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Coronavirus impact: Flyers fume as airlines, travel agents refuse cash refunds

Last month, the government had directed airlines to refund money in cash to passengers for tickets booked after March considering that these people booked tickets for emergency purposes and their money should not be blocked

twitter-logo Manu Kaushik        Last Updated: May 14, 2020  | 22:13 IST
Coronavirus impcat: Air travellers suffer as airlines, travel agents refuse cash refunds

KEY HIGHLIGHTS

  • Refunds for tickets booked directly from airlines during lockdown have been issued to passengers
  • About Rs 3,700 crore is still stuck with the airlines in form of credit shells
  • Cash-strapped travel agents have not been able to issue refunds as airlines have returned them in "virtual wallets"
  • MakeMyTrip is getting a lot of flak on social media for creating wallets on its own website to issue refunds
There seems to be no respite for air travellers even after the government's intervention. The cash-strapped airlines and the travel agents, including online travel aggregators (OTAs), are trying different techniques to avoid giving refunds to the passengers who had booked tickets for travel during the ongoing lockdown period.

Essentially, there are two types of passengers who are bearing the brunt of the lockdown announced by the government from March 25: those who booked tickets before March 25 for travel during the lockdown, and those who booked tickets after March 25 for travel within lockdown period.

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Last month, the government had directed airlines to refund money in cash to passengers for tickets booked after March considering that these people booked tickets for emergency purposes and their money should not be blocked. Following the directive, airlines started giving cash refunds to passengers who booked directly through the airlines' website. But that is a small percentage (about5 per cent) of total bookings; majority of the bookings happened through travel agents. That's where the travel agents have a problem since airlines have shifted the onus of returns to the agents. How?

The airlines are returning money to agents into their "virtual wallets" on the airlines' websites. Most large agents have to maintain a wallet (with cash) with airlines to make ticket purchases on behalf of their customers. Through these "virtual wallets", the agents cannot transfer money to their bank accounts. The travel agents, in return, could not process refunds for their customers because their money is still stuck with the airlines.

"We are closely working with our airline partners to work out more benign policies for the customers and trying our best to streamline the cancellation and refund process. We are processing refunds as per the policies defined by the airlines," said Dhruv Shringi, co-founder and CEO of Yatra.com, in an email response.

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But this is just one side of the story. The amount of tickets booked prior to the lockdown is estimated at Rs 3,700 crore. This money is being converted by the airlines into credit shells, which are basically notes against a cancelled ticket that can be used for future booking. Travel agents, therefore, are not issuing cash refunds. MakeMyTrip (MMT), which controls over 50 per cent of the online travel booking market, is particularly getting a lot of flak on social media because it's refunding money to customers in wallets on its website. "I want refund in my original payment method. Why you guys are transferring to wallet," said a Twitter user tagging MMT.

A spokesperson for MMT said in an email response that "we are working closely with our airline partners and are seamlessly passing on refunds to our customers as soon as we receive the same from the airlines."

The fact is that airlines are not processing cash refunds except for a few passengers who booked directly with the airlines. "Nearly 80 per cent of the airlines (domestic and international) are giving refunds in credit shells. The national carrier Air India which should lead with an example is also issuing credit shells. Some airlines have said to agents that they need 180 days to process cash refunds. We are requesting our members to refund money in cash wherever they can. We don't want customers to feel cheated," says Jyoti Mayal, president of Travel Agents Association of India (TAAI), a travel agents' body with over 2,700 members.

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Passengers who are stuck with credit shells feel that they are being short-changed by the airlines. "That's not a right strategy. We are getting a lot of complaints. Suppose a passenger had booked an international ticket which usually costs high on long-haul routes. What if he or she doesn't want to fly to some other country over the next one year given the current circumstances? They might not be able to utilise the entire amount in credit shell till the time it's valid," says an OTA executive.

As per ratings agency ICRA, the domestic airlines are losing Rs 75-90 crore per day owing to the lockdown. "While some airlines have sufficient liquidity and/or financial support from a strong parentage, which will help them sustain over the near term, some airlines, which were already in financial stress, are facing existential crisis," said Kinjal Shah, Vice President at ICRA. The cash flow situation of both airlines and travel agents is strained, and that has resulted in passengers clamouring for refunds.

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