By Ranjit Singh
AS a result of government directives around the world to limit the movement of people during the Covid-19 outbreak, many airlines have grounded their fleets. Passengers who have had their flights cancelled are given vouchers or credits to fly at another date within a stipulated time frame.
But should airlines be allowed to keep customers’ monies, which amount to billions of ringgit in Malaysia alone, when they cannot even give an assurance when flights will resume? Should they not refund customers the money?
Yesterday (April 14), the Malaysian Association of Tour and Travel Agents (Matta) took to task the Malaysian Aviation Commission (Mavcom) for giving flexibility to airlines over refund policies on cancelled flights due to the Covid-19 outbreak.
“Airlines operating in Malaysia had indicated approximately 13.6 million seats were cancelled, which literally means hundreds of millions of consumers’ hard-earned dollars are stuck with the airlines, including more than the 100 foreign airlines currently operating in Malaysia,” Matta said in a statement.
A simple back-of-the-envelope calculation by applying an average ticket price of RM500 translates to RM6.8 bil in monies collected by airlines from passengers for cancelled flights which are due as refunds. If the average price is increased to RM1,000, the amount goes up to a whopping RM13.6 bil.
In the US, UK and the EU, there are strict requirements that refunds are made when flights are cancelled, but that’s not the case in Malaysia. Here, airlines instead offer vouchers for bookings on future dates where you have to pay the difference in prices and have no guarantee there will be a flight.
Malaysia Airlines said it will provide vouchers for cancelled flights. Bookings using these vouchers must be made before Dec 31, 2020. The passenger must fly before June 30, 2021, and failure to fly within the stipulated time will render the ticket worthless. Also, the customer has to pay the difference in prices.
Meanwhile, budget carrier AirAsia Bhd Group CEO Tan Sri Tony Fernandes was reported as saying that the airline does not encourage refunds but rather credits which have a 365-day validity. He also said 80% of its customers had agreed to receive the credits and the carrier would offer refunds on a case-by-case basis but the processing time would be around 12 to 16 weeks. But were they really given an alternative?
Hybrid carrier, Malindo Air only offers vouchers for cancelled flights to be used within a set period of time.
In the US, it has been reported that the Department of Transport has made it mandatory for airlines to refund their passengers within 30 days for cancelled flights.
However, in Malaysia, the airlines do not refund their passengers as a matter of course and some of them even make it cumbersome for passengers to seek a refund. They are more than willing to provide vouchers or credits to enable the passengers to fly at a later date.
The question that arises is: aren’t passengers entitled to the refunds because they have already made advance payments for their flights? The fear of flying because of Covid-19 would make people not take the risk unless it’s absolutely necessary.
In effect, this means that Malaysians are giving the airlines operating in the country an interest-free loan, a loan which may never be repaid if the airline goes bust. And these “loans” are already in the billions of ringgit!
What about the scenario where the airline issues vouchers for a prospective flight but later cancels the flight. Isn’t the passenger entitled to a refund in this scenario?
Another issue that arises is that what good are the vouchers or credits if the airline company goes bust? The possibility of airline companies shuttering is very real as flying has come to almost a halt and many of them have undertaken massive retrenchments.
Airlines are asking for government financial help in these troubled times, including Malaysian-registered ones such as AirAsia, Malaysia Airlines and Malindo but do they have the moral compass to ask for such help when they do not even honour the promise of refunding their passengers for cancelled flights. Should they be bailed out if they are so callous about their public obligation? The answer is No!
Passengers are already subsidising airlines by making advance payments for their bookings to the tune of billions of ringgit and the airlines are acting in an irresponsible way when they refuse to refund passengers in cash for cancelled flights.
A colleague who had booked a flight on ANA (All Nippon Airways) from KL to Tokyo was fully refunded for the flight he cancelled. However, he had to pay RM300 as a cancellation fee.
Passengers make advance payments for their flights. This revenue is accrued by airlines as income and utilised to pay for operational expenses. It is high time that airlines consider a new accounting method.
They should be required to place a portion of these funds into a trust account and use it to pay out refunds if the need arises. This would be a fair solution to passengers who had cancelled their flights as they can avail themselves of the refunds.
The government must step in to ensure passengers who cancelled their flights get their refunds. Mavcom must compel airlines to ensure that policies are in place to enable airlines to make refunds to passengers. There should be penalties imposed on airlines that fail to adhere to this rule. — April 15, 2020
