It has roughly been three weeks now that airline policies have switched from paying out a cash refund to “protecting the value of your ticket” for future travel. While initially, it looked like a good idea to have this as an option for people as against locking in a date now for a future trip, which would have stemmed the cashflow requirements for airlines, many airlines, even those in good financial health, made it their default and only option.
The Government of India has given an advisory to the airlines to refund; however, it is not enforceable, and airlines have chosen to ignore it.
Turns out that the @DGCAIndia has issued an advisory to airlines last night to cooperate with the travelling public and help them with refunds etc in wake of #Covid_19. Who is following yet? We don’t know. Image via @awnusharma pic.twitter.com/D51SWEPgJQ
— Ajay Awtaney (@LiveFromALounge) March 13, 2020
In the USA and Europe, the regulators have driven a harder line, telling the airlines that
Airlines are looking at this as a Force Majeure event, citing their inability to operate as per schedule for no fault of their own. They are also pointing towards the Government, as per my discussion with a couple of airlines trying to cancel my tickets. Agents have been given zero leeway to consider the situation and offer options. The line is clear, take vouchers and come back later.
However, their friends in the industry, the travel agents and the online travel agents don’t seem to like this line of thinking, also mainly because this move is out of their hands, but they are the ones facing ire from the passengers.
The Internet and Mobile Association of India (IAMAI) issued a press release yesterday; the IAMAI justified why it is essential to make full refunds to the customers and not hide behind Force Majeure clauses. You can read the entire press release here, but here are some important points they make, italicized by me.
The Internet and Mobile Association of India [IAMAI] on behalf of the Online Travel Aggregators (OTAs) and the other travel tech services have taken strong exception to the proposal for ‘Force Majeure’ for airlines services. This follows the recent media report of certain quarters suggesting force majeure provisions for airlines sector in terms of its payments and dues to others, in order to protect the businesses in times of the ongoing crisis.
According to IAMAI, if airlines are allowed to not make refunds on grounds of force majeure, it will create significant downstream disruptions in the travel and tourism sector. Such a move may allow airlines to come out stronger but at the cost of destroying the downstream ecosystem affecting the livelihoods of millions.
The travel and tourism sector is going through one of its worse phase, with all present and future booking activities closed thereby stopping all incoming revenues; coupled with cancellations and demands for refunds which creates major cash flow challenges for everyone involved in the business. Customer refund is the top priority of most OTAs and airlines bookings are one of the most contentious one given the magnitude and complexities involved.
The association highlighted that there are over almost 2 lakh independent travel agents, tour operators, and online businesses and up to 7 lakh personnel working in the sector. This sector directly provides livelihood to over 9 lakh of personnel including self-employed entrepreneurs, on-roll employees, call center agents, retainers, insource and outsourced staff, women, and individuals working part-time from their homes as holiday expert. The entire ecosystem, often involving small entrepreneurs and self-employed can crumble if the airlines are allowed force majeure and avoid making payments that eventually percolate down to these agencies
I certainly do appreciate the views presented here. The rules of travel have traditionally been focussed on the asset owners, in this case, the airlines. Business is not done on a case by case basis, but instead, advances are put down in many cases to deal with the LCCs who are not on the IATA BSP and so on.
Customers have already borne the brunt of the shutdown of Kingfisher Airlines and then Jet Airways, and given the second one was just about a year ago, customers are on edge and would want their money back. Additionally, in such stressful times, they don’t want to be arm-twisted for no fault of their own, with their money on the hook with these airlines.
This is going to be an interesting one, and for once, there are no right answers. Everyone is thinking of this from their point of view. Airlines have leases to pay and salaries to pay, even though they won’t be flying these planes anytime soon. OTAs are at the receiving end for a product they sell, but they have no say in airline policies. They can’t even turn around one day and say because of how the airlines behaved right now, OTAs will blacklist them later, because airlines are the reason customers come to OTAs. And as quickly as there will be a sale by any airline, all the morals will be out of the window, and they will start gathering business again. Lastly, the customer, who is financing so many of these institutions which owe him a full-money-back, but is being consoled by the promise of travel later. Travel, he/she, may or may not want for days or months ahead.
If you were in charge of an airline, what would you do in this tricky situation?
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