Iata: ‘End airline cash refunds for cancellations’

Iata has written an open letter to the trade confirming the substitution of vouchers for cash refunds for cancelled flights during the Covid-19 lockdown.

The airline association also confirms these will be issued via the Iata billing and settlement plan (BSP) and calls on governments to “recognise the necessity of this approach” and lift requirements for cash refunds.

The letter to “the travel agent community” from Iata director general Alexandre de Juniac promises to operate the BSP with “as much flexibility as possible” during the crisis.

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But it says the BSP, which normally handles more than $1.25 billion a day, is now operating with “far more cash exiting than is coming in”.

As a consequence, De Juniac tells agents: “On the issue of airlines withholding ticket refunds in the BSP, or issuing vouchers in lieu of refunds, I’m afraid the message is not one that will provide comfort.

“Our industry is experiencing a critical liquidity crisis. Most airlines are spending more cash in reimbursing passengers than they receive in new booking revenues.

“We recently estimated the industry’s liability in this area at $35 billion.

“In this context, airlines’ most urgent need is to keep their remaining liquidity to pay salaries and face their fixed costs.

“It is practically impossible for industry players to find sufficient financial means to keep the air travel value chain operating in the short time airlines have before facing bankruptcy.

“The best answer for both airlines and travel agents is for regulators to ease requirements for cash refunds and allow airlines to issue vouchers instead.

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“These vouchers can be managed through the Iata BSP using processes and procedures that already exist. This would remove the pressure on agents to issue cash refunds at a time when airlines are making decisions based on their own need to preserve cash.”

De Juniac notes: “We are grateful that regulators in Canada, Colombia and the Netherlands have recognised the necessity of this approach and hope others will do the same.”

Iata does say it will allow travel agents’ settlements “to be made a bit later without penalties”.

It adds: “Further, we are allowing agents to continue selling even when they are late with remittances [and] offering to extend deadlines for audited financial statements by up to a month.”

The association also offers “to engage in open and collaborative discussions with the travel agency community, in the Passenger Agency Programme Global Joint Council” to formulate a structure for these vouchers.

The letter was issued on April 2.

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