IAG had a €3.5bn liability for unflown flights – as the EU rejects requests to issue vouchers

In a positive move for passengers, although a less positive one for airlines, the European Union has blocked plans to force customers to take a voucher instead of cash when a flight is cancelled.

The Dutch Government had proposed a plan to allow airlines to stop offering cash refunds.  The proposal would have allowed airlines to force passengers to accept a credit voucher, valid for 12 months.  The only upside was that the airline would have had to swap the voucher for cash after 12 months if it had not been redeemed.

In a statement, the European Commission for Transport, Adina Valean, said that:

“Airlines must refund canceled flight tickets. They can of course also offer a voucher but — and this is very important — only if the customer agrees to accept this. If the customer does not want a voucher or other proposed solution, the company must reimburse.”

This only applies to passengers whose flights are cancelled.  An airline can still impose a voucher – with no requirement to turn it into cash at any point – if it lets you voluntarily cancel a non-refundable flight which is still operating.

How much money could British Airways have to refund?

I dug out IAG’s 2019 accounts to see how big a problem this is for British Airways, Iberia, Aer Lingus, Vueling and LEVEL.

You need Note 21 on page 165.

The outstanding sum at the year end for flight tickets which had been sold in advance of travel was €3.57bn.

Total IAG passenger revenue for 2019 was €22.5bn.  This implies that the average passenger books 58 days before departure, although in reality it will be longer than that as short-notice tickets are disproportionately more expensive.

I would imagine the €3.57bn figure was higher when coronavirus hit Europe, because a lot of people will have booked for Summer 2020 during January and February.  I have also assumed that the €3.57bn includes the associated ‘pass through’ UK Air Passenger Duty.  If it doesn’t, the sum is higher.

For simplicity, if we assume that IAG had €4bn of pre-booked ticket sales at 1st March and that 66% by value were for travel in March, April and May, the group is looking at refunding €2.7bn of flights.  

At a stroke, this takes out 30% of IAG’s €9bn cash and cash equivalents, and this is before the huge weekly costs of running a grounded fleet with virtully no income.

If 50% of passengers over March, April and May could be pursuaded to take vouchers instead of cash, IAG could potentially keep €1.35bn in the bank.

These are serious sums of money, and you can see why IAG – and other airlines – are less than keen to issue cash refunds even when they are legally required to do so.

British Airways has removed the functionality to refund a cancelled flight for cash from its website (although you can get a British Airways cash refund online with our workaround – it is still working from some if not all) although it will pay up if you call.

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How to earn Avios from UK credit cards (January 2025)

As a reminder, there are various ways of earning Avios points from UK credit cards.  Many cards also have generous sign-up bonuses!

In February 2022, Barclaycard launched two exciting new Barclaycard Avios Mastercard cards with a bonus of up to 25,000 Avios. You can apply here.

You qualify for the bonus on these cards even if you have a British Airways American Express card:

Barclaycard Avios Plus Mastercard

Get 25,000 Avios for signing up and an upgrade voucher at £10,000 Read our full review

Barclaycard Avios Mastercard

Get 5,000 Avios for signing up and an upgrade voucher at £20,000 Read our full review

There are two official British Airways American Express cards with attractive sign-up bonuses:

British Airways American Express Premium Plus

30,000 Avios and the famous annual 2-4-1 voucher Read our full review

British Airways American Express

5,000 Avios for signing up and an Economy 2-4-1 voucher for spending £15,000 Read our full review

You can also get generous sign-up bonuses by applying for American Express cards which earn Membership Rewards points. These points convert at 1:1 into Avios.

American Express Preferred Rewards Gold

Your best beginner’s card – 20,000 points, FREE for a year & four airport lounge passes Read our full review

The Platinum Card from American Express

50,000 bonus points and great travel benefits – for a large fee Read our full review

Run your own business?

We recommend Capital on Tap for limited companies. You earn 1 Avios per £1 which is impressive for a Visa card, and the standard card is FREE. Capital on Tap cards also have no FX fees.

Capital on Tap Visa

NO annual fee, NO FX fees and points worth 1 Avios per £1 Read our full review

Capital on Tap Pro Visa

10,500 points (=10,500 Avios) plus good benefits Read our full review

There is also a British Airways American Express card for small businesses:

British Airways American Express Accelerating Business

30,000 Avios sign-up bonus – plus annual bonuses of up to 30,000 Avios Read our full review

There are also generous bonuses on the two American Express Business cards, with the points converting at 1:1 into Avios. These cards are open to sole traders as well as limited companies.

American Express Business Platinum

50,000 points when you sign-up and an annual £200 Amex Travel credit Read our full review

American Express Business Gold

20,000 points sign-up bonus and FREE for a year Read our full review

Click here to read our detailed summary of all UK credit cards which earn Avios. This includes both personal and small business cards.