European Union (read more here and here) and the United States (read more here) have both already reminded airlines that they need to provide REFUNDS for canceled and delayed flights instead of vouchers.
The president of IATA, International Air Transport Association, decided to chime in on Friday and suggested that the government should allow airlines to issue VOUCHERS instead of refunds.
You can access the IATA CEO’s thoughts here.
Here’s the relevant part:
But there is a very harsh economic reality setting in. Airlines cannot cut costs fast enough. And with the $35 billion owed to travelers for flights that could not or cannot take place, airlines face an imminent depletion of the cash they need, not just to maintain employment, but ensure that they will be around to support the economic revival when the COVID-19 crisis is over.
Passengers have the right to get their money. They paid for a service that cannot be delivered. And in normal circumstances, repayment would not be an issue. But these are not normal circumstances. If airlines refund the $35 billion immediately, that will be the end of many airlines. And with that an enormous number of jobs will also disappear.
So what’s to be done?
The simple answer is that airlines need time. And that is why I am supporting airlines (and our partners in the travel and tourism sector) in their request for governments to delay the requirement for immediate refunds. We propose vouchers that could be used for future travel or refunded once we are out of this crisis period. This would buy the industry vital time to breathe—surviving the crisis so that they are ready to fly when better days arrive.
Well. What could airlines have done?
1. Be Prepared
There is at least one unexpected black swan event every decade that affects air transportation.
What airlines did with the money that travelers have paid in advance? Paid it out to shareholders in the form of dividends and stock buybacks?
3. Balance Sheet
Made sure that there is no debt on the balance sheet after 12-year long economic boom.
I don’t understand why we, the passengers, need to cover the business risks of airlines in the form of these vouchers or to have to bail them out once every decade? Shouldn’t airlines be prepared for these “once-in-a-lifetime” events that take place once every ten years, if not more often?
IATA is an organization whose missions is to lobby governments on behalf of its member airlines. You do have to take their suggestions with a grain of salt.
Airlines would love to keep the cash that passengers have paid for flights that won’t take place. But this is not how businesses ought to work, and governments should ensure that passengers get their refunds promptly.
If this means that some of the airlines will go under, so be it. It is easy to run a business when the times are good and debt cheap. Recessions clean up the field from companies that serve no purpose and are not financially sound.