In the case of cancelling a flight, airlines have to offer the choice between reimbursement and re-routing. However, the numerous cancellations entailed by the COVID-19 pandemic have led to an unsustainable cash-flow situation for the travel sectors, and in some cases, companies have not yet received reimbursement of prepaid services. Thus, the immediate refund of the full price can cause serious financial problems for the airlines.
The COVID-19 pandemic has resulted in numerous travel bans, warnings, or restrictions at the borders, and aviation came to a virtually complete halt, which has led to a vast number of cancellations. It was an unforeseen situation that no one could prepare for. Many passengers have inquired whether they were entitled to compensation under Regulation (EC) No 261/2004 of the European Parliament and Council. According to the Regulation,
passengers have the right to compensation by the operating air carrier if their flight is cancelled less than two weeks before the time of departure, unless “the cancellation is caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken”.
In the case of package trip cancellations, directive (EU) 2015/2302 of the European Parliament and of the Council (12) (‘the Package Travel Directive’) provides that, if the trip is cancelled due to ‘unavoidable and extraordinary circumstances’, travellers have the right to get a full refund of any payments made for the package within 14 days after the termination of the contract.
The coronavirus travel restrictions fall under the above-mentioned exception, explained the experts of D.A.S. Legal Expenses Insurance Company to Origo. Therefore, the purchase price has to be reimbursed by the airlines. However, the cancellations caused liquidity problems in the transport and travel sectors, and airlines do not always receive reimbursement of prepaid services. If carriers become insolvent, there is a risk that many passengers would not receive any refund at all.
According to the EU Regulation, airlines have to provide the reimbursement of the full cost of the ticket within 7 days following the passenger’s request, which can be made in money or in the form of a voucher (only possible if the passenger agrees), or offer re-routing.
Since re-routing has rarely been applicable under the current circumstances, the European Commission has made a recommendation (2020/648) “on vouchers offered to passengers as an alternative to reimbursement for cancelled package travel and transport services in the context of the COVID-19 pandemic”. The aim was to ease the liquidity problems of carriers and provide better protection of the interests of travellers by making vouchers more attractive. The commission recommended that
vouchers should have a minimum validity period of 12 months, and they should be a valid payment option for any transport service or package travel offered by the airline. Vouchers should also be transferable to another passenger without any additional cost and should have a higher value than the amount of any payment made for the package travel or transport service originally booked.
The “Recommended characteristics” section also specifies that if the validity period of the voucher exceeds 12 months, passengers should have the right to ask for a refund and that vouchers should allow passengers to travel on the same route under the same conditions as described in the original booking.
Experience shows that the customer service of most airlines is overloaded, and refunds are often not issued for several months. If the airline is based in the EU, passengers have the option to contact the European Consumer Centre or initiate a so-called EU order for payment procedure, added the experts of D.A.S.
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