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…
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.