COVID-19: Airlines Plead for Mercy as Debt Burden to Passengers Hits $35 Billion

Weighed down by an unbearable debt burden of $35 billion to passengers for cancelled flights, airline operators are currently pleading with the authorities for a grace period.

A UN top trade official says to date, the International Air Transport Association (IATA) estimates that airlines owe $35 billion to passengers.

IATA is, however, advocating for governments to delay the requirement for immediate refunds and allow companies to offer vouchers for future travels or refunds once the COVID-19 crisis period is over.

Already, 4.5 million flights are expected to be cancelled until June 30 as global lockdowns to contain the spread of the rampaging COVID-19 currently affects half of the world’s population.

According to the Director of International Trade and Commodities, United Nations Conference on Trade and Development (UNCTAD), Pamela Coke-Hamilton, the UN World Tourism Organisation estimates that international tourism could fall by up to 80% this year.

Measures taken to combat the spread of COVID-19 have an unprecedented impact on businesses and consumers, challenging governments to both protect consumers’ economic interests and prevent airlines from going bust.

They argue that honouring consumers’ right to refund, which sometimes stems from legislation and sometimes from a contract, will make them insolvent.

As recommended in the United Nations Guidelines for Consumer Protection, member states must ensure that all enterprises obey the relevant laws and regulations of the countries in which they do business.

The UNCTAD chief says businesses should also deal fairly and honestly with consumers at all stages of their relationship and avoid practices that harm consumers, particularly with respect to vulnerable and disadvantaged consumers.

According to her, ‘’exceptional times call for exceptional measures. Of course, it is in consumers’ interest that airlines are kept in business, but consumer rights must also be respected and protected.

‘’Governments should intensify their efforts to prevent practices that are damaging to the economic interests of consumers.

‘’They should ensure that manufacturers, distributors and others involved in the provision of goods and services adhere to established laws and mandatory standards, as recommended in the UN Guidelines for Consumer Protection.

‘’Governments must fight abusive practices in all sectors, including aviation.’’

China established a free ticket exchange policy for all tickets purchased before January 2020. The United States warned airlines of their obligation to refund cancelled tickets to consumers and India gave airlines a 30-day period to make refunds effective.

Consumers International reports that its member consumer associations from China, Malaysia, Romania, Peru, the United Kingdom and the United States have also called on businesses to respect consumers’ right to refunds for travel bookings.

The consumer association MGP India called for international guidelines to ensure airlines respect consumers’ rights.

The European Union issued a recommendation to make travel vouchers an attractive alternative to cash reimbursement, allowing for vouchers to be issued with a validity of 12 months after which the reimbursement is actionable.

Amicable solutions, where consumers accept some new conditions proposed by airlines, are a good way of preserving both consumers’ rights and the service itself.

However, not all consumers will be in a position to accept a voucher or a delayed refund. Some consumers may need the refund money immediately and, if their right is recognized in the consumer protection law or the contract with the airline, their claim should be satisfied.

Ensuring adequate consumer protection

As governments around the world provide multi-million-dollar state aid to airlines to avoid bankruptcy, airlines should not abuse the rights of affected consumers, especially the most vulnerable ones.

Governments should advise airlines to provide full refunds if consumers don’t want to accept vouchers, and to provide appropriate and complete information regarding consumers’ options.

To adequately protect consumers, UNCTAD calls on governments to:

Engage with airlines to design satisfactory voluntary voucher schemes, while respecting consumers’ rights;

Enforce consumer protection laws against abusive business practices such as penalties or fees and breaches of refund rights;

Provide clear, precise and accessible information on consumers’ rights in case of cancelled flights, including refunds;

Ensure a transparent process for the confirmation, cancellation, return and refund of products and services;

Ensure effective dispute resolution and redress systems for consumers, especially through electronic means.


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