Many of the world’s grounded airlines are receiving lavish government funding. The French and Dutch governments are giving Air France-KLM about €10bn. Dubai is injecting new equity into Emirates. The US is providing its airlines with $25bn of support.
But there is another group that has been even more generous. It includes me, possibly you and millions of others who paid for flights that were then cancelled because of Covid-19 and who are now struggling to get refunds. Together, we have made an involuntary, no-interest, unsecured loan to the world’s airlines.
How much have we lent? Alexandre de Juniac, director-general of the International Air Transport Association, says we have paid $35bn for flights that cannot now take place. The law is clear. We are entitled to our money. If our flight was meant to start or end in the EU, the UK, Switzerland, Iceland or Norway we are owed a refund. The US Department of Transportation says, too, that if your flight is cancelled, you are entitled to get your money back, even for tickets that were sold on the basis that they were not refundable. In the US and the UK, consumers and lawyers have launched or are thinking of starting legal action to recover their money.
Yet worldwide, many airlines are doing everything they can to avoid shelling out. A common tactic is to push passengers to accept vouchers instead of cash. In the UK, Rory Boland, editor of Which? Travel, the consumer journal, credits easyJet and Jet2 with helping customers with refunds, but he points to Ryanair and British Airways as trying to slip out of their obligations.
BA allows customers to claim a voucher online but makes them phone to claim a refund. Boland said Which? had received complaints from customers unable to get through to BA on the phone. An FT reader emailed me that he had been trying for nearly two weeks.
Then there are airlines that make refunds look easy but hang on to the money. Before the crisis, I had booked a Singapore Airlines return ticket to Australia. When the flight was cancelled, I went on to the Singapore website, swiftly located the refund button and provided my details. Three weeks later I phoned the airline’s call centre to ask how my refund was getting on. I had no trouble getting through to a polite customer service person who confirmed that my request was being processed. When would I get my money? He couldn’t say. Weeks, months, years? Sorry, can’t tell you.
There’s a good reason for the airlines’ recalcitrance, of course. Many are on the verge of bankruptcy. De Juniac said they employed 2.7m people directly. A further 65.5m worked in the aviation value chain. Many are losing their jobs. Airlines need to conserve their cash. But customers have cash needs too. So do businesses whose staff were booked to fly.
That airlines might go bust adds to the consumer worry. If they do, what are those vouchers worth? And if you were waiting for a cash refund, what are your chances of getting it? The European Commission last week suggested airlines make vouchers more attractive. They should consider offering vouchers worth more than the refund. Passengers should be allowed to transfer their vouchers to someone else. Vouchers should be valid for at least 12 months and, if unused at the end of that time, should be automatically redeemable for cash. Governments or the private sector should set up a scheme to guarantee the voucher’s value if the airline went out of business.
The EU hasn’t performed gloriously through the coronavirus crisis; its members have been cantankerous and self-serving. But these are constructive proposals. They provide some hope that the airlines’ unwilling creditors may eventually be compensated for the flights they booked.
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