Recently we’ve seen both the US Department of Transportation and European Commission clarify that cash refunds need to be provided to passengers in the event that flights are cancelled or schedules are changed significantly.
This has been a tough point for airlines, as many airlines have essentially claimed that they’d completely be out of cash if they had to provide cash refunds rather than vouchers for cancelled flights.
IATA’s argument against immediate flight refunds
The International Air Transportation Association (IATA) is the trade association representing about 290 airlines, or 82% of total air traffic. It’s an organization that essentially speaks on behalf of the industry.
IATA Tweeted to express disappointment at the US DOT’s ruling on flight refunds, arguing that it risks 750K jobs, each of which supports 13 additional jobs in the wider US economy:
We’re deeply disappointed by @USDOT ruling on issuance of vouchers for flight cancellations due to gov’t travel restrictions. This decision risks 750,000 #airline jobs, each of which supports 13 additional jobs in the wider US economy.
➡️ https://t.co/QmEoDtO8Ke pic.twitter.com/T97EkhcFlN
— IATA (@IATA) April 4, 2020
The Tweet links to a note by Alexandre de Juniac, President of IATA, and I’ll share the highlights here:
But there is a very harsh economic reality setting in. Airlines cannot cut costs fast enough. And with the $35 billion owed to travelers for flights that could not or cannot take place, airlines face an imminent depletion of the cash they need, not just to maintain employment, but ensure that they will be around to support the economic revival when the COVID-19 crisis is over.
Passengers have the right to get their money. They paid for a service that cannot be delivered. And in normal circumstances, repayment would not be an issue. But these are not normal circumstances. If airlines refund the $35 billion immediately, that will be the end of many airlines. And with that an enormous number of jobs will also disappear.
So what’s to be done?
The simple answer is that airlines need time. And that is why I am supporting airlines (and our partners in the travel and tourism sector) in their request for governments to delay the requirement for immediate refunds. We propose vouchers that could be used for future travel or refunded once we are out of this crisis period. This would buy the industry vital time to breathe—surviving the crisis so that they are ready to fly when better days arrive.
That’s our proposal to travelers. But it is not just their understanding that we need. Our travel agent partners are caught between the airlines and consumers. We are reaching out to them to create a structure for managing a voucher system that will be good for consumers, agents and the airlines.
I know that this is far from ideal. But the alternative is even worse. Without this flexibility, airlines will collapse, and jobs will disappear. Accepting a voucher or delayed refund today will mean that the airlines will be around for when we have our freedom to travel restored.
As you can see, his argument essentially boils down to:
- Travelers are owed $35 billion in refunds, but if airlines processed those refunds, many airlines would be out of business
- Passengers have the right to a refund, as they didn’t get the service they paid for
- Airlines need time, which either needs to come in the form of vouchers rather than refunds, or at least a delay in issuing refunds
- It’s acknowledged that this is far from ideal, but the alternative is even worse, and jobs will disappear if airlines collapse
- “Accepting a voucher or delayed refund today will mean that the airlines will be around for when we have our freedom to travel restored”
My take on IATA’s stance
I’ve said it before, and I’ll say it again — it’s wrong when airlines aren’t providing cash refunds when they cancel flights. It seems to me like theft to sell a product and then not even give people their money back when you don’t deliver. Never mind the fact that in many countries this violates the government regulations.
But I also think it’s important to acknowledge the reality of the situation, which is that many airlines either literally couldn’t afford to refund everyone in cash, and/or would be out of business within days if they did.
So where does that leave us?
- Some will say “too bad, that’s their problem,” and while I generally agree, the reality is that it’s also going to be our problem (globally), when governments around the world have to bail out airlines
- For those who don’t support any sort of bailouts, do we really want to potentially be in a situation where virtually no airlines globally are left? If this goes on much longer, that’s a very real possibility
But at the same time, why should airlines have the sympathy of passengers?
- US airlines are already getting government bailouts to the tune of tens of billions of dollars
- Why should individual consumers essentially be providing airlines with the liquidity needed to survive? It’s not consumers’ faults that airlines have already spent the money they took in from future tickets
- For airlines that do run out of cash, there’s a process for that — Chapter 11 — and isn’t that more appropriate than essentially stealing from customers?
- Customers will be quick to point out that airlines have almost zero mercy when it comes to flight refunds under normal circumstances, even if consumers can’t “afford” the change fees
- Why isn’t IATA at least openly advocating for airlines to greatly increase the validity of vouchers?
Ugh…
What happens when an airline refuses to issue a voucher or refund $?
AA canceled flights bought via BA, and BA won't do squat about it. The ticket was bought with an Amex Plat, so I'm hoping they can help.
Is there any hope of getting restitution of some kind?
many of you did great points, i think people should directly address this to him:
https://www.facebook.com/alexandredejuniacofficial/
perhaps another suggestion for IATA: now that oil has dropped, can we reduce the "fuel surcharges" back down ???
Can i suggest people to go to iata blog and leave comments? May he will realize his mistake
I have flights booked with easyJet for a now not happening trip to London at the end of the month and am gearing up for the ensuing battle to get my money back.
They are currently offering "free" changes (if the new flight is more expensive I have to pay the difference, if it's cheaper they keep the difference.) Alternatively, they are offering face value vouchers that can be used against one or more...
I have flights booked with easyJet for a now not happening trip to London at the end of the month and am gearing up for the ensuing battle to get my money back.
They are currently offering "free" changes (if the new flight is more expensive I have to pay the difference, if it's cheaper they keep the difference.) Alternatively, they are offering face value vouchers that can be used against one or more flights until the face value is used up, but they are only valid for 6 months from date of issue.
Neither of those options works for me for various reasons.
If they want to hang on to my money without providing the service I paid for then they need to let *me* choose how and when to spend it. Any voucher needs to be:
A) Valid indefinitely (no expiry date, ever);
B) Transferable (my travelling companions and I were fit, willing and able to travel when we booked and paid for our tickets but who is to say that will be the case later on?); and
C) Fully flexible, i.e. can be used for one or more flights up to the total face value (since I may not be able or want to travel to my original destination once travel is possible again.
None of this would cost the airline a penny and for them to impose restrictions on the way I can spend the money I gave them in good faith is very shortsighted in that it is going to drive me to seek the refund I am entitled to as opposed to leaving my cash in their hands.
Two weeks ago my salary ended. Zero. I want the cash that I paid for my JFK-HND flight on BA, the first leg of which was cancelled. What about my cash flow? Without making deposits in my bank account I can pay my bills forever. Why should I "lend" money to BA when I'm in the same cash situation?
Thanks, Lucky.
@Ham, CX from Hong Kong refuned every single trip I booked with them, including their budget airline, Hk Express.
Why vouchers? Another layer of accounting documents. Just extend the validity of your present ticket for another year. For a new ticket or final refund.
I understand airlines' stance but I'm not quite sure why should it be my problem. They are not my best friend, we have a business relationship. If they want me do them any favours, there needs to be some incentive (either my loyalty based on previous experiences, or a direct benefit offered by an airline, such as extra amount if I choose voucher).
I decide between the voucher and cash refund based on three elements:
I understand airlines' stance but I'm not quite sure why should it be my problem. They are not my best friend, we have a business relationship. If they want me do them any favours, there needs to be some incentive (either my loyalty based on previous experiences, or a direct benefit offered by an airline, such as extra amount if I choose voucher).
I decide between the voucher and cash refund based on three elements:
A) Likeliness that I will fly the airline in future, i.e. the route network.
B) Airline's financial strenght. I'm not leaving my money with an airline that might go bust by the time I fly with them again.
C) Customer service. If they treated me well in past, I will return the favour. Ironically, when airline makes it more complicated to get cash, I will become more likely to request it.
Since I'm European and most of my travel is within the EU, I'm legally entitled for a refund on all my reservations. Nevertheless, I was happy to accept a voucher from KLM and SAS - I'm confident I will fly with them again and I always found them customer-oriented. There were nice to me, so I will be nice to them (I know many would disagree about SAS, but I have only a good experience :)).
On the other hand, I requested a cash refund from CSA because they don't serve routes I normally fly, the airline sucks and I would not be surprised if they went bust in upcoming months.
For everyone advocating consumers paying to prop up airlines, I’ve got a better idea: how about you guys all get together and contribute to propping them up, while everyone else gets their refunds? Assuming big companies are irreplaceable and therefore must be saved by robbing their customers is not how capitalism works. Why not just let the state own it then?
If the airlines go under, someone will snap them up at fire sale prices, assuming the business is viable.
For all advocating the airlines be allowed to go under because of your hatred for them, why continue reading a travel blog if no flights will be there in the future? The airlines are forced to "cancel" flights because travel is restricted. They didn't put the restrictions in place. Yes, they took advantage of the last bail out and bought back shares for profits to the shareholders and execs. Yes, they have been cutting back...
For all advocating the airlines be allowed to go under because of your hatred for them, why continue reading a travel blog if no flights will be there in the future? The airlines are forced to "cancel" flights because travel is restricted. They didn't put the restrictions in place. Yes, they took advantage of the last bail out and bought back shares for profits to the shareholders and execs. Yes, they have been cutting back on service, on seat space, on loyalty programs. But face it, your company would do the same if business was going full speed. You don't need to offer the things you do in tougher times. Business goes in cycles and the customer gets to be driving things at times, the company drives things at times. Yes this bothers you, but no need for wishing them failure. We will need them and airlines don't pop up because one goes under.
What a lousy business model. To provide your flight services today, we have to use money that someone gave us for their flight tomorrow.
“Airlines can issue vouchers with no expiration date, but we make change and cancellation fees illegal for flights up until, say, 72 hours before takeoff.”
That’s called refundable fares. They exist today but hardly anyone books them. Aren’t we the ones who created the monster by demanding cheaper and cheaper travel?
The time to speak up was when airlines created luggage fees, cut meals and introduced 30’ seat pitch. But people accepted because $150...
“Airlines can issue vouchers with no expiration date, but we make change and cancellation fees illegal for flights up until, say, 72 hours before takeoff.”
That’s called refundable fares. They exist today but hardly anyone books them. Aren’t we the ones who created the monster by demanding cheaper and cheaper travel?
The time to speak up was when airlines created luggage fees, cut meals and introduced 30’ seat pitch. But people accepted because $150 transcon is so nice to have.
If you think better and stronger airlines will emerge after bankruptcies: those already happened after 9/11 and what emerged is what we have now.
While I agree that the airlines have made their own bed here, pragmatism is required if they are to survive - important to the global economy.
How about a voucher that is offered rather than forced on consumers, structured as follows:
- no expiry
- pays interest at 10% about some agreed reference rate
- airlines can redeem at will
Having a penal rate will encourage airlines to redeem the vouchers...
While I agree that the airlines have made their own bed here, pragmatism is required if they are to survive - important to the global economy.
How about a voucher that is offered rather than forced on consumers, structured as follows:
- no expiry
- pays interest at 10% about some agreed reference rate
- airlines can redeem at will
Having a penal rate will encourage airlines to redeem the vouchers as soon as they can afford to as they will be a much more expensive form of debt.
I will be prepared to take the risk on their solvency as the rate is high.
@Jake
Made a lot of sense. I stopp6 reading after that. Too many folks who read this blog need to wake up and smell the coffee.
Flying is expensive?
Compared to what, please tell me.
50 years ago, with regulated airlines, one could fly Seattle to NYC for about $200. Yes, you got two free bags.
Jet fuel was probably 25 cents a gallon.
Before this crisis, I was checking Seattle...
@Jake
Made a lot of sense. I stopp6 reading after that. Too many folks who read this blog need to wake up and smell the coffee.
Flying is expensive?
Compared to what, please tell me.
50 years ago, with regulated airlines, one could fly Seattle to NYC for about $200. Yes, you got two free bags.
Jet fuel was probably 25 cents a gallon.
Before this crisis, I was checking Seattle to NYC RT on a basic fare, meaning you must pay for your bags was about $250, main cabin fare about $370.
I could drive the same route, if I only counted the cost of fuel, that would be
6,000 miles / 30 mpg x $2.50/ gal = $500.
Maybe walking would be cheaper, but only if I didn't eat or sleep for a couple of months.
They got the bailout, they gotta hand over the refund.
I want more news about the airlines that actually treated their customers decently. Japan Airlines, ANA, Singapore, etc. Are they pulling this shenanigans too or what?
Airlines, listen up! In amongst this thread are some excellent suggestions from readers that will not only let you have the money that future passengers have lent you but will assure you of a reliable passenger base going forward. But no, greed overcomes you. Look at Air Canada's attitude. Minimal flexibility from you but you want maximum flexibility from your fare-paying customers. To hell with you, your share buybacks, grotesque executive comp, surly 'service' (I...
Airlines, listen up! In amongst this thread are some excellent suggestions from readers that will not only let you have the money that future passengers have lent you but will assure you of a reliable passenger base going forward. But no, greed overcomes you. Look at Air Canada's attitude. Minimal flexibility from you but you want maximum flexibility from your fare-paying customers. To hell with you, your share buybacks, grotesque executive comp, surly 'service' (I am talking here about NA and European carriers).
Why not give travelers the choice of a refund or a voucher with a higher value than the original tickets. Give us a real incentive to not request a refund, not the 50 euro Lufthansa Group is offering you, but something of real value to encourage people to travel again.
@Paul
Great, now we can say goodbye to those employees who think they can have job security even if they perform poorly on the job too. Two birds, one stone. Better to force the issue now and possibly get a credit card chargeback or an actual refund rather than waiting until they go bust and be way past the point at which you can get a chargeback.
@Matt Fortini
This is not an...
@Paul
Great, now we can say goodbye to those employees who think they can have job security even if they perform poorly on the job too. Two birds, one stone. Better to force the issue now and possibly get a credit card chargeback or an actual refund rather than waiting until they go bust and be way past the point at which you can get a chargeback.
@Matt Fortini
This is not an interest-free loan, it's worse. Some percentage of the voucher users will end up not using their voucher, which means they are getting a negative interest loan, when you look at the entire customer base. And you have to take the substantial counter party risk of the airline going under and paying nothing on your loan.
Absolutely bonkers. There should be a lesson here, and it should not be "if you're big enough you just get bailed out by everyone and can steal from your customers". You can PLEAD with your customer and BEG them to not refund the ticket, but you CAN'T just STEAL it.
In bankruptcy, the priority will be those union contracts, pension obligations. Force the issue now and your refunds are toast as they are very low on the priority list. Rant all you want, those results will actually work, financially, against you. The wokeness of the replies here is not surprising.
Agreed!
I highly doubt if these airlines go into bankruptcy we will have no more airlines. Typically shareholders, union contracts, pensions, and anyone whom they still owe money to get hosed and that would include people who gotten airline vouchers.... we are not stupid. Cash is king. Take your refunds NOW. Don’t get hosed.
How does a non-US airline use Chapter-11, then ? !
I'd be somewhat sympathetic, except that currently the vouchers I'm being offered are for very-short duration, and there's absolutely NO guarantee that when I try to use them, the airfares won't have been ramped-up significantly, so that I shall be on-the-hook for a lot more money, just to fly the route which I've already paid-for.
And who guarantees that the airline will remain in-business, after...
How does a non-US airline use Chapter-11, then ? !
I'd be somewhat sympathetic, except that currently the vouchers I'm being offered are for very-short duration, and there's absolutely NO guarantee that when I try to use them, the airfares won't have been ramped-up significantly, so that I shall be on-the-hook for a lot more money, just to fly the route which I've already paid-for.
And who guarantees that the airline will remain in-business, after I've accepted their credit-note, for travel sometime in the future, eh ?
Viking cruise line offers full refund of cancelled cruises ...or...125% value for future cruise credit with 2 yr expiration! If I pay cash & you cancel...give me my cash back...or...let me CHOOSE to get a voucher refund ...& in an attractive time line...minimum 2 yrs. DON’T make me pay for something I don’t get...THAT’S what I call stealing!
Option: Choose a voucher that has fewer restrictions, i.e. no expiration, 20% bonus when applied, change to cash refund after 12 months. Or refund the money NOW. Frankly, if they go bankrupt, the main loss to consumers would be the miles programs/elite status. The assets (planes, support equipment, pilots, flight attendants, support staff) will all be available after a bankruptcy.
Matty my boy you suffer from greed and grandiosity. Of course you care about your money. You wouldn’t be complaining if you didn’t. You most likely work for a bank or a car company and were very eager to get your bailout in the last downturn (a situation your industry created). The airlines did not cause this virus or your dishonesty. You’re not getting your money back. Too bad! Get over it and quit your complaining.
Iata misses the whole point, the opportunity cost of money. If they want time, buy it! Instead i feel his argument comes off very entitled. I think turkish is doing it the right way and i am happy to buy a ticket from them, you can change your ticket or you can turn it into miles or you can get 10% increase in value if you change it to voucher, why do arilines think that...
Iata misses the whole point, the opportunity cost of money. If they want time, buy it! Instead i feel his argument comes off very entitled. I think turkish is doing it the right way and i am happy to buy a ticket from them, you can change your ticket or you can turn it into miles or you can get 10% increase in value if you change it to voucher, why do arilines think that they are so special ? Because they can lobby governments? Only when passengers and airlines stand equally can we think of helping each other like good friends. As of now, airlines dictate our relationship and that is exactly why many people are not happy about keeping their money to save them. Airlines need to change their attitude first. Until then let them die and learn from their mistakes.
I think IATA needs to think about what will happen to customers if their proposal went through.
Airlines have consistently been making the customer experience worse in general while finding additional ways to extract more revenue.
If I am issued a voucher, there is no guarantee that it will be able to buy me a ticket with the same experience as of today for the same route. With airlines downsizing and probably wanting...
I think IATA needs to think about what will happen to customers if their proposal went through.
Airlines have consistently been making the customer experience worse in general while finding additional ways to extract more revenue.
If I am issued a voucher, there is no guarantee that it will be able to buy me a ticket with the same experience as of today for the same route. With airlines downsizing and probably wanting to make up for lost revenue, who knows where ticket prices will be a couple months down the line.
Again, consumers and smart businesses should always plan for the unexpected (at least that’s what I’ve read from a lot of financial planners).
I think there’s always room to compromise but in general if you’re not getting the goods or services you paid for, I think it’s a given that you deserve your money back.
Don't worry, Mikey. I'm not getting any government grant or loan, I've taken a huge pay cut as a partner in my firm to make sure we can keep everyone on during this crisis.
I don't care about my money as such. But I do care about not subsidizing their grossly incompetent management, and our cash should take priority over your miles.
Let them fail. Sue the management team if you must. Give us back our money, we're not a bank.
How many of the people who are so opposed to letting the airlines survive have no problem skipping their rent, mortgage payment, or credit card payment. How many of these people are collecting unemployment even though they were self employed. How many are getting small business grants and loans that they would not qualify for. They should show the same tolerance they expect to be shown!
John H
Having seen airlines go under before, after 9-11 - Sabena and Swiss - no-one got refunds. Chapter 11 untrue statement about small people getting their money back. That did not happen on the companies I looked at in 2003 and 4. Everyone got hosed.
The airlines need to be forced to sell all the buy back shares, before a bailout, and that money put towards employee payroll.............and then locked in untouchable pension funds.
If they go bankrupt then maybe they will think twice about baggage fees and change fees etc
I wonder if we'll go back, at least at the beginning of the recovery/reorganization/bankruptcy/etc., to a time when traveling was reserved only for people with money and it was too expensive for regular folks. It behooves airlines to make travel accessible for all in order to go back to making profits and the levels of travel that they had pre-crisis, but I wonder if leisure/vacation travel will be challenging for regular people (aside from people...
I wonder if we'll go back, at least at the beginning of the recovery/reorganization/bankruptcy/etc., to a time when traveling was reserved only for people with money and it was too expensive for regular folks. It behooves airlines to make travel accessible for all in order to go back to making profits and the levels of travel that they had pre-crisis, but I wonder if leisure/vacation travel will be challenging for regular people (aside from people being financially impacted by loss of jobs, etc.).
I have to say IATA is a freaking fool that suggests ppl to buy meat if they cudnt afford rice: we are not in the same shoe, at all. Just think about numerous ordinary ppl who are also suffering. Why should we pay for such greedy and indifferent industry?
Maybe in the future air carriers will be more tightly regulated in what they can do with advance purchase funds. I would propose that they be treated like funds in an escrow account which cannot be used for operating expenses until the service has been delivered -- like bank deposits or real estate purchases. Instead it appears airlines are spending tomorrow's dollars on today's services, a risky business practice at best in any industry.
@Janet,
I have to respect you for your sheer chutzpah: if it weren’t for those greedy, selfish consumers who got refunds they didn’t really need, those with real need could have refunds. Bravo!
You’re the only one I’ve seen who has actually managed to blame the victims here. You’re argument can be summarized thusly: support my criminal enterprise by allowing us to commit further criminal acts or you’ll be sorry! LOL.
Enough of this...
@Janet,
I have to respect you for your sheer chutzpah: if it weren’t for those greedy, selfish consumers who got refunds they didn’t really need, those with real need could have refunds. Bravo!
You’re the only one I’ve seen who has actually managed to blame the victims here. You’re argument can be summarized thusly: support my criminal enterprise by allowing us to commit further criminal acts or you’ll be sorry! LOL.
Enough of this nonsense. The airlines will go bankrupt, they’ll reorganize the very next day and start flying. But taxpayers do not need to bail them out by allowing them to flout the law and fleece consumers.
No pity at all.
Update: I just called Air Canada to discuss flights which were cancelled. I offered them 2 options: Put me on the same route with same class of service in next 3 months. Refused (very nice and polite agent - I feel sorry for them). Put me on United which is a partner airline and has super cheap fares compared to what I paid one month from now. Also refused stating that they have to be...
Update: I just called Air Canada to discuss flights which were cancelled. I offered them 2 options: Put me on the same route with same class of service in next 3 months. Refused (very nice and polite agent - I feel sorry for them). Put me on United which is a partner airline and has super cheap fares compared to what I paid one month from now. Also refused stating that they have to be Air Canada flights. They offered either a voucher or for me to pay a difference in fare in the future (they would waive change fees). These options are not palatable so I have requested a refund through the website. Let's see if/when it goes through.
Why should I play bank to an airline? I'm not getting what I paid for, and in return I get a crappy voucher that expires in six months?
No way.
Let them go bankrupt. Nobody _needs_ to fly. Let them go bankrupt now, let shareholders lose their money and the mileage grifters lose their miles, start over.
But first? Give me back my g*ddamn money. This is theft, and it's NOT my...
Why should I play bank to an airline? I'm not getting what I paid for, and in return I get a crappy voucher that expires in six months?
No way.
Let them go bankrupt. Nobody _needs_ to fly. Let them go bankrupt now, let shareholders lose their money and the mileage grifters lose their miles, start over.
But first? Give me back my g*ddamn money. This is theft, and it's NOT my responsibility to provide liquidity for you people's miles and shares. The greed is un-be-lievable.
So IATA believes that by allowing airlines to keep passengers money in exchange for a voucher would stop the airlines from filing for bankruptcy? No No No - it may only DELAY bankruptcies, but it will certainly not stop bankruptcies.
IATA as an organisation represents airlines - not consumers.
10 million workers who have recently lost their jobs need their mney back. Consumers must be the priority, not shareholders of airlines.
The airlines need to figure their own legal way out. Either try to raise money through the capital market, and/or convince consumers (or at least most of them if not all) to keep their money in the airline through promotions like a never expiring voucher with a “bonus” on top. If a 10% bonus isn’t enough keep offering more, sort of like how getting people off a over sold flight works.
This is how capitalism...
The airlines need to figure their own legal way out. Either try to raise money through the capital market, and/or convince consumers (or at least most of them if not all) to keep their money in the airline through promotions like a never expiring voucher with a “bonus” on top. If a 10% bonus isn’t enough keep offering more, sort of like how getting people off a over sold flight works.
This is how capitalism works.
And when raising the “big picture” argument of us needing international airlines, consider the “even bigger picture” argument of bailouts hurting the entire system of capitalism.
Maybe I would be satisfied if the airlines incentivized me to take a voucher. E.g. give me a 20% bonus for choosing a voucher over cash. Otherwise they just want their cake and to eat it too. Or they can take loans to pay consumers back. No sympathy here.
Too bad, so sad. Airlines never seemed to listen to customers in the past, why should customers care now? If that means limited ability to move around globally in the future, oh well. The industry will be rebuilt eventually.
~ The Honorable Reginald
My take on this is it's shell game or a house of carsd collapsing.
Airlines have been relying on and spending FUTURE flights prepaid revenue on today's expenses, bonuses, and dividends. Shame on them.
Now is their day of reckoning.
Never fear, they will learn absolutely nothing and fall into the same pattern again once they sell the very first post-covid ticket.
@Stuart — In practice, in chapter 11, small claims (under $1,000, or under $10,000 depending on the case) are paid in full. If your claim is impaired in bankruptcy, you have certain procedural rights, and just to make the process go faster, small claims are paid in full to avoid the cost of giving those procedural rights to everyone who’s owed a small amount. In addition, as a practical matter, they’d probably elect to repay...
@Stuart — In practice, in chapter 11, small claims (under $1,000, or under $10,000 depending on the case) are paid in full. If your claim is impaired in bankruptcy, you have certain procedural rights, and just to make the process go faster, small claims are paid in full to avoid the cost of giving those procedural rights to everyone who’s owed a small amount. In addition, as a practical matter, they’d probably elect to repay passengers in full (even those holding tickets worth more than $10,000) because of the bad will that would be generated in future operations if passengers take on losses. So the bankruptcy scenario is unlikely to harm passengers. Also note that, in the past, airlines have reaffirmed their mileage programs in bankruptcy.
@Lucky — Agree with @Ryan, although I think it’d be even more seamless than he thinks: Bankruptcy would wipe out shareholders; it wouldn’t mean that the airlines cease functioning entirely. The existing airlines would continue operating, but with their shareholders wiped out (and probably pensions would be offloaded to the government, and union contracts would be rewritten to be less generous). The bondholders would have their bond claims extinguished and instead they’d be the new shareholders with equity in the new airline. Delta, AA, UA can keep flying at that process continues. On some level, it’s very unclear whether they can steer through this crisis without bankruptcy because it’s likely to take a few years before travel recovers fully to pre-COVID levels. The federal bailout would need to be a lot more generous to get them all the way through until there's a vaccine. You're not likely to see huge travel demand until everyone's vaccinated and feels there's no more risk from the virus.
@Marci — In today’s modern economy raising capital is pretty easy to go. Worldwide there’s a savings glut, which is part of the reason bond returns have been so low. It’s not that hard for companies to raise capital.
@Janet — People need the money right now too, not just airlines. Many passengers who bought an airline ticket have lost their jobs or seen a decrease in income. Everyone needs to look out for themselves, and if you have extra money for charitable giving purposes, the airlines don’t really rank as a place that is most deserving of that. Why not take your refund and give the money to poor communities that are ravaged by the virus? Public hospitals that can’t even provide sufficient protective equipment for doctors and nurses risking their lives? Those heroes need the support much more urgently.
How much cash do the CEOs of all airlines that IATA is representing have combined? I'm talking liquid cash that is their personal assets? Would it add up to $35 billion USD? If so why don't they pool it and use that as an interest free loan to their airlines that allows customers to get their money back and airlines to survive.
There is a much greater chance that the CEOs can afford to...
How much cash do the CEOs of all airlines that IATA is representing have combined? I'm talking liquid cash that is their personal assets? Would it add up to $35 billion USD? If so why don't they pool it and use that as an interest free loan to their airlines that allows customers to get their money back and airlines to survive.
There is a much greater chance that the CEOs can afford to spend $35b and not starve versus a lot of their customers that won't be able to pay their bills using an airline voucher.
My main thing is, that even if authorities or passengers are OK with vouchers, the airlines are probably already planning these voucher with the intent to screw up passengers as soon as they exit the crisis. Be it too short validity, too hard to use the vouchers, etc... I'm sure there is a bean counter in the airlines already sketching plans to exit the crisis without the liability of all the vouchers they owe to...
My main thing is, that even if authorities or passengers are OK with vouchers, the airlines are probably already planning these voucher with the intent to screw up passengers as soon as they exit the crisis. Be it too short validity, too hard to use the vouchers, etc... I'm sure there is a bean counter in the airlines already sketching plans to exit the crisis without the liability of all the vouchers they owe to passengers. Airlines showed passengers over the years to have ZERO reasons to trust them. How many passengers has to actually print out DOT regulation to show the airlines when they try to skirt their responsibility?
I’m easily please and an email for a senior manager stating, sorry and this is the current situation, we are working hard to resolve the back log and will be in touch again on xxxx date may well be enough.
BA responses or lack of them show me they are not concerned about the customer just the cash they have in the bank.
Who do you fly with when this is all over though....
Since they are using passenger's fare as loan for liquidity, maybe they should convert into bonds. Yes, some people need money back now, but at least it earn interest. Also some might be willing to buy these bonds, so someone with these "bonds" might get money back they need by selling them.
People are out of work because of the virus and they need the refund to keep their households running. Sorry airlines, you have options to reorganize and/or get government bailouts. Won't be the first time they've done it, certainly not the last either.
uwu I’m just a wildly profitable airline with anxiety uwu
I have sympathy for airline employees but airlines brought this on themselves. They spent advances given by customers on paying shareholders before flights were complete. Then they got bailed out multiple times with taxpayer money. Now they want customers who remember how badly they were treated to give them an interest free loan on top of all this? I think airlines should publicly apologize for mismanagement and offer the choice of refunds or increased amount...
I have sympathy for airline employees but airlines brought this on themselves. They spent advances given by customers on paying shareholders before flights were complete. Then they got bailed out multiple times with taxpayer money. Now they want customers who remember how badly they were treated to give them an interest free loan on top of all this? I think airlines should publicly apologize for mismanagement and offer the choice of refunds or increased amount on vouchers.
What staggers me is the lack of reality in the above comments. “Airlines” might be faceless brands, but powering those brands are 750k jobs providing homes, paying mortgages, feeding children.
This is a major global crisis-not one nasty airline cancelling your flight for some preventable reason. The vast majority of people reading this blog would find easy use of a refund voucher. Instead, you’ll chase cash and risk hundreds of thousands of jobs.
...What staggers me is the lack of reality in the above comments. “Airlines” might be faceless brands, but powering those brands are 750k jobs providing homes, paying mortgages, feeding children.
This is a major global crisis-not one nasty airline cancelling your flight for some preventable reason. The vast majority of people reading this blog would find easy use of a refund voucher. Instead, you’ll chase cash and risk hundreds of thousands of jobs.
Let’s hope it’s not your job on the line next.
So if the refund issue is forced by govt, the airline declare Chapter 11. Debt get written off, ie your refunds, your frequent flier miles. Airlines get to reorganize, usually with same stockholders. Be very careful what you wish for. The refunds at the end of an extended period, say Dec 2021, seems the best solution. Customers who want to travel can. Those that don't get their refund then.
Better than the - let them die attitude- which I find crazy.
Should have spent less money on avcoado toast buffets and more on saving for a rainy day.
If not for their predatory past of levying numerous restrictions, conditions and time clocks not to mention the hassle of even using a voucher, which before recently involved, in some cases, going to the airport to book a flight in order to use one, one might not be bothered with the idea of a voucher for future use. The real intent of these vouchers was to make them nearly impossible to use. Before Coronavirus, I...
If not for their predatory past of levying numerous restrictions, conditions and time clocks not to mention the hassle of even using a voucher, which before recently involved, in some cases, going to the airport to book a flight in order to use one, one might not be bothered with the idea of a voucher for future use. The real intent of these vouchers was to make them nearly impossible to use. Before Coronavirus, I avoided vouchers, how can I possibly be comfortable with one now? The airlines own this. They want us to trust them when they have a proven track record of not being trustworthy. If there comes a time in the future after we all get through this nightmare together, the air travel industry cleans up its behavior, then maybe they can rebuild consumer trust. No mercy in the meantime. Get your cash everyone!
@ Ben -- The airilnes' problems should not be made our problems. They owe us money for services not rendered. The IATA is out of their minds. Go steal from someone else.
The bailout provides free money to the airlines - that should be sufficient to keep them afloat.
As many others have suggested, a much better solution would be for the airlines to offer vouchers that don’t expire and have a higher value eg 125-200% of Original fare. That would incentivize customers to agree to loan them money instead of requesting cash refunds.
This pandemic and the economic turmoil have created a chilling effect on non-cargo civilian aviation. The aviation industry is going to contract severely. Everything from small FBOs and flight schools to the largest carriers will have eye watering financials in the red. People in the industry will find themselves out of work and will probably need to find careers in other fields. Some pilots I follow on social media are contemplating hanging up their wings...
This pandemic and the economic turmoil have created a chilling effect on non-cargo civilian aviation. The aviation industry is going to contract severely. Everything from small FBOs and flight schools to the largest carriers will have eye watering financials in the red. People in the industry will find themselves out of work and will probably need to find careers in other fields. Some pilots I follow on social media are contemplating hanging up their wings and exercising their backup degree they got in college.
Airlines will collapse. The worst managed ones that grew too fast will die. Better managed ones that treat employees and customers right, and don't start up vanity routes and purchase new shiny planes with the latest features will survive.
Perhaps a compromise: Airlines can issue vouchers with no expiration date, but we make change and cancellation fees illegal for flights up until, say, 72 hours before takeoff.
How about a voucher that pays interest? Or even a bank of fee waivers for customers that get used in the future? If we're going to lend them the cash that they used for stock buy backs, we should be the creditors and get paid properly.
Airlines didn't create this mess but confiscating customers money is illegal and should remain illegal. Instead, which is what I said on Flyertalk several months ago when my Cathay Pacific flight was cancelled due to coronavirus that airlines should let customers reschedule their flights until the end of the schedule with no fare difference in the same class of service. If that does not work fro the customer, then offer the customer a voucher valid...
Airlines didn't create this mess but confiscating customers money is illegal and should remain illegal. Instead, which is what I said on Flyertalk several months ago when my Cathay Pacific flight was cancelled due to coronavirus that airlines should let customers reschedule their flights until the end of the schedule with no fare difference in the same class of service. If that does not work fro the customer, then offer the customer a voucher valid for a minimum of 24 months and it really should be 36 months and provide them with a bonus of 10%, 15%, or 20% depending on the cost of the fare and/or class of service. Plus if the customer doesn't use the voucher in this time frame then issue a full refund to the original form of payment. If neither of these options work then let the customer get a refund.
Most customers will likely use the voucher and find one of these options attractive. Sure it may depress future yields but let's be realistic. Yields are going to be depressed for the next 6 to 12 months at a minimum IMO.
If the major worldwide airlines offered refunds in miles at a penny a mile for instance, they'd get a lot of takers. That would help a lot and the customers would be happy as well. Win/win.
Same old scare-mongering tactics the banks used in the last financial crisis. Let the airlines go under. Stronger, better managed airlines will arise from their dust.
IATA describes the tough reality. If consumers wants to fly after the virus crises, they should accept the vouchers. Otherwise there will be no airlines left, or at least no cheap flight tickets anymore.
And same applies for any other hotel/travel/service/entertainment. These are exceptional circumstances, it is imposible to give monetary refunds to everyone. Actually if those who do not need the money immediately for food would have been able to realise this and...
IATA describes the tough reality. If consumers wants to fly after the virus crises, they should accept the vouchers. Otherwise there will be no airlines left, or at least no cheap flight tickets anymore.
And same applies for any other hotel/travel/service/entertainment. These are exceptional circumstances, it is imposible to give monetary refunds to everyone. Actually if those who do not need the money immediately for food would have been able to realise this and accept the vouchers, those who really needed it could have been refunded. But no, hundreds of people applied for monetary refunds at the same time, no surprise this happened... I am honestly outraged by the lack of comprehension and compassion of people. You loose your pocket money for a trip while others (in the travel industry and elsewhere) loose their jobs, more unfortunate people loose their life.
They should all pool together to Issue IATA vouchers valid on all airlines
This idea of "let the airlines die, the market will create new ones" is completely blinkered thinking paired with blind faith in the "invisible hand of the market".
Starting up an airline is orders of magnitude more difficult than starting up, say, a restaurant. The capital outlay costs alone exclude most entities, and the complexity excludes most others. Factor in the loss of the efficiency of scale the current airlines enjoy and travelers will end...
This idea of "let the airlines die, the market will create new ones" is completely blinkered thinking paired with blind faith in the "invisible hand of the market".
Starting up an airline is orders of magnitude more difficult than starting up, say, a restaurant. The capital outlay costs alone exclude most entities, and the complexity excludes most others. Factor in the loss of the efficiency of scale the current airlines enjoy and travelers will end up paying significantly more for a less reliable product. Saying that new smaller airlines could provide anything close to the network we have now is like saying that because companies exist that can build private toll roads, it's no big loss if someone dynamites the CONUS interstate system.
Also, it's worth pointing out that in this "let them all go bankrupt" scenario, whatever salary or pension wins the various employees of the airlines have won over the years will be voided, while the executives will still be taken care of. They always are. Some of them will probably be the ones to buy up the pieces of those airlines at bargain basement prices.
I understand wanting to put the screws to the C-suite jackals whose profit-squeezing behavior left the airlines in such a precarious liquidity position, but all the wrong people end up getting hurt without a responsible, level-headed approach to this crisis.
My pie-in-the-sky suggestion would be to regulate the airlines as one does a utility, eliminating the massive profiteering incentive and forcing them to reinvest all their income into the company.
I have so little sympathy for an industry that built its profits on gouging customers with stupid fees for ticket changes that would have cost the airline nothing. Seems to me that if airlines want to effectively borrow money from me by not giving me a refund, then it owes me a premium. Offer me a more valuable voucher and maybe I’ll accept that instead of a cash refund.
I stand to lose my miles in a bankruptcy (unless a buyer decides to honor those miles as a goodwill effort to retain frequent flyers). Nevertheless, Why should I feel concern for an airline that never bends their rules and even now offers limited time restrictions on everything they do. Yes, I also mean you, Delta. You might have great PR but I pay my fees every year and you barely allow any use of...
I stand to lose my miles in a bankruptcy (unless a buyer decides to honor those miles as a goodwill effort to retain frequent flyers). Nevertheless, Why should I feel concern for an airline that never bends their rules and even now offers limited time restrictions on everything they do. Yes, I also mean you, Delta. You might have great PR but I pay my fees every year and you barely allow any use of a companion certificate, barely extended now also. LOL.
The law is clear. If you really can't continue as a going firm and pay your legal debt then declare bankruptcy. This is not likely because then shareholders and executives will lose.a. lot.
So again, Why should ticketed passengers lose when entitled to a refund but the owners keep their property.
Airlines will always exist in some form, have no fear.
"Do we really want to potentially be in a situation where virtually no airlines globally are left?"
You can't honestly believe that would occur. Do you really think that if, for example, the big 3 went under nobody would launch a new airline? Heck, they'd probably launch 3 'new' airlines with the exact same branding after buying the assets from bankruptcy.
We get new airline launches every year, even when it's clear the market is...
"Do we really want to potentially be in a situation where virtually no airlines globally are left?"
You can't honestly believe that would occur. Do you really think that if, for example, the big 3 went under nobody would launch a new airline? Heck, they'd probably launch 3 'new' airlines with the exact same branding after buying the assets from bankruptcy.
We get new airline launches every year, even when it's clear the market is saturated. If the market was wide-open due to mass bankruptcy, we'd have more new airline announcements than we know what to do with.
The real question is "Do we really want to potentially be in a situation where virtually no existing airlines survive?" and frankly I'm fine with that.
Proposal is simple (for me at least):
You can’t provide the service
You don’t want to refund
You’re at fault
You have to be flexible, not the customer.
Meaning same routing , same passengers, same class of travel, valid for 18 months(if available).
You can’t ask people to pay for a rate difference if you mess up. Really
There's a few other options that would be seen as a compromise but airlines aren't willing to take. For one, they can issue vouchers that don't expire and can be used for any passenger, much like gift cards.
Airlines had the 9/11 for airline management to create some "sovereign fund" in case of emergency. For other crisis will come, they always have, even at 50 years distance.
Instead, they pocketted money from bailouts, without issuing shares.
Instead, they gave billions to shareholders and management.
Instead, they spent billions in buybacks.
Let them solve their lack of foresight with private capital.
That in turn may teach them finally to internalize systemic...
Airlines had the 9/11 for airline management to create some "sovereign fund" in case of emergency. For other crisis will come, they always have, even at 50 years distance.
Instead, they pocketted money from bailouts, without issuing shares.
Instead, they gave billions to shareholders and management.
Instead, they spent billions in buybacks.
Let them solve their lack of foresight with private capital.
That in turn may teach them finally to internalize systemic risks better.
They have been milking the public one way or the other, and not just by devaluating FF programs...
And they want to keep customers hostage ?
What kind of responsible management is this ?
These are Wild West thugs, IATA included.
If I am not mistaken, and I might be, the alternative of the airlines filling Chapter 11 under these circumstances would create a scenario where passengers holding these tickets would, if lucky, get 10 cents on the dollar.
I would say the IATA assessment is pretty accurate and straight forward. There is no pretty solution to this. But certainly I can see regulations coming in the future that airlines will need to maintain a...
If I am not mistaken, and I might be, the alternative of the airlines filling Chapter 11 under these circumstances would create a scenario where passengers holding these tickets would, if lucky, get 10 cents on the dollar.
I would say the IATA assessment is pretty accurate and straight forward. There is no pretty solution to this. But certainly I can see regulations coming in the future that airlines will need to maintain a certain level of reserve cash so as to issue refunds under catastrophic scenarios like we see.
Give me a 20-year valid voucher, on any operating flight on my route at the same class of service, with no additional cost or fees, regardless of 'market cost' at the time of flight, and I'll consider it. Until then, absolute refund.
Crocodile tears!
I feel no pity for an industry that has gouged consumers, mistreated passengers and used record profits to line the pockets of stockholders and management.
They’ve painted themselves into a corner and that’s their excuse for illegally confiscating consumers’ cash? It’s dishonest and disingenuous and it only confirms that they’re untrustworthy.
By the way, there’s no need to bail out airlines. Let shareholders take the loss and then, if necessary, governments...
Crocodile tears!
I feel no pity for an industry that has gouged consumers, mistreated passengers and used record profits to line the pockets of stockholders and management.
They’ve painted themselves into a corner and that’s their excuse for illegally confiscating consumers’ cash? It’s dishonest and disingenuous and it only confirms that they’re untrustworthy.
By the way, there’s no need to bail out airlines. Let shareholders take the loss and then, if necessary, governments can take an equity stake in these businesses.
Ok, but think about this...
If I have to pay the bank but I can't, they'll kick me out with the police and sell everything I have, they don't care. But if they can't pay, they get a free ticket?
Seems kinda unfair to me...