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Ticket refund issue: As important deadline nears, spotlight on airlines' financial stress

As per the Supreme Court's order last year, credit shells get over on March 31, 2021. After that, airlines will have to refund tickets booked for travel during the lockdown.

March 25, 2021 / 03:52 PM IST
Representative Image.

Representative Image.

A poll by Twitter user Pari Kankaria on how long people have been waiting for refund of their tickets from Air India drew sharp responses. While the poll itself, when one last checked, showed that the highest 33.3 percent have been waiting for over a year for a refund, many of the participants also shared their ordeals. Some complained they have been sent 'back and forth between airline and travel agency' for the elusive refund.

The national airline, on the other hand, stressed that it has been handicapped by a 'severely impacted' revenue stream ever since domestic flights resumed on May 25, 2020, amid the COVID-19 pandemic. The airline, in a statement to Moneycontrol, said it has cleared Rs 931.38 crore worth of refunds, from April 1 2020 to March 22, 2021.

"It is not feasible to give a time frame for opening of automatic refunds as cancellation rate is high owing to sudden regulations in view of new variants and increase of cases," the airline said.

Air India, which is being privatised, may end this financial year with a loss of up to Rs 10,000 crore - its highest in 14 years.  The airline had stopped automatic refunds. Instead, refunds were managed by its own offices within 'pre-assigned budgeted amounts.' The airline said, "Refunds are progressively increasing with the increase in the revenue of the company."  It has now opened automatic refunds for a 'limited time one day a week.'

This ordeal of the customers, and the continuing stress of airlines, has again come under the spotlight as a Supreme Court set deadline of March 31, 2021, to maintain credit shells nears. The apex court in its order in September had said that airlines can hold the refund in a credit shell till March 31, 2021. Post that, the air carriers will need to refund the amounts to customers.

Close

The credit shell arrangement had brought a relief to airlines, which were otherwise struggling to meet their fixed costs as flying remained curtailed. At the same time, it also led to much heartburn among customers, especially for those who didn't plan to fly and had no use of the credit shells.

The refund issue seems to have regained intensity from February onwards. Ever since domestic flights resumed in May, refunds were the biggest source of passenger complaints, as per data from regulator DGCA.

These peaked in September and October, when grievances on refunds made up for over 80 percent of the total complaints. That reduced in the next three months, and came down to 41.3 percent in January 2021. But in February, it has risen to 54.6 percent of the total complaints.

What are the airlines saying

IndiGo, the country's largest airline, said on March 24 that it had refunded 99.95 percent of the total amount owed to its customers. This amounted to Rs 1,030 crore.

This is by far the clearest message that has come from any airline, also possibly reflecting that IndiGo is in a much better financial condition than any of its peers.

GoAir and Vistara shared similar statements, when asked by Moneycontrol.

The Wadia-family owned airline said: “GoAir is in compliance with the Supreme Court ruling and DGCA guidelines pertaining to the refunds to be given to passengers for the air ticket bookings and cancellations during the lockdown period.”

And the joint venture carrier of Tata Sons and Singapore Airlines stated: “Vistara is in compliance with the honourable Supreme Court’s order on refunds to customers affected by the suspension of air travel in 2020, during the nationwide lockdown.”

A spokesperson of SpiceJet, the country's second largest low cost airline, told Moneycontrol that it has reached out to its travel agents, "to share details of pending credit shell PNRs so that the airline can immediately reverse the credit shell amount back to the agency ID." The airline is adhering to the Supreme Court's order, the spokesperson said.

Sources close to AirAsia India too said that the airline has "made most of the refunds and has reached out to travel agents for the remaining."

From April on wards, industry observers say, airlines will be under pressure to meet customer requests for refunds. It is not going to be an easy ask, as the resurgence in COVID-19 infections is beginning to have an impact on air travel. This will add to the cash flow challenges that the airlines face. Overall, advisory CAPA India said last year, the Indian aviation sector may lose up to $4 billion in the 2021 financial year.



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Prince Mathews Thomas heads the corporate bureau of Moneycontrol. He has been covering the business world for 16 years, having worked in The Hindu Business Line, Forbes India, Dow Jones Newswires, The Economic Times, Business Standard and The Week. A Chevening scholar, Prince has also authored The Consolidators, a book on second generation entrepreneurs.
first published: Mar 25, 2021 02:30 pm
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