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IATA aims to remove the obligation to issue cash refund (for flight cancellation)

IATA aims to remove the obligation to issue cash refund (for flight cancellation)

Old Mar 20, 20, 10:18 am
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IATA aims to remove the obligation to issue cash refund (for flight cancellation)

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Jennifer Janzen is doing some lobby on behalf of the airlines to force governments to take away the obligation of airlines to offer cash refunds, after an airline had cancelled a flight (We are not talking about a situation where a passenger elects to cancel her ticket):

On the request for flexibility to offer rebooking or vouchers in place of refunds, the Commission specifically rejected that possibility.
Faced with a cashflow catastrophe, many airlines can only offer vouchers in lieu of immediate cash refunds for cancelled flights. The Commission must accept that this solution – which many people would regard as reasonable in the current extraordinary circumstances – should be facilitated.
Given the extraordinary circumstances and financial pressures our airlines are facing, if this is the Commission’s view—then an emergency amendment to Regulation 261 may be needed, and would be welcomed by the sector,
What it boils down to:
IATA wants the EU bodies to remove point 8a) in EC261/2004.

Article 8

Right to reimbursement or re-routing

1. Where reference is made to this Article, passengers shall be offered the choice between:

(a) - reimbursement within seven days, by the means provided for in Article 7(3), of the full cost of the ticket at the price at which it was bought, for the part or parts of the journey not made, and for the part or parts already made if the flight is no longer serving any purpose in relation to the passenger's original travel plan, together with, when relevant,

- a return flight to the first point of departure, at the earliest opportunity;

(b) re-routing, under comparable transport conditions, to their final destination at the earliest opportunity; or

(c) re-routing, under comparable transport conditions, to their final destination at a later date at the passenger's convenience, subject to availability of seats.

What it means -> Passenger had bought airline tickets for a good amount of cash. Now the airline cancels a flight. The airline is only obliged to issue a voucher. The airline is not required to refund the ticket with cash.

What are two main disadvantages of vouchers:
1) If an airlines shuts down (bankcruptcy), the voucher is practically worthless.
2) Airline may elect to jack up fare in the future. Hence, you cannot buy the same flight with the vouchers - than the flight that was cancelled.

Sorry, in my eyes this is an outrageous behaviour of the airlines.

What is more troublesome -> IATA is putting pressure on EU member states and the EU commission to pass an emergency amendment to EC261/2004 that retroactively changes the law. That means, you or your lawyer are sueing an airline for a full refund (after the airline cancelled the flight). Based on the current law (EC261/2004), that is an easy win in a court of law. However, with a retroactive change in the law, you may loose the case (and are on the hook for the lawyers fees of the airline)

In the meantime, we also expect member states in the European Council to come to an agreement on the review of the Regulation before the summer,” Reynaert added.

Last edited by warakorn; Mar 20, 20 at 10:23 am
warakorn is offline  
Old Mar 21, 20, 4:31 am
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Sounds like a win for the travel insurance industry to sell expensive insurance policies
etch5895 is offline  
Old Mar 21, 20, 4:47 am
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It's a pity they won't respond by threatening to declare all airline bailouts in the EU as potentially illegal state aid.

(The EU also has a much bigger problem of dramatic, disorderly airline disintegrations in recent years...)
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Old Mar 21, 20, 5:37 am
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Again, passengers of cancelled flights should not accept vouchers!

Instead, I suggest to file credit card chargebacks. It's technically acquirer bank handing over the cash, not the airline. Hence, it doesn't matter how much cash the airline has on hands.

Why I dissuade everyone to accept vouchers (for airline-imposed cancellations)?
Well, let's look at the best case scenario for the Coronavirus outbreak:
Western nations are managing to flatten the curve of new invections. That may happens in mid-April. Again, this is the best case scenario.

However, air travel is not going to rebound just because the number of new infections is declining. There are several reasons for that:
1. Countries will still keep their borders shut for pax movements. Hence, people are not allowed to travel to other countries.
2. There is always the risk of a second Coronavirus wave. Who is in his right mind is going to book (leisure) travel if there is an increased chance that the airline may go bankcrupt (no money, no flight), or the travellers might get stuck again somewhere far, far away?
3. Corporation will have mostly adapted to the new situation. Travel costs are close to zero at the moment. Why would any corporate finance department allow travel again, when it's still dangerous (employees getting stuck), costs extra money, and is largely redundant (since video conferences works, as well)? Many corporations (not travel -related) are going to try to offset the losses due to the Coronavirus recession with a reduction in costs (that's the travel budgets).
4. The free movement of people (as we have known it before the crisis started) will only be allowed once a effective vaccine was found + is able to produced for more than 6 billion humans + has been distributed. We are talking about Q3 2021! here - in the best case scenario.
5. Vaccines may become not effective, because the virus has mutated.

What is the logical solution -> 99% of all airlines have no chance to survive a shutdown (with maybe some token services left) for 18 months. Either these companies get liquidated or are restructed through some kind of bankcruptcy process. In both cases -> vouchers are going to become worthless. EU governments will have much bigger problems on their hands (all the self-employed people, small businesses), so there is going to be significant opposition to bail out airlines for a period of 18 months.

When it comes to airlines, airport, travel, recreation business -> the party is over!
warakorn is offline  

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