We find ourselves at an extremely difficult crossroad regarding airline settlements and refunds through the BSP.
Currently, there are growing tensions between the global agency community and airlines with regards to refund money that airlines are holding.
A series of formal communication has been made by trade associations calling on IATA to accelerate refunds, while agency groupings globally are urging government to take “strong enforcement action against airlines which flout the law by withholding refunds due following the cancellation of flights”.
In a statement to Skift last week, IATA said it had already encouraged its airline members to facilitate any claim for reimbursement. “But given the current liquidity situation this is a business decision for each individual airline and is outside of IATA’s scope. IATA has also reminded airlines that in some jurisdictions agents are required under law to provide refunds to passengers,” it added.
Source: Skift Article 31 March 2020 “Airlines could start facing legal challenges over withholding refunds”
Below, ASATA unpacks the situation in greater depth, as well as some of the actions or steps you may wish to consider for your business:
1. Monthly Remittance
A request was put forward to IATA and the airlines to retain monthly remittance under current conditions. Whilst not rejected, it was not agreed to offer an extension either. Between IATA and ASATA we are going to monitor how agent liability shifts from a payable to a receivable position. As at last week, 10% of agents in BSP-ZA had shifted into a receivable position inside the BSP (refunds due exceed remittance due). This could mean that come May 2020, most agents might find themselves in a receivable position and fortnightly remittance would benefit quicker refunds received. This of course is subject to airlines actually refunding and in light of the most recent developments, this becomes academic.
We know that airlines have increasingly been switching off your refund applications via the GDS and we are even getting reports of airlines advising agents that refunds through BSP link could take up to 6 months to process. SAA has even chosen to switch off refunds through BSP Link (as are other airlines)
We have been in discussions with IATA to consider options, including offsetting refunds against your next remittance. This was also considered by the Travel Agency Commissioner. We are further proposing that IATA consider placing the next remittance into Trust, in order to protect the funds paid by agents into the BSP.
3. Credit Card Charge Backs
We understand that you can charge back on credit card settlements but have been told that SAA will ADM you if you do. ASATA is reviewing the legal obligations on behalf of the card companies and airlines as it pertains to dealing with charge backs.
4. Reducing your Bank Guarantees with IATA
You are able to apply to IATA to review your financial security. This can be done through the IATA Portal. You can either ask to review your financial security or apply for a reduction of your RHC and based on the outcome, request a review of your guarantee that is commensurate to the new RHC. There should (obviously) be a reduction that should free up some cash. We understand that this matter, together with other issues raised around BSP, will be addressed by IATA.
ASATA is continuing to do everything we can to assist with the frustrating and challenging lack of access to refunds, including assessing legal avenues available to you. We will report back in due course.