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.
The document is here. 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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About Head for Points
I wonder if Easyjet will get this memo, having taken the refund option online for two flights three weeks ago they are both sitting at “refund being processed” , I’m £500 down and they just terminate each call.
But they are processing your refund. Was any timeline set out on how long the refund should take to process?
I don’t know how automatic the refund process is but I imagine if 100% of flights sold for the next month need to be refunded then that’s a significant amount of admin for staff to get through
The regulation says 7 days
To offer it or process it and have it in your account because even in normal times it can take longer than that to hit your card.
Like I said I don’t know the automation of the process but if it’s in anyway manual there is going to be a huge backlog.
Surprised the airlines haven’t tried the cruise company method of offering more as a voucher. Carnival offer 125% as a future credit. Would sway quite a few I would imagine.
Some airlines are already doing this too.
Agreed. It makes good business sense for all airlines to give an incentive to offer voucher. They will keep cash now. And when planes start flying again you will have those using vouchers loading plane seats, and in turn the remaining seats demand should increase the price.
Not to mention the loyalty factor.
Aer Lingus e-mailed me a couple of days ago to say that if I were to take a voucher, it would be for 110% of the full ticket price.
Not that I have any Aer Lingus flight pending.
Still waiting for Vueling to cancel BHX-BCN in May – they are still taking bookings from 1 May onwards, though.
4 weeks in and we are still waiting for voucher. Flight and car hire = holiday but no offer then other than a voucher.
Anyone know how we can get the voucher or even money please as clearly all BA phone lines are busy . Thank you
When was the outbound flight?
Cancelled by you or by BA Holidays?
Someone needs to tell TAP this, they’re refusing refunds on flights they’ve cancelled and only offering vouchers with very restrictive usage.
They’re saying the Portuguese government are telling them to do this too.
The Portuguese government might as well be like Italian government. Just do s75/chargeback on your credit card for non delivery of service.
It’s a couple of friends I’m helping. Lloyds have said they’re not accepting any travel related chargebacks at the moment. Doesn’t even sound legal? And their travel insurance have said that they won’t pay as the airline have offered a voucher. She booked it with TravelUp who are saying she needs to rebook by end of April and fly before Dec to make it even worse.
Credit card?
Call them say you are claiming for non fulfilment of contract as flight paid for was not provided so this is breach of contract. Under Section 75 the credit card in UK is jointly liable for fulfilment of the contract. Tell them additionally under EC261/2004 you have the right to full cash refund. Demand refund.
If they still stick, remind them that s.75 they are also required to cover you for consequential losses, these may include extra hotel costs, the cost of a replacement ticket if you exercise your right to choose to travel on a later date instead even if that ticket costs much more,all of these are your right under s75 due to s75 coveri g you for consequential loss. Suggest to them that they wi find it cheaper to provide you the refund you are entitled to now otherwise sadly it may turn out to be much more expensive.
Ideally record the call. If they still refuse tell them you will refer them to the Financial Ombudsman “the FOS” (this costs them about £600 just for the referral although they may have a “season tiicket” rate).
Thanks. The credit card refused again, but I made her ring a third time and insist on speaking to a manager, and saying they wanted to open a formal complaint. They’ve finally accepted the claim and say it’ll take 10 days to investigate.
Just another friend booked on KLM with Air France now. I see the US DOT has sent a memo instructing all airlines to pay within 30 days, that might help.
and the Dutch government.
The EU Transport Commissioner has basically told all of them the la stands and they can’t force vouchers.
This certainly should tell regulators that we should never, ever relax the protections we have.
Can you imagine how much worse it would be, how much more would consumers be abused by airlines if this is what they are already doing to consumers now? Airlines that are not providing flights customers paid have decided they can keep the customer’s money anyway.
TAP has very,very bad rep apparently for needing to be sued for passengers’ EU261 rights. It’s hard to imagine, but from what I saw they might even be worse than Iberia to deal with if something goes wrong.
I am over a month from pressing the ‘refund’ button on my cancelled easyJet flights and yes, still “being processed”. I have now asked my card issuer for a chargeback despite being told not to contact them in the current circumstances. I was not offered an alternative at the time. I have another 10 easyJet flights through to January booked. EasyJet looks in trouble and it will be a long haul getting these short haul flights refunded.
Why do they look in trouble?
I have flights with them also that they cancelled and I’ve not heard a thing and I don’t have time to try the phone based on others attempts. I’m far from concerned though. I don’t see them going anywhere.
That’s precisely it……..they wont be going anywhere!!!
Big cash pile, reduced costs, sale for next year (that sold out so met it’s objective) bringing cash in now, an owner offering additional cash (with strings).
Look beyond the hysteria.
The issue is that easyJet not refunding when they are obliged to. The online ‘refund’ button has been withdrawn and they cannot be reached by phone.
Being committed to paying out over twice their net worth for new planes that no airline will want in the short to medium term probably does not help.
Stelios has always been critical of the growth forever strategy. At some point it has to fail.
They are different issues. Not processing a refund in a timely manner. About to go bust.
It remains to be seen if they purchase the planes, if terms remain the same, or if they back out. Even if they go ahead, they won’t be paying 100% in cash on delivery.
Easyjet may not survive. There may be no humans left. We are a long way short of both scenarios.
+1. easyJet are very very clever and did the right thing by shutting down till there is a path forward.
I have so much invested with easyJet on flights that they are cancelling, it frightens me.
But ” am I bovvered? ” No I am not.
I was already annoyed with some of their unannounced sneaky new policies which were costing me unfairly taken money. I am also very annoyed that they won’t be processing refunds for a long (possibly long, long) time.
But do I think they will disappear?No they won’t. They,and Ryanair, will be strong and viable after this. So I don’t like them, but I have faith in them.
For balance, BA costs (e.g. fuel and wages) are also massively reduced so their cash pile will stretch further. They might yet also receive compensation or insurance. The problem therefore may not be of the magnitude suggested. Still far from ideal however.
Stop with this rational approach, it’s pitchfork time 🙂
The key number is the leasing bill for the planes …
BA have mixed fleet between owned and leased. It’s not in the leasee’s interest for BA to go pop. Good chance of some holiday or other reduction to limit cost.
Point being, it is folly to assume only negative adjustments are hitting the balance sheet. I’m sure the house of Rob is seeing some gains and some losses. The house of Entitled is. BA will be the same.
I lodged disputes against all my cancelled flights today where I haven’t been able to get a refund yet as I can’t reach the TA, airline refusing (KLM one of them), better to have it in the works.
To be honest if it were BA or easyjet and a relatively small amount etc a voucher would be fine. If these companies go under then we’re all going to pay the price in decreased competition / increased fares for years to come. But all these flights are for abandoned plans that I just won’t be rescheduling for any reason. Though I made an insurance claim for one hotel and they cut the cheque 3 days later so at least I’ve got that back up
I was due to fly with BA at the end of the month (which has now been cancelled). Only a day or so after the cancellation I received an email from BA confirming my full cash refund , no phone calls or questions required, very easy process (which I am very surprised with considering the problems people have had with getting refunds).
I think a lot of the problems stem from people being proactive and trying to cancel their flights/ holidays in advance. They clog up the lines and then don’t get the answer they want, so get vocal on blogs and social media, exacerbating the situation further.
Whereas doing nothing seems to allow the BA machine to carry on as usual, processing cash refunds for flights and holidays that they cancel.
There is a similar proposal from the German government in recent of tour operators.
Does anyone know if this has also been rejected and cash refunds must be offered?
I have two large amounts riding on this.
In respect of+
No news yet AFAIK.
Glad they’ve done this. Problem with a voucher is they could just massively increase prices once this is all over and people with vouchers are trapped.
Perhaps a voucher for an equivalent flight with some stipulations would be reasonable. Say book x days in advance and for some reasonable dates.
Idiot! Increased prices!!? Don’t be ridiculous. The airlines (those that survive) will be begging for custom – both leisure and business.
Fred, I think your view is misguided. The airlines will do whatever they want to generate new bookings once restrictions are lifted. That may well be sales but it may not. People who need to travel will pay whatever fare is charged. The airlines also have a captive audience of thousands of customers who have vouchers they need to exchange for flights but these won’t generate new cash unless customers are forced to pay a fare difference. I suspect airlines are hoping a number of those vouchers will go unused but now it seems the airlines will still be on the hook for cash refunds. It’s very messy.
Charming!
Prices may increase if people are desperate to travel after this is over. Depends on how long this goes on for.
And why would they be begging for custom if they have billions of vouchers out there?
Blimey, Fred, are you okay?
You seem very angry.
+1 😂
I agree. For example I’ve got the return of an ex-EU that I want to cancel as when I do eventually come back to the UK I want to take a more direct route.
Now if Qatar would agree to fly me to Europe at some point before 30th Sept for no fare difference, then I’d be perfectly happy to sit on that. Not like planes are going to be running around full of high fare passengers anyway
To be fair to Easyjet they put their whole winter schedule on for £29.99 or less for most flights, so this would allow you to swap to something with nothing to pay in most circumstances
I had an email from Easyjet CEO yesterday. Presumably many got the same note?! Within it he says
‘If your flight is cancelled as a result of this, I am sorry. Our customer service team will be in touch to let you know how to switch to a new flight, get a voucher or be reimbursed. We are currently dealing with an unprecedented number of calls and are working hard to try and process these as quickly as we can – however, with a number of our service centres directly affected by government restrictions, it may take longer than usual and so we thank you for your patience.’
On the basis of a promise to be contacted I feel less pressure to keep trying to call to ask for the refund.