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Coronavirus: Which EU airlines have most to lose from refunding cancelled flights?

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Over the weekend I looked at the scale of IAG’s liability in terms of how much it may have to refund customers for pre-booked flights.  With €3.5bn of pre-paid but not flown flights at 31st December, it is a big number.

Bank of America published some research yesterday on a similar theme which I think is worth a look.  This is all taken from publicly available financial reports and only covers airlines quoted on the stock market, which is why Virgin Atlantic is excluded.

Here is the first chart.

This looks at the amount of money each airline has banked from unflown flights (much of which will need to be refunded) as a percentage of how much cash it has in the bank.

As you can, this is a disaster for Norwegian.  As of its last set of financial statements, it was on the hook for refunds worth DOUBLE the amount of cash it had in the bank.

Turkish and Wizz Air are in the strongest position – they had enough to cash to refund their sold tickets three times over.

IAG’s position is weaker than it looked in my analysis.  This is because IAG likes to talk about ‘cash and cash equivalents’, which also includes arranged loans where the money has not yet been drawn.  Bank of America is looking purely at cash.

easyJet is also looking weaker than its theoretically strong headline numbers suggest.  This explains why easyJet borrowed £600m from the Government yesterday and has been desperately trying to avoid paying cash refunds.

Here is the 2nd chart, which is not as relevant.  This looks at the value of unsold tickets in terms of how many months revenue it represents.  This table is more susceptible to timing influences based on the year end date of the airline, because airlines tend to generate the majority of bookings in the first few months of the year.

I’m not sure how Turkish can only be sitting on three weeks of advance bookings!  The figures for the other airlines are all roughly similar, and I think differences could be explained by whether they have a December or March year end.

Comments (48)

  • andre says:

    slightly OT: any airline cancelling fuel surcharges on tickets for the near future due to the sudden drop in oil…?

    • Peter K says:

      They don’t call it fuel surcharges any more, just surcharges.

    • Lady London says:

      Ahahahahaaaaaaaaa did anyone ever think they would reduce those charges?

      BA was sued for calling their own co-pay dema ded money in the USA “fuel surcharges”. They settled out of court. Now they just call it ‘taxes’ as an abbreviation for ‘taxes and surcharges’ and don’t explain that most of it is money that BA keeps not taxes.

      It’s called “YQ” on your fare breakdown and look how big it is. But at least it has a new name now 🙂

      • ChrisC says:

        BA call it ‘carrier imposed surcharge’

        It’s the bloggers and comentators who call it ‘taxes’

        If people can be bothered to look it is specifically listed in the fare breakdown so it’s quite clear what it is.

        • Lady London says:

          Anecdotally BA agents on the phone call it taxes without further clarification. Not a concern for us but there’s a case that the average punter is being deceived.

  • bill says:

    Jet 2 – we’ve decided to recommence our flights programme on 17 June 2020

    • Mr(s) Entitled says:

      I like Jet2 as an airline. They may be worth watching for good deals as they start to take bookings again and attempt to bring cash in.

      • Ben says:

        On my booking they have tried to be sneeky, in terms of not mentioning refunds but only rebooking options.
        I will wait for their call and ask for a full refund

  • ADS says:

    do you have a link to the original BoA report ?