Airlines can’t Afford to Give Refunds as 25 Million Aviation Jobs at Risk: IATA Counters Governments

Early this month, the US Department of Transportation directed airlines to give refunds for flights cancelled due to travel disruptions across geographies and several countries’ entry restrictions amid the Novel Coronavirus pandemic. In the enforcement notice issued on April 3, the DOT starkly reminded airlines of their ‘longstanding obligation’ to process quick refunds when airlines cancel confirmed tickets, or make a significant change in the flight schedule, or offer alternative flights that passengers choose not to accept. The chief of the European Union Transport sent a similar message telling airlines to reimburse travelers for flight cancellations in view of the COVID19 health emergency.

Needless to say, aviation is the first direct victim of the unprecedented circumstances triggered by the Novel Coronavirus outbreak. It has brought air travel to a standstill, thereby resulting in gradual depletion of revenues for airlines. In order to prevent the drying up of cash reserves, most airlines are issuing vouchers carrying flight credits for future travel, instead of giving cash refunds for cancelled tickets. DOT described it as airlines’ violation of the ‘refund against cancellation’ rules and stated that no such circumstances as the current stagnation of civil flight services should be an excuse for airlines to hold on to cash.

In a counter argument to the enforcement notices to airlines, the International Air Transport Association (IATA) has sought governments’ attention to the deplorable state of the aviation industry and requested help for airlines.  In its desperate messages to governments worldwide, IATA said unambiguously that airlines could not afford to refund hundreds of thousands of flight cancellations as millions of aviation jobs are risk.

IATA that represents 290 airlines in 120 countries, including the likes of Delta, Lufthansa and British Airways, said in its latest advisory that passengers should accept vouchers as global demand for air travel has plummeted by over 70% this quarter. “Refunding the cancelled tickets is almost unbearable for us,” said De Juniac, Director General of IATA. Refunds for the cancelled flight tickets worth $35 billion were due by the end of the second quarter. Either vouchers or open tickets are all airlines can give in view of the global travel downturn. All governments have been urged not to pressurize airlines for cash refunds.

Most airlines including Air India are offering to keep tickets of suspended flights and cancelled travel in the open status for use within 12 to 24 months from the date of original issuance. Open tickets can be used for rescheduled travel without paying the change of date fee. However, unused Lufthansa flight tickets can be used for rebooking until August 31, 2020. The COVID19 vouchers of Delta flight tickets are valid for two years through May 31, 2022. Delta vouchers carrying flight credits can be reedemed to rebook travel within May 2022.

Fees for change of travel dates in confirmed itineraries and charges for extra baggage weight are two major sources of revenues for airlines. Usually, airlines make USD3 billion from cancellation and change of date fees a year, which is currently waived for rebooking of COVID19-affected travels.