German Government Backs Lufthansa’s Non-Refund Policy

The German government sorta kinda seems to be siding with Lufthansa violating the EU’s policies on flight refunds.

Flight refunds & European airlines

The European Union has among the strictest consumer protection laws in the world, with a policy known as EC261. Just recently it was clarified that airlines subjected to EC261 do need to give passengers the option of a cash refund in the event that a flight is cancelled.

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Despite that, most European airlines are violating the policy, and are refusing to issue refunds. Airlines are largely trying to justify this by pretending the option for a refund doesn’t exist, and when they’re pressed on it, they argue that they’re not issuing refunds at this time.

Germany sides with Lufthansa as bailout looms

Germany plans on providing aid to Lufthansa, though the way that plays out depends on whether Lufthansa will be forced to provide cash refunds to passengers or not.

According to Bloomberg:

• Lufthansa has about 5.1 billion EUR in cash and undrawn credit facilities
• As of the end of December 2020 (according to an annual report), Lufthansa had about 4 billion EUR in unused ticket money
• Assuming that number is about the same now, Lufthansa would run out of cash in about 25 days if they had to provide cash refunds for all tickets

Therefore the German government has asked the European Commission to allow Lufthansa to issue vouchers rather than cash for flight cancellations.

The government is already looking at providing hundreds of billions of Euros of aid to all kinds of companies, and Lufthansa having to provide cash refunds would likely cost German taxpayers several billion Euros.

This really is a tough issue

I’ve repeatedly made the point that I think 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

I don’t in any way support airlines holding onto peoples’ money and in many cases violating government regulations. But I also recognize that for some airlines it’s a function of life-or-death, and the alternative is either going out of business or bigger bailouts.

None of which excuses what they’re doing, but… ¯_(ツ)_/¯

Bottom line

The German government is asking the European Commission to adjust rules so that Lufthansa doesn’t have to issue flight refunds for cancellations. The German government will likely provide aid to Lufthansa, and if the airline does have to issue cash refunds, that money will essentially be coming out of taxpayers’ pockets.

I recognize the challenging position airlines are in, but if they want to force people to keep vouchers, they need to do a better job having less-horrible policies associated with them — make the vouchers valid for several years, make them transferable, and/or offer a bonus for those who get a voucher when they’d be entitled to a cash refund otherwise.

It will be interesting to see what the European Commission decides…