Tens of thousands of cancelled flights. Millions of impacted travelers. Billions of dollars in limbo. And airlines are doing everything they can – including ignoring laws – to keep the money.
Airlines’ initial reaction to the COVID-19 pandemic were marginally positive. Increased flexibility and waiver of change fees came along, though initially only for new bookings. As cancellations mounted, however, the industry changed its tack. Rather than following their typical policy of refunding fares where the flight no longer operates many airlines are now pushing passengers to accept a credit for future travel, hoping to keep that cash on hand to ride out the downturn.
IATA now estimates airlines hold $35 billion in paid fares against cancelled flights. That’s $35 billion that should be refunded to travelers. The industry also anticipates a $39 billion loss in Q2 2020. Nearly doubling that with cash outflow would be catastrophic for many airlines. It is no wonder, then, that the carriers are lobbying hard for passengers to accept vouchers in lieu of cash refunds.
Generally speaking regulators have opposed that option, though there are some exceptions. Transport Canada offered a ruling very favorable to the airlines (and unfavorable to passengers):
On the one hand, passengers who have no prospect of completing their planned itineraries with an airline’s assistance should not simply be out-of-pocket for the cost of cancelled flights. On the other hand, airlines facing huge drops in passenger volumes and revenues should not be expected to take steps that could threaten their economic viability.
While any specific situation brought before the CTA will be examined on its merits, the CTA believes that, generally speaking, an appropriate approach in the current context could be for airlines to provide affected passengers with vouchers or credits for future travel, as long as these vouchers or credits do not expire in an unreasonably short period of time (24 months would be considered reasonable in most cases).
Other regulatory bodies, including the EU, were not so kind to the airlines, instead continuing to protect consumer rights. Brazil, Colombia, and the Netherlands also relaxed regulations regarding refunds in recent weeks.
IATA’s Director General and CEO Alexandre de Juniac opined that a hybrid solution could be offered, satisfying all parties. He believes that consumers should accept vouchers in the short term that could be converted to a proper refund in 3-6 months, after the main cash crunch passes. This is very similar to United Airlines‘ recent policy changes that are seen nearly universally as anti-consumer, particularly as they changed after tickets were purchased.
In addition to changing the terms of the contract after well after it was executed the voucher scenario presumes to shift the financial risk to consumers. The refunds due convert to an unsecured, interest-free loan to the airlines. The “loan” is necessary owing to the likelihood of financial collapse of those businesses. This suggests that, at a minimum, it not be granted interest free.
Some airlines are offering a bonus of 10-20% in value for customers who choose the voucher over a refund. This seems a more reasonable compromise but it is, unfortunately, not the path that IATA endorsed nor that most airlines offer.
Perhaps vouchers are a reasonable option and some customers would accept that as an outcome voluntarily. But airlines’ and travel agencies’ behavior on the matter has not always been above board, furthering the frustration on the matter. One traveler recently explained that only the return half of a trip was cancelled so the airline expected that they would still fly the outbound and did not want to refund that fare. Another had two vacation packages on hold with a travel agency. When the first cancelled as a result of border closings the agent forced a credit rather than a full refund but did not apply that credit to the second trip when the payment came due, instead charging the traveler anew.
In the US some legislators are calling on airlines to revert to giving out refunds, owing to the multibillion dollar bailout package just passed. But that policy was not included in the law and it is unclear that the airlines care enough to voluntarily cooperate.
For a (generally) up-to-date listing of airlines and their operational levels check out this spreadsheet maintained by PaxEx.Aero and other industry experts.
More on COVID-19 and the airlines affected
- Alaska Airlines offers elite bonus earning in face of COVID-19 booking weakness
- Massive cuts, uncertain recovery timelines for aviation in the face of COVID-19
- Qantas cuts international 25% through September facing coronavirus-induced demand drop
- Spirit Airlines plans 5% growth reduction for April as COVID-19 hurts demand
- American Airlines slashes schedule, increases flexibility for customer rebookings
- US to block some European visitors
- Two key takeaways from American’s latest schedule cuts
- Regulators suspend slot rules, opening door to deeper airline cuts
- Beyond route cuts, airlines initiate extended suspension of operations
- Gogo looks to ride out coronavirus-related dip in demand
- Trans States Airlines: The first US airline victim of COVID-19
- JetBlue removes 40% of capacity, delays new deliveries as demand drops
- Airlines get a break on coronavirus EC261 comp, looking for more
- Airport lounges shutter as airlines slash capacity
- Will COVID-19 delay the opening of Berlin Brandenburg Airport?
- Qatar Airways plans 75% capacity cut in response to COVID-19
- Emirates, Turkish Airlines slash route networks, ground aircraft
- JetBlue plans additional draw down in service
- Is it time for US airports to start closing terminals??
- Converting to cargo: Putting passenger planes to use in the COVID-19 era
- IATA anticipates recession, slower recovery, as COVID-19 impact drag on
- US carriers cut frequencies, not destinations as they seek federal funding
- JetBlue plans 70%+ cut in April operations
- Cancelled flights, vouchers and the airline cash flow crunch
- Spirit Airlines reportedly cutting 90% of flights
- US airlines cut deep, but not deep enough
- An eerie quiet over New York City: The flights are gone
- Who wants what? How the US airlines are responding with CARES Act funding on the line
- Delta, United extend elite status by a year, adjust other benefits
- DOT adjusts, finalizes airline route requirements for CARES Act funding.
- Lufthansa announces major, permanent fleet restructuring
- Air Canada, Alaska Airlines extend elite status
- Deeper cuts, reprotect options coming for JetBlue
- Air Canada replaces seats with cargo in 777-300ER cabin
- American Airlines extends status, eases qualification
- A new take on amenity kits in the COVID-19 era
- COVID crushing inflight connectivity: Part 1
- Stuck in the past, DOT botches its CARES Act implementation
- DOT grants exemptions to Delta, Alaska Airlines, Hawaiian Airlines under CARES Act obligations
- Introducing yin-yang seating for economy class
- Inflight social distancing will kill short-haul LCC travel: IATA
- Gogo furloughs 60% of workforce, applies for CARES Act support
- COVID crushing inflight connectivity: Part 2
- De Havilland, Air Canada Cargo partner on Dash 8-400 cargo conversion
- JetBlue plans new route network for CARES Act compliance
- Spirit Airlines running triangle routes to meet CARES Act requirements
- Sun Country wins big as United, Frontier lose in latest CARES Act ruling
- Frontier Airlines pushes new route plan for CARES Act compliance
- Argentina plans to restart flights in September 2020
- Spirit Airlines asks DOT again to drop destinations
- Delta Flight Products, TechOps develop isolation pod for COVID-19 military transport
- JetBlue aims to drop 16 "major hub" destinations from its network
- Allegiant scores leniency from DOT in CARES Act obligations
- Panasonic Avionics implements furloughs to address slowing business
- American, Delta confirm accelerated fleet retirements
- Airbus aims to ease "COVID Combi" temporary freighter conversions
- The Weekly Wrap: FlightPlan, personal screening and more!
- United’s long-haul operations focus on a new "workhorse"
- United plans touchless bag tag kiosks
- Temperature scans in, 767s out for Air Canada, Rouge
- JetBlue, Spirit score exemptions to drop service at major US airports
- IATA recommends against blocked middle seats, favors "layered" protections
- United plans to resume (cargo for now) Hong Kong-Singapore service
- JetBlue suspends six cities through June
- Project Wingman USA Opens Lounges for Frontline Healthcare Heroes at Two Major New York City Hospitals
- Cape Air’s ugly April stats (and some possible good news for May)
- Fighting for the middle: A pandemic seating shift
- Avianca declares bankruptcy, seeks protection in restructuring
- United raises ire in cutting hours for salaried employees
- DOT further relaxes airline CARES Act obligations
- Allegiant sees quick recovery on the horizon
- Delta drops 777 fleet as coronavirus cuts continue
- JetBlue offers free TrueBlue Mosaic status, plus a year extension
- United faces lawsuit over M&A employees pay cut
- Optimism on the horizon: The Weekly Wrap 15 May 2020
- Beached Whale: A380’s future turns more bleak
- TSA implementing lower-touch screening protocols
- Volotea plans for growth into a COVID-affected Summer
- Health passports in our future: The Weekly Wrap
- LATAM seeks US bankruptcy protection, plans to continue operations
- JetBlue plans return of international markets in June
- Frontier, Mobile bicker over flights to Orlando
- US retaliates against China, blocking all flights
- China blinks, US to back down on flight ban
- ATPCO moves to ease ticketing changes for airlines worldwide
- Inflight magazines are not dead yet: The Weekly Wrap–5 June 2020
- From pre-flight massages to COVID-19 testing: XpresSpa pivots to XpresCheck at JFK
- GermFalcon to take flight as Honeywell UV Cabin System
- Allegiant driving passenger traffic recovery
- Air travel is bouncing back: Can the trend hold??
- Masks Matter: US carriers plan more enforcement for on-board behavior
- JetBlue plans to outsource airport operations at (more) smaller destinations
- Norwegian set to restart European services from 1 July
- Jilted travelers get aggressive in seeking airline refund enforcement from the DOT
- LATAM Argentina, LEVEL Europe face bankruptcy
- Air Canada launches half-priced Aeroplan rewards in North America
- AirShield proposes curtains of air to separate passengers in flight
- Curing Catering Concerns: The Weekly Wrap–19 June 2020
- A big hint that British Airways will retire its 747s soon
- JetBlue’s crazy summer of new routes
- Air Canada fights back on refund demands, disputes DOT authority
- JetBlue pilots secure no furlough deal through April 2021
- Peek inside the largest converted cargo aircraft flying today
- ZIM Flugsitz seeks insolvency protection
- JetBlue launches trial for Honeywell’s UV Cabin System (f/k/a GermFalcon)
- ExpressJet to wind down operations on 30 September
- Spirit Airlines avoids pilot furloughs in October
- A stalled recovery: Airline traffic retreating
- United Airlines introduces at-airport COVID testing for SFO-Hawaii flights
- AirAsia Japan halts operations
- Cathay Dragon shuttered, 8,500 jobs eliminated
- Researchers link 59 Irish COVID cases to inbound long-haul flight
- A fleet of salvage-priced planes
- Global Eagle charts a new course out of Chapter 11
- United launches pre-flight COVID testing to London
- Allegiant ditches advertising, improves conversions
- Interjet lacks fuel, cancels flights for two days
- Canada plans aviation bailout, so long as passengers get refunds
- JetBlue to stop blocking seats in January
- JetBlue plans additional spending cuts, debt raises into 2021
- Norwegian abandons long-haul operations, refocuses on 737 routes in Europe
- Air Canada, Transat merger approved, with notable conditions attached
- Scammy COVID-safety "certifications" could put industry recovery at risk
- ATPCO adds testing, vaccine requirements to flight search results
- US DOT puts the squeeze on Hong Kong
- Air France secures €4 billion, (maybe) cedes Orly slots
- Air Canada refunds (finally) coming with government bail-out
- United adds Europe routes in hopes of a recovery
- Finnair adds A330 cargo conversion with Lufthansa Technik, Airbus
- Anti-microbial power outlets set to fly
- Aer Lingus delays Manchester-US service launch
- Air Canada fights back, disputes $25 million DOT fine
- Cathay Pacific giving away "Plane for a Day" in vaccination push
- JetBlue sees only 300 unvaccinated as deadline looms
- Ethiopian, Aero HygenX partner to deploy UV-C cabin disinfection
- Air Canada fined $2 million in DOT settlement
- JetBlue plans February schedule adjustments
- Northern Pacific visits Saipan in search of partners
- Eastern Airlines plans Shanghai flights
- LATAM fined $1 million for COVID refund delays
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Great article. Even worse is that many airlines are still not allowing refunds of award reservations. And you can’t charge anything back to a credit card, because they want a redeposit fee in order to return your miles. Last night I tried to cancel a BA Avios domestic award reservation on AA metal. When I bought the ticket the terms were that I could pay the $5.60 fee to cancel the ticket and get my miles back. Now BA has changed the terms and said all I can get back is a CREDIT VOUCHER -even though getting my miles back is a voucher in itself.
Jeff Pelham says
I feel that the airline/travel industry is acting in bad faith and taking advantage of the Canadian Travel Agency’s opinion statement of credits versus refunds. I booked as part of a group and the Airline cancelled our trip (booked last summer for March 30-April 6/20). The travel agent said our travel credit voucher was redeemable for 24 months but we had to travel as the same group to the same resort. After much back and forth they said we did not have to travel as same group but we absolutely had to travel to the same resort. I checked and the same trip/resort next year costs more. For one of the families of 4 in my group they will have to pay an additional $1100 to redeem their travel voucher. If they are not able to afford the additional cost they will not be able to redeem their travel credit. We understand that there is a pandemic and that it more favourable to the Airlines to grant travel credits instead of the normal refund but they are attaching strict conditions to these vouchers. I don’t understand why if they cannot offer a refund why they will not provide a straight monetary value exchange in the form of a credit. We the individual citizens are being asked to do our part and accept credits instead of the reunds we are suppose receive. Yet. the offered travel credits with the attached strict conditions will require that we pay more out of pocket to be able to redeem them. I am at a loss of how they are able to take advantage of the CTA opinion statement in this way and get away with it. I am trying to reach out to anyone that will listen. These travel credits are being offered with multiple strings attached for many. For some, these travel vouchers will be unredeemable if they cannot afford the cost of the price increase difference of the resort they are being forced to go back to. I chose my trip based on the price and my ability to pay not based on the resort. My take away from this is not to book via a travel agent again and to go direct to the airline carriers online trip forum. Air Transat had tried to offer us a straight monetary exchange credit without the strict conditions but Sell Off Vacations got involved and said Air Transat could not offer that to us. Air Transat is now pulling there original offer of a 24 month credit for any travel with them (no stings) and telling us as per Sell Off Vacations we have to go back to same resort. I thought my agreement of carriage was with Air Transat not Sell Off Vacations. There are many more folks like me out there in the same position.
Seth Miller says
Agreed that requiring the exact same destination is an unreasonable ruling. I also wish that there were no scenario that would require additional outlay and strongly believe that company’s insisting on vouchers should give the full value in a very flexible manner. But I also would not insist that the higher priced itinerary necessarily be included. It is a very tough situation.
Also, being stuck between the airline and the tour operator is a tough spot. I’m not sure where it’ll end up eventually.
michael tucker says
the government really needs to do something about the airlines., they are robbing the consumer.If they can’t deliver what we paid for they should be giving us a refund. It’s time for the consumer to email their respective congressmen or women and urge them to draft a bill to protect us and have the government regulate the airline industry and also the cruise lines too.Let’s start a national rally so Congress will pay attention to us.
Travel insurance…. My insurance tells me that, If I can not go because of travel restrictions, they will cover me. BUT, if the airline offers a credit voucher, they will not. They suggest either use the voucher or wait til it expires and then make the claim. This does not reassure me much. I do not trust the airline or the insurance.
Found some interesting flight cancelation data here: https://sourceful.us/doc/121/coronavirus-flight-cancelation-tracker
Seth Miller says
Lol…those jerks ripped off the document that me and a couple colleagues were maintaining during the peak of the crisis. That’s my data! 😀