to passengers they are entitled to a refund and show there is a straightforward process for claiming it.”

But the CAA would “allow these airlines a short period to make the necessary improvements before we reach a definitive view”.

The third group had “substantial backlogs of refund claims and are taking too long to process refunds” and “this group includes some major carriers”>

The CAA said it is seeking commitments from these airlines to speed up refund processing and it warned: “If performance does not improve in line with the commitments, the CAA will not hesitate to take enforcement action.”

The regulator noted it supports airlines offering vouchers and rebooking alternatives to consumers where these “make sense for the consumer”, but airlines must provide cash refunds to passengers who request them.

The CAA said it would continue to monitor the behaviour of all the carriers.

Which? Travel editor Rory Boland said: “This update from the regulator confirms what we have been highlighting to it for months – that airlines are continuing to disregard the law and withhold huge sums of money from their passengers during a time that has placed incredible stress on people’s financial and emotional wellbeing.

“The time for monitoring and performance reviews has long passed.

“Airlines have been breaking the law on refunds for months, and to delay action for any longer goes against the regulator’s claims to be on the side of consumers.

“We need to see urgent enforcement action to hold airlines to account, set a higher standard for the months ahead, and demonstrate that there are real consequences to breaking the law on refunds.”