I’ve been hard on airlines all week, noting they are breaking the law by refusing to issue refunds for flight cancellations. My opinion remains principally unchanged. Today, however, I want to look at the issue from the airline side.
Airlines Are In Survival Mode
Airlines are currently backed against a wall due to negative demand (bookings minus cancellations). With cancellations far exceeding demand for new flights and airlines forced to cancel many flights due to government restrictions (though 20% loads hardly make such flights otherwise profitable), airlines are fighting for survival.
I’ve talked to many airline workers this week, including revenue management folks. While they would not go on the record, they all presented this dilemma: if we were forced to issue refunds now to all the people we owe refunds to, we would liquidate…there would be no money to continue.
That’s quite sobering and I don’t think it is just the usual airline doublespeak.
So let’s assume, for argument purposes, that airlines do face this dilemma: if they refund, they die.
Can you blame them for withholding your money?
The Slow Wheels Of Justice
Here’s what airlines have going for them: they hold the money and the wheels of justice grind slowly. Want to sue an airline? It will take weeks and not months, even if you are guaranteed to prevail based upon the contractual language of your ticket purchase and government guidelines which mandate refunds for cancelled flights.
It may be, if the situation deteriorates further, that more governments will exempt airlines from refunding non-refundable tickets, as the Canadian government did earlier this week. Thus airlines have additional incentive to hold your money.
And consumers have short memories. With choices limited, I strongly doubt that consumers will avoid United or Air France or Lufthansa after COVID-19 blows over…just ask David Dao.
So airlines have time on their side, a slow legal system, and customers with short memory spans. If my choice was survival or delaying refunds…I guess I have to admit that I’d be dragging my feet too…
CONCLUSION
Every day airlines hold your money is another day of survival. Once COVID-19 is controlled, airlines hope for future bookings to surge, providing the liquidity to honor currently-deferred refunds.
The irony is that U.S. airlines are about to receive a massive bailout, including direct cash aid. In a sense, airlines are picking taxpayer pockets twice. Once through this bailout and again through by refusing to refund customers tickets in a timely fashion (with a big and laudable exception for Delta).
Hopefully customers will remember that…though I doubt it.
Even so, if I was running an airline and my choices were survival or refunding…well, I would survive to live another day.
Survive. I can’t believe tbis is even a question.
If they refund they sink. So breaking the law is a moot point anyway.
If they survive they will refund and can always say there were extraordinary circumstances and get away with slap on the wrist which they would be happy with.
With airlines in survival mode, they should be slashing fares for the fall and next winter. This is far enough out that people should be comfortable booking (hopefully) however, when looking for any travel beyond August (especially Holiday season travel) fares are at the normal fares and don’t create an incentive to book this far out.
Personal finance advice is that you should have enough savings to live a year without income in your late 20’s and a decade when you’re 40. Airlines should have enough money to last a year or two but they don’t.
Yeah i’ve gotten all my money back from AA. United is the only airline refusing to help out, even though i have a flight originating HKG, which is clearly stated on their covid-19 waiver site.
I got a refund from Spirit — yes, Spirit — after accepting a voucher and then some back-and-forth “email and email again.” And it wasn’t even a cancelled flight, but one I chose not to take. If Spirit can do this, United can refund actual cancelled flights.
It’s fraud for airlines to cancel a flight and then keep your money — literal fraud.
If only United could declare Chapter 11. Oh wait…
I was flying from Budapest to Brussels on Brussels Airlines on “March 30” and the flights and the airline shutdown … but I was notified on March 12th about it … I woke up in the middle of the night and called their customer service in India … great and nice convo and helpful … he said he submitted the refund request and with 72 hours I would get a notice saying refund in process …. 21 days later nothing … He did submit the request because when I try accessing the PNR it says to contact Customer Service, and it seems a lot of people are going thru the same as i’ve read.
Since they are owned by Lufthansa .. I’m thinking they are not processing any refunds
So I just called Chase and protesting the charge. Chase said they would send me a letter for me to sign and I had to return it and 99,9% of the time I would get my money back (as a credit, which I’m ok with)
I am gonna state the obvious points. They can’t take your money and not provide u the service they promised.
They can’t take your money because many of the people they are in effect stealing from are also in a financial crisis.
Dispute with your credit card. We all have our problems, stealing from others is not the solution.
As long as airlines stringently uphold regulations beneficial to them, why should it be OK for them to flout those benefiting customers?
Live and let live only works when both sides play nice.
Airlines have set the precedent. Why shouldn’t customers?
As a customer I do have a long memory and wish more of us would. Until that day, Pax will always be sheep.
I filed a DOT complaint against United for refusing to refund a cancelled flight last week. I have initiated a credit card dispute, but in the meantime, I have already heard back from the DOT:
“This responds to your communication regarding United Airlines. The U.S. Department of Transportation seeks to ensure that all airline passengers are treated fairly. Complaints from consumers are helpful to us in determining whether the airlines are in compliance with our rules and to track trends or spot areas of concern that warrant further action.
Based on the information you have provided, your complaint appears to fall under the Department’s rules. We will forward your complaint to the airline and ask the company to respond directly to you with a copy to us. Airlines are required to acknowledge receipt of a consumer complaint within 30 days and provide a substantive response to the complainant within 60 days. We will review the airline’s response. If you need to contact me, please include your name and case number (see above). I will make every effort to reply to your message within one business day.
If our review of your complaint and the response from the company discloses a potential violation of our rules, we may pursue enforcement action. Generally, we pursue enforcement action on the basis of a number of complaints which may indicate a pattern or practice of violating our rules. Your complaint may be among those considered and may lead to appropriate enforcement action including the assessment of civil penalties. However, we have no authority to order compensation for individual complainants.
We have entered your complaint in our computerized industry monitoring system, and it will be counted among the number of complaints filed against this airline in our monthly Air Travel Consumer Report. This report allows consumers and air travel companies to compare the complaint records of individual airlines and tour operators. The data in this report also serve as a basis for rulemaking, legislation and research. Consumer information for air travelers, including the Air Travel Consumer Report and our pamphlet Fly-Rights, a Consumer’s Guide to Air Travel, can be found on our website: http://www.transportation.gov/airconsumer. Thank you for taking the time to contact us. “
“However, we have no authority to order compensation for individual complainants.”
United is banking on that.
Lo and behold, the DOT complaint worked and United agreed to issue a refund within 10 days!