Unclaimed Covid travel refund notes held by airlines ‘worth hundreds of millions’

Hundreds of millions of pounds’ worth of unclaimed travel refund vouchers are being held by airlines for flights cancelled during the pandemic.

British Airways owner International Airlines Group – which also includes Are Lingus, Iberia and Vueling – reported as having €911 million relating to unredeemed vouchers alongside its 2022 annual results last Friday.

The level of unclaimed vouchers fell from €1.4 billion at the end of 2021.

The 35% reduction means roughly that one on in three  credit note holders used their voucher on flights last year, the Telegraph reported.

Customers who took up credit notes instead of refunds when global air travel almost halted during the pandemic have until September to use them or lose them.

If there is a similar take up rate to 2022, holders risk missing out on vouchers worth almost €600 million, the newspaper calculated.

BA said it was proactively encouraging passengers to use their credit notes before the September deadline, with more than 700,000 redeemed in 2022.

EasyJet had £111 million of unused vouchers on its balance sheet at the end September, according to its most recent results reported by the Financial Times. 

Some major airlines encouraged passengers to accept vouchers rather than cash refunds as Covid border restrictions first hit their operations and led to a wave of cancellations from the spring of 2020.

Former IAG head of strategy Robert Boyle, now an analyst at Gridpoint Consulting, told the FT the sudden rush of compensation claims in 2020 “was extraordinary and absolutely could have bankrupted all the airlines if they had literally paid out to everyone at the time”.

He added it was unusual for airlines to break out vouchers in their results, and there was no historical comparison to try to estimate how many will ever be used.

“It is going to be an upside of some sort . . . it could be quite a big number,” he said.

He was quoted separately by the Telegraph as saying: “There is a likelihood of a significant release to profits once the extent of the vouchers expiring becomes clear.

“If the vouchers are never used, IAG will have extra seats available to sell. Given what has happened to ticket prices since the pandemic, the cash value of those seats will be even bigger than the reported voucher values.”   

But Alexander Patterson, an analyst at Peel Hunt, told the FT the unused vouchers were “less a windfall and more a liability”, given that the cash has been received and customers could use the vouchers to fly.

The value of there unclaimed vouchers emerged after BA was reported to have lost a court case against a customer in a dispute over flight vouchers for travel to Japan in January 2020.

EasyJet told the FT the unused vouchers accounted for just 2% of its ticket revenue, meaning “there is a very small proportion of customers who have not yet used their vouchers”.

The carrier added the number of unused vouchers would have fallen since September, particularly as the first two months of the year are typically a busy booking period, when the airline reports strong travel demand.

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