Airlines are cancelling flights and downsizing their operations because of the global coronavirus pandemic. When they don’t fly the flights they’ve sold, they have to refund customers’ money.
The European Union’s rule 261 applies and requires these refunds. The E.U. reiterated that last month. However European airlines have been ignoring this and not processing refunds, at least for their European customers.
The U.S. reiterated that airlines have to refund tickets for cancelled flights, and threatened fines if they do not. European airlines have been generally willing to refund tickets for flights to and from the U.S. I had no problem getting a refund for cancelled KLM tickets.
The airline trade association IATA objected to the refund requirement saying airlines should be able to keep the money because they need the money, and therefore should be entitled to no interest loans from customers providing only vouchers for future travel instead.
Now 13 European nations are asking to change the rules to allow airlines to keep their customers’ money despite not providing the services customers purchased.
Belgium; Bulgaria; Cyprus; Czech Republic; France; Greece; Ireland; Latvia; Malta; Netherlands; Poland and Portugal all argue,
- Returning cash is hard on airlines
- Rules requiring refunds were written without considering the circumstances of this pandemic
These nations collectively are asking for EU261 to be amended offering a wavier of the refund requirement.
Nearly all law and regulation was written without considering the circumstances of this pandemic. And the current situation we’re in certainly shows that many rules make no sense. For instance, laws limiting health care competition and preventing addition of new hospital beds and rules that stood in the way of virus testing seemed to make little sense. Rules that prohibited restaurants from delivering alcohol have been waived in many jurisdictions.
Does it make sense to let airlines keep consumer cash? They’re facing challenges but so are individual customers who may have lost their jobs, may have gotten sick and won’t be able to travel, and won’t find vouchers useful with changing airline flight schedules and where the airline whose voucher they have may not be offering them the best deal in the future.
Of course airlines want to keep money, and build in a constituency of people hoping their airline script is worthwhile and therefore support further government bailouts. In fact the letter from these 12 governments explicitly calls for these bailouts,
Moreover, as consumers are offered vouchers with a long-term validity, it is crucial to discuss ways to protect voucher owners against the risk of bankruptcy of the airlines that issued those vouchers. We are ready to explore this on a European level and call upon the Commission to take this aspect into account.
However if airlines do not have enough money to continue operating without stealing customer cash then they are essentially bankrupt and should be restructured. Customers shouldn’t be forced to become unsecured creditors without the protection of an administrator.