Iata has confirmed it will allow airlines to issue vouchers in lieu of cash refunds for cancelled flights in an open letter to the travel trade from general secretary Alexandre de Juniac.
The move comes as a blow for travel businesses struggling with cash flow amid unprecedented demand for refunds owing to cancellations arising from the coronavirus pandemic, with Iata acknowledging there was far more cash exiting than coming into industry financial settlement systems.
Vouchers will be issued through Iata’s billing and settlement plan (BSP). “I’m afraid the message I have to deliver is not one that will provide comfort,” said de Juniac, addressing the trade late last week.
Iata has, however, backed calls for governments around the world to relax requirements for immediate or prompt refunds, which in the UK are enshrined in the Package Travel Regulations.
Abta on Tuesday (7 April) launched a new Save Future Travel campaign calling on travel businesses across the UK to write to their local MP setting out the impact of the PTRs on their cash flow in a scenario the regulations simply weren’t designed to accommodate.
Tuesday also saw The Travel Network Group lend its voice to these calls, urging business secretary Alok Sharma to take swift action to ease the burden on agents.
In his letter, de Juniac said Iata recognised agents were facing “extraordinary challenges” and would “show as much flexibility as possible” in the current circumstances.
Agents will be allowed to delay BSP settlements without penalty and continue selling if they are late with remittances. Iata is also giving agents a month’s grace on providing audited financial statements, or arrangements in respect of financial guarantees, and has stressed it is open to suggestions on how it can be “more responsive” on these issues through the Passenger Agency Programme Global Joint Council.
“The global airline industry is going through its gravest crisis,” said de Juniac. “One-third of the global fleet is parked, and we estimate that revenue from passenger ticket sales will fall 44% this year compared to 2019. There simply is no precedent for what our members and you, our travel agent partners, are experiencing.
“As the operator of industry financial settlement systems that in normal times process more than $1.25 billion in industry funds every day, Iata faces the enormous responsibility of maintaining the security and integrity of these systems during a period when far more cash is exiting than is coming in.”
De Juniac, though, said Iata’s actions had to be balanced against the “critical liquidity crisis” the sector was experiencing. “Most airlines are spending more reimbursing their passengers than they receive in new booking revenue,” he said.
“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 that airlines have before facing bankruptcy.
“In this context, we believe 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. These vouchers can be managed through the BSP using processes and procedures that already exist today.
“This would remove the pressure that is currently on agents to issue cash refunds at a time when airlines are making decisions based on their own need to preserve cash.”
He praised regulators in Canada, Colombia and Netherlands for “recognising the necessity” of the approach set out by Iata, but stressed he knew it was not the answer the trade wanted to hear.
“These are dark days for our industry, but we are resilient, and we will get through them, together,” de Juniac added.