While the COVID-19 crisis has had a critical impact on global air travel, airlines and its distribution partners, including travel agents, are discussing refund and voucher policies for airline-cancelled flights.
These discussions are aimed at supporting both passengers who had their flights cancelled due to COVID-19 and the short-term financial stability of airlines, with travel agents generating about 50% of global air travel bookings.
Airlines are in the unenviable position where there is a sudden influx of requests for refunds and this has caused considerable financial stress. As a result, there has been a tendency to delay the refunds or issue vouchers to the consumer in an effort to maintain the liquidity of the airlines.
“While we, as a representative of the travel agencies which have been significantly impacted by COVID-19 and the associated travel bans are sympathetic to the issue, we believe that the delay or refusal to refund passengers is in contravention of the Consumer Protection Act,” says ASATA CEO Otto de Vries.
Agents want to support airlines at this difficult time and are best positioned to educate customers as to the refund and voucher policies offered by airlines. However, the final decision must be left to the consumer and the consumer should be offered the choice of a refund.
“In accordance with the Consumer Protection Act, airlines should extend full refunds for customers requesting them, the total amount paid by the customer, in lieu of a credit for future travel. We do not condone unsecured vouchers as an alternative to the consumer’s right to a refund, particularly in the case of South African Airways.
“As we are all aware, passengers who have booked flights on SAA have been given three options, none of which include the option for a full refund. Bearing in mind that the CPA requires all consumer funds for future bookings to be ring-fenced and treated separately from the assets of the supplier, a refund should be legally possible even when the supplier is in financial distress,” adds de Vries.
“IATA’s Director General has reminded Airline CEOs it is important for airlines to review the various rules, regulations and legislations around the world regarding refunds and to seek legal advice concerning refund obligations in the jurisdictions where they operate.”
The travel agent’s role in refunds and vouchers
The intrinsic nature of air ticket bookings means that travel agents must be involved in the process of establishing refund and voucher policies to ensure they are able to service their customers.
But this means that airlines will have to reinstate automated ticket change capabilities through the Global Distribution Systems and update these automated processes with airlines’ policies on refunds and vouchers to streamline the process. This will allow travel agencies to process all refunds and vouchers through the GDS.
Furthermore, customers who have requested a refund via their travel agent should receive the same treatment as a customer who has requested the same refund directly from the airline. If the customer booked their air ticket through a travel agency, that customer should be able to turn to their travel agency to process the refund or voucher instead of on the airline’s website.
ASATA furthers supports the following guidelines as it pertains to the issuing of vouchers by airlines in lieu of travel:
- If vouchers are offered and accepted by the customer, vouchers must be made accessible through all channels, direct or indirect distribution.
- Travel agents should be able to offer vouchers to their customers which would be activated through GDSs.
- Where a voucher is to be issued and the ticket was paid for by a company on behalf of an employee/traveller, the voucher should be issued in the name of the company and should be transferable from travel agency to travel agency. One voucher should cover the ticket and any ancillaries to the ticket.
- Consideration should be given to converting the value of the total ticket price, including any ancillary services fees, to an airline credit note to shift away from ticket, voucher, Electronic Miscellaneous Document (EMD) or other specific document and covert full amount of ticket value paid by customer into credit note for use against any future purchases.
- The voucher must have a face value to allow true flexibility in its use, unless an airline guarantees a passenger the original origin and destination for a new trip, regardless of the new price.
- The vouchers should be available for a period of 12 months from the original date of travel departure, free of change-fees and automatically refunded in cash on the expiration of the voucher.
- The voucher should be usable on all the airlines of a group (if relevant), for any route operated by the airline, in any market or country and should not be restricted to the original destination or class of travel.
- The voucher should be usable for any passenger, original or new, and for any number of passengers.
- The booking agent or the agent designated by the customer should be able to access and manage the voucher, as well as receive remuneration for the voucher. Accessibility and management via GDS should allow agent control of the voucher.
- At any point in time a voucher must be eligible for an immediate refund in urgent cases like financial problems, death, sickness, moving, divorce, birth, unemployment.
- Any issuing or redeeming of vouchers as a result of COVID-19 should not incur additional costs to the customer as their cancellation is involuntary.
- To avoid a potential devaluation, the value of the voucher should be equivalent to the amount of dollars at the time of the purchase.
”Vouchers should be guaranteed to protect from a potential bankruptcy of an airline. Even if, after 12 months from the original departure date, the customer chooses a refund in cash (also applicable for any residual value of a partly used voucher) and the airline is not able to provide this refund or has already become insolvent, the voucher must be protected by a guarantee fund,” explains de Vries.
In the case of SAA, the CPA requires the airline to ring-fence consumer funds for future bookings and to ensure that these funds are not used as operational funds for any reason.
At any event, ASATA believes that vouchers should only be a temporary solution and that this policy should expire 31 December 2020.