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
Happy now Rob. You and your mob of alleged loyalty experts have contributed (in a small way given you’re not as important as you like to think you are) to airlines having to haemorrhage cash. I hope HfP fails too. You deserve it.
What total rubbish!
I am not giving any airline an interest free loan for not providing the services *I* paid for.
People also have mortgages and other bills pay just like airlines – why are they more important?
More hysteria.
It’s not down to Head for points the problem. People are legally entitled to a refund. Perhaps if the government said they would guarantee the vouchers/ credit people would be happy to take them where they can manage without the cash.
The concern is you take a voucher or credit then the airline still goes bump and your vouchers are worthless. Who can afford to risk that?
The trouble is the restrictions on the vouchers, very short usage timescales. We’re already booked up for the next year, so a voucher that needs to be used for flights flown within 12 months (or less in many cases) wouldn’t be usable. Especially with some airlines that are less versatile in terms of route.
If they extended the time limit, say it must be spent within 24 months, I’d happily accept it.
Plus BA may well be charging much, much more money for the same flights next year.
How far do you think your voucher refund of a bargain flight you found us going to go, at that time?
People need to push BA hard now for refunds
If BA can afford to use its reserves to pay flight crew £80k a year to sit at home, they can afford to refund the money for flights they are not operating.
If BA fails, another airline will take its place in due course
Are they sat at home for a year? I know perspective of time can be misleading but I could have sworn it has only been a couple of days.
Oh, and they can partly afford it because part of the tab is picked up by the government. See previous comments about reduced costs.
…”part of the tab is picked up by Government”.
We all know this means us picking up the tab, as taxpayers. I am happy to help preserve employment for the good of our country.
But other than that, I think we’ve done enough for BA, havent we?
Give people back the money they’re entitled to, BA!
pretty sure they are not paying flight crew 80%, that’s cabin crew and some other ground based staff. Flight crew took a 50% cut in April and May I believe
Pilots took 4 weeks unpaid leave, HOWEVER there is a catch – if BA did a better deal with crew, the pilots deal is nul and void. You can expect the pilots to get 80% now.
But is it 80% of bare pay only, i.e. cabin crew don’t get their duty allowances that make up a bit proportion of their income?
Crew get 80% of allowances too.
Isn’t Rob only advising on the laws, regulations and their associated updates.
At no point does he say what you have to do, but only provides consumer advise.
The closest he goes is to say it’s a positive move for passengers – which is it as many people will need cash at this difficult time above a voucher.
Furthermore, highlighting to the public what they are legally entitled to cannot be linked to airline failure.
If you run an airline, these are the sort of risks you take. No one forces IAG or VA to operate, but they choose to do so to make profit (which they have recently). This profit making enterprise however comes with legal requirements and risks – all should be accounted for as part of a well run business. If any airline (or other large business for that matter) can not afford to meet its legal requirements then it is not the consumers fault if it goes bust.
Furthermore at this time there are many people who will need the cash more than an airline. I recognise that airlines are massive employers (and no one wants to see job losses) but it will be much easier for the airlines to negotiate with the government and large financiers compared to an individual who can’t afford their bills this month because, in part, their money is tied up with BA/VA.
The cash to the individual has more value right now than to an airline
Also bear in mind airlines get the cash in before they actually earn the revenue. Most businesses aren’t so fortunate.
Hey Fred, can I ask where you are coming from on this? Are you a BA pensioner?
He’s clearly not a BA employee, because anyone getting paid 80% of their salary – so more than 100% of their usual net salary once commuting etc costs are removed – to sit around all day and do literally nothing (you cannot even check your work email, or your furlough is invalidated) would presumably be very cheerful 🙂
On the other hand, I will be earning a negative amount for a few months since I doubt our income will cover the salaries of the team. Which means the £2,400 that British Airways owes me in taxes will come in handy ….
Not if they can’t pay their rent and bills, Rob.
If you’re a BA employee and getting 80% of your salary – with zero commuting costs and all the other costs you run up during a typical working day – you will probably be getting more net cash per month than you had before.
Will IAG’s insurance company try to weasel their way out claiming a “Force Majeit?”
The law is the law and consumers are entitled to a full refund. A voucher is obviously not equal to a cash refund – and its shows the arrogance and greed of most of the airlines that they’re trying to palm people off with a voucher, if they want people to take a voucher offer some extra % value incentive. I have a load of BA flights in May I expect some of which to get cancelled – as I fly BA at least once a month I shouldn’t have any trouble using a voucher but cash is king, why on earth would I accept a voucher. Germany have also proposed this change – I think it’s very sneaky to retrospectively change consumer law. But since Lufthansa is taking state aid I can see why they’d suggest this.
We have had 2 cruises cancelled and been offered a choice between a voucher for 125% of the value or a straight cash refund from Royal Caribbean (Celebrity). IAG could take a leaf out of their book. Of course consideration should be given to longer term company viability
Snap! Same for me 2 cruises cancelled I was going to cash out but have decided to be positive and I’m about to try for 3rd time lucky. But not till January 2022. FCC aren’t 25% off next cruise but is worked out on what you have previously paid. My “ discount” is £652 or double that if my cousin comes on next booking. They aren’t transferable to another person unfortunately I’ve tried that. I know my original money is safe as Trailfinders hold in client trust account and worse case scenario I could do a section 75.
We have had 2 cruises cancelled and been offered a choice between a voucher for 125% of the value or a straight cash refund from Royal Caribbean (Celebrity). IAG could take a leaf out of their book. Of course consideration should be given to longer term company viability when accepting vouchers
Perhaps a charitable view could be that the attempt to force vouchers that may become worth far less than customers paid airlines for flights that did not happen – instead of the cash refund customers are entitled to – could perhaps not be airlines’ greed and arrogance.
Perhaps we could say airlines are panicking faced with a situation that is completely new and they are doing the best they can, just making bad decisions.
Have a flight on May 1 to LGW and back from LCY after the weekend.
BA still selling tickets!
But since LCY is closed and LGW ops have been shut down, you’d think they might have contacted me to shift to the LHR flights still operating.
Or even just to cancel!
Not that I want to go, just waiting for the cancellation email to get the cash. Which for me is important – food on my table better than food on BA’s.
Same I have some Berlin/LCY flights in May I can’t see happening and not been cancelled, don’t know why they haven’t just rebooked to LHR/TXL.
i imagine they are under immense pressure to sort out the schedule in rolling 2 or 3 week increments. The May flights are far enough to worry about next week. As long as they don’t go into their 14 day window for EU261 they will be ok. Considering most people will now be working from home, the teams will be trying to work out which flights are still flying and then move people where they can. You flight will be cancelled soon if they are not able to do that, just be patient – it’s a very manual process
14 day window is irrelevant for ec261 in current environment. Compo not claimable for any flight in these overall circumstances currently.
All other rights such as right to a refund or reroute, or duty if care, apply regardless of if change made in more than, or less than, @14 days
On Thursday this week I received an SMS from BA notifying me that my flight to SCL on 25th April was cancelled. I called You First straight away, my call was answered without any holding whatsoever and the gentleman was more than happy to arrange a refund, no questions asked.
My companion voucher and Avios have recredited already. Does anyone have a realistic time frame for how long it’s taking the poor staff at BA to process the cash refund?
My refunds credited my Amex after 2 days on all 3 of my bookings cancelled thus far.
My refunds appeared on Amex in less than a week, I am really pleased. I am still waiting my money to be refunded from Virgin though….
Can I ask a stupid question please?!
I have a glut of domestic flights over the next few weeks. Some have been cancelled but in most cases, just one leg has been cancelled with the return currently operating.
In terms of a refund, am I able to claim a refund for the total ticket price as a whole even if only one of the two flights has currently been cancelled? None of my bookings are one way.
Ta
Yes, if any leg of the trip is cancelled you can claim a full refund.
Lovely stuff – thanks for confirming.
Do you need to claim, though? Or would normal, standard operating procedures be that a refund will be issued in due course because the flights were cancelled by the carrier?
Practically, you need to claim.
You might even need to push and persist as well, practically
You’ll be just another person clogging up the call centre queues then, though. Possibly then becoming another person saying they can’t get through on the phone and BA are denying your rights to a cash refund…
Has anyone managed to get a refund from Iberia?
Spotted in MMB that my flight to Madrid in a couple of weeks has changed from 9:15am to 11:30am (although will be cancelled in due course I expect).
As I understand it, I should be able to refuse this change and get a refund now, however the website only gives an option of accepting the change or getting a voucher. Tried calling and am only given the option to pay for a flight, which is weird as my reason for calling is to cancel a flight, or get a text with details of applying for a voucher. If I choose neither I get disconnected.
How can I actually speak to someone?
Use the Iberia CS and at say travelling tomorrow or something like that.
You should be able to connect and speak to someone.
I have done exactly this and managed a refund. Took about 7 days or so to receive in my card account but worked.
Thanks Roger – will give that a go
This time I got straight through to an agent who only initially gave me the option of a voucher even though I specifically said I wanted a refund. I had to insist that I wanted a cash refund, and that I was entitled to it.
It’s very sneaky how the airlines are acting. There will be a lot of people who don’t know their rights and assume they are only entitled to a voucher as that’s the only option being given.
Agree with other posters that the airlines should be offering a bonus if they want customers to actively choose a voucher rather than a refund.
Although I suppose they must be doing a good enough job tricking people into selecting the vouchers that they don’t need to do this…
i called a couple of weeks ago after a redemption flight i was on was cancelled. Took a few goes to get through to Iberia Plus (normal Iberia call centre can’t process these bookings) but managed to cancel. The Avios haven’t reappeared in my account but the cash refund arrived after about 10 days
Good news! Has anyone else been told my lufthansa phone agents on the phone that they can’t issue you a refund because they do not have enough staff available globally to profess the refunds? Sounded kind of legitimate to me, but when I asked to be put on a refund waitlist the agent said the wait lists were full and I’d need to call back in a few months (even though my travel is due this week although the flight has been cancelled…)
Lufthansa make BA look wonderful. Section 75 is your best bet I think.
Forget that rubbish. Complete, complete rubbish and evidenc of a deliberate plan set up to deny you your rights.
Call your card company.
If credit card request s75 refund or chargeback
If paid by charge card request chargeback as you did not receive what you paid for.
Endof.
Does the Euro 3.7bn quoted include taxes etc which are netted off elsewhere in the balance sheet?
Not clear to me, in all honesty. My guess was it included taxes because they are also a liability as BA must repay them too.
No. Accrued revenue is a “clean” figure. Cash received for taxes but not paid out would go to a different liability account
Ie Dr cash 100, Cr accrued revenue 80, Cr tax liability / airport tax payable etc 20.
On a refund, it’s then reversed out.
*unearned revenue. That’s what looking after a baby does to your brain!
It’s far worse than €4bn then!
But you are still only selectively looking at one part of the balance sheet. None of this is happening in isolation.
I cancelled a virgin flight for the end of the month, was told miles would be back in account in ten minutes but cash would take 90 days!! Totally unacceptable. The law states 28 days maximum for a refund
What law is that then?
Actually I think the law says seven days, and the law in question is Article 8 of EC261/2004
Isn’t that law in respect of cancellations BY the carrier?
Yes, you’re right.
The problem with a voucher is that it doesn’t necessarily buy you the equivalent service you have been refused.
If they offered a voucher guaranteeing me a CW seat on a flight to Miami in Easter 2021 then I might be tempted to take it. I have no intention of taking a voucher for a fixed amount of money when I have no idea how much the flight might cost when I come round to booking it…
But the circumstances are extraordinary, and I think asking the airline to bear the full cost of them is unfair. Refund yes, some guaranteed future booking at same cost, not fair.
But it’s also not fair to try to get someone to accept a voucher (non-interest earning, non-inflation protected etc) when it means that the equivalent product may not be affordable with it in the future.
This is why adding, say, 8% to the value of a voucher for future use makes it an acceptable proposition, but giving no adjustment compared to cash is not.
The voucher is something else again, the law says you’re entitled to a refund, the voucher is a cash grab by desperate businesses. I certainly agree that if they want to play the voucher game then an incentive is reasonable.
I’m not sure what would entice me to take a voucher over cash, but I know it would be more than 8%. 108% of potentially nothing is never going to outweigh 100% cash refund. Speaking personally nothing under 20% would even cause me to think about not wanting the cash back.
The 8% only compensates for statutory interest for 1 year so does not increase the value of the voucher.
They need to increase value by 25% or so to even begin being a reasonablealternative to the cash refund you have a right to. BA’s already been earning either interest or business profit on your money while they’ve had it. After that an amount needs to be further added to the voucher in addition to cover bankruptcy/restructuring risk or “sneaky tricks” risk say 15% for BA, plus an amount for possibly fewer flights or less avios seats to choose from say 5%.
And BA wants you to take a voucher for the same amount as the cash that owe you? They’re “having a laugh”. I can eat with cash from a refund, but not from BA’s promises
They can give me my money back, or a voucher for the same flight in the future. Those put me back in the same place as I was before – a cash voucher does not.
If they want me not to ask for cash then make a sensible alternative offer
Excellent point
And if BA goes bust, won’t people holding vouchers just be unsecured creditors, maybe getting back a percentage of what they are owed?
I can’t see S75 still applying to anyone who accepts a voucher.
Another problem with vouchers is that BA are not treating them as cash. My brother has received a voucher for cancelling a stand alone car hire booking. He is also due to make a final payment on a summer holiday booked with BA. BA are refusing to accept the voucher in part payment. They are insisting on cash.
People left with vouchers will get nothing in that situation.
I would rate BA as pretty solid and also Ryanair and easyJet.
Other airlines may only be solid with the support of their government.