Evolving airline refund policies: A pit of confusion for advisors

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Evolving airline refund policies: A pit of confusion for advisors
Photo Credit: Antonio Guillem/Shutterstock.com

Last June, Richard Lewis, a travel advisor from Columbus, Ohio, booked two clients with roundtrip tickets on South African Airways (SAA) for this coming May. 

Now, with Covid-19 having shuttered the global travel industry, South African Airways has suspended all international flights through May 31. Nevertheless, the government-owned carrier is offering only flight credits, but no refunds, on suspended routes. 

For Lewis and his clients, this is a particularly tough problem, since in an era when airlines around the world are in jeopardy, SAA is particularly vulnerable. Even before Covid-19, the carrier was already going through bankruptcy, backed by new government infusions of capital. As such, Lewis said, he is not confident SAA will ever resume U.S. routes. 

“I’m inclined to run the refund for my client,” he said, an action he would take through the Sabre GDS. “But I’m worried that in 60 to 180 days I’ll get a debit memo that says, ‘You had no authority to give that guy his money back.’”

As carriers in the U.S. and elsewhere have canceled enormous portions of their scheduled flights through May, refunds have become a vexing and confusing challenge. According to ARC, refunds for many airlines are now far outpacing sales. 

Meanwhile, cash-crunched carriers are appealing to governments around the world for massive bailouts. In the U.S. and the EU, carriers are required under law to offer refunds in cases where they cancel flights. But airlines here and elsewhere are now taking a variety of measures aimed at reducing refund payments or avoiding them outright. 

“The airlines want to make sure they do the right things for their customers, but they also want to make sure they have the cash to survive,” said Peter Vlitas, senior vice president of airlines for Travel Leaders Group. 

Brett Snyder, a travel advisor and airline industry analyst who pens the Cranky Flier blog, said, “This isn’t to punish people, explicitly. It’s because of a desire to preserve cash and stay afloat. ... The problem is, it’s usually an impact on people. They’re not getting what they pay for, and the airlines are saying, ‘Too bad.’”

While SAA is explicit about its refusal to pay refunds, others have taken a more tactful approach. Swiss, which is owned by the Lufthansa Group, says on its website that it is “currently unable to process any kind of refund on any channel. Please be aware that our focus is currently on handling urgent requests.”

But while Swiss encourages customers to consider its newly liberalized rebooking policies, it does not state that refunds won’t eventually be processed.

Some airlines have also taken the extraordinary step of informing ARC that they will manage all refunds directly and not allow them to be processed via GDSs or ARC’s Interactive Agent Reporting system, a move that is sure to impact the business flow and processes of travel agencies. As of March 31, Air France, KLM, Lufthansa, Emirates, WestJet, Copa, Avianca,  El Al and Scandinavian were among 30 such airlines. 

Travel advisors, ARC said, should contact the airlines directly and follow their individual policies for refunds. 

ASTA president and CEO Zane Kerby said the travel agent trade group is ready to fight against the possibility of more debit memos for members that result from the coronavirus crisis. He addressed the issue in a webinar on March 30.

“We call on the airline community to do what is right: protect the traveler by offering the refund option on all tickets during this unusual, once-in-a-lifetime pandemic, and allow travel agencies to manage the customers they booked without the threat of any credit card chargeback and/or subsequent debit memo,” he said.

At least two of the GDSs, Amadeus and Sabre, have deactivated ticket-changing functionalities for those airlines at their request, moves that should reduce the chance of an agent being stuck with a debit memo. Travelport did not respond to inquiry about the issue.

“Amadeus strongly believes that all parties across the industry should respect ticket and fare rules and comply with consumer-protection laws, in the interest of the travelers we all serve,” the GDS said.

Despite the DOT refund mandate, the 10 mainline U.S. carriers are taking a variety of postures in relation to refunds. In response to Travel Weekly inquiries, some said straightforwardly that customers whose flights have been canceled due to the Covid-19 crisis can get refunds. Others gave indefinite, even coy, responses.

Allegiant, American, Delta, Frontier and Hawaiian said outright that customers who request refunds will receive them. Notably, American has also begun offering additional flight credits as an incentive for customers to choose a voucher as it tries to reduce its refund tab.

Alaska Airlines said it will provide refunds for canceled international flights and for the “majority” of canceled domestic flights.

Southwest said it was providing refunds as of March 25, but it cautioned that the policy is subject to change.

JetBlue and Spirit said only that they are providing travel credits and waiving fees, while avoiding explicitly stating that they are not providing refunds. Both carriers guarantee refunds on canceled flights in their contracts of carriage.

United has implemented a somewhat complicated refund policy that has drawn criticism for travel agents. For canceled international flights, United will provide a credit for travel disrupted by six hours or more. The credit is good for 12 months from the time of purchase. The carrier will provide a refund only after those 12 months, should customers not use the credit. For canceled domestic flights, United will provide refunds in cases in which travel has been disrupted by more than six hours.

Vlitas expressed confidence that United and other major U.S. carriers will survive the crisis. All can expect to be boosted by the government stimulus package.

Still, individuals who are unable to get refunds or who accept travel credits can’t be assured they’ll be made whole.

Industry analyst Seth Kaplan identified SAA, Aerolineas Argentina, Thai Airways, Mexico’s Interjet and Virgin Australia as carriers that were weak entering the crisis and are not certain to be saved by government action. 

Norwegian Air also entered the downturn in weak condition. Norway has already provided the carrier with $275 million in loan guarantees, but that’s only enough to last until June.

Should a carrier go out of business, customers’ best chance of getting their money back is by disputing the charge with their credit card, experts said.
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This report was edited on Tuesday with a comment from ASTA CEO Zane Kerby about debit memos, updated information on airlines handling all refunds, and updated information on GDSs deactivating ticket-changing functionalities.

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