EU: Passengers Have Right to Full Flight Refund, Can Refuse Voucher

The EU has doubled down on its own passenger rights commitment as it made clear that passengers have the right to demand a full refund of their flight and can refuse a voucher offered by airlines.

European Commission

After many weeks of silence on the issue, the European Commission has made it clear that the ongoing corona (COVID-19) crisis does not change the basics of its own passenger rights regulation.

Although the commission has said earlier that passengers have no right to special EC/261 compensation if their flight is cancelled due to the corona virus, it has remained silent on the issue whether an airline is allowed to hand out vouchers instead of a full flight refund.

According to the EU passenger rights outlined in EC/261, airlines must refund such cancelled flights within seven days after the cancellation.

Refund

The European Commission has now said that this part of EC/261 is still valid in time of the corona crisis and told EU nation states that airlines must refund passengers in cash if they wish so. Airlines can still offer a voucher for a cancelled flight, but according to the Commission passengers have no obligation to accept this and can demand a full refund.

EU Commissioner Margrethe Vestager said: “If you have lost your job, if this is your entire holiday budget for travelling that sits in these tickets you cannot use anymore, then you need a refund. And that is why we say this is your right, full stop.”

Bombshell

The news will likely hit the travel industry hard as many European airlines have staunchly refused to process refunds and only offered vouchers.

Major EU airlines such as Air France-KLM, Lufthansa and TAP Air Portugal have refused to process refunds and handed out vouchers to affected passengers.

The same counts for travel agencies who had to cancel the holidays of their customers because of the corona virus and came up with vouchers for a future holiday as well.

Bankruptcy

Airlines, as well as travel agencies, decided to use vouchers instead in an attempt to protect their cash-flow. If passengers and travellers who have seen their flights and holiday cancelled would all demand their money back, it might well mean the end of many businesses as not every airliner or travel agency has enough money on hand to pay out all these claims at once.

Because of this, airlines and travel agencies alike have all campaigned for the use of vouchers, saying it is a necessary evil to protect jobs in a market which has been extremely hard hit by the corona crisis. They also pointed out that if a company would go under, passengers would probably not see anything back of their money at all, thereby claiming it is in the best interest of the people too.

Passengers and travellers on the other hand argue that they should not be the one to basically loan money to airliners and travel agencies as this is the job of national governments. They also claim that even accepting a voucher does not mean they are protected as such vouchers would be equally worthless if a company still goes bankrupt in the foreseeable future.

In my opinion, there is something to say for both arguments.

What now?

The big question is what will happen now – as the European Commission statement is unlikely to be a definite answer in this question. Thee Commission has sent out letters to the EU nation states who failed to force their airlines and travel agencies to respect passenger rights.

Yet this is only the first step in infringement procedures when countries fail to implement EU law. Passengers and travellers might still need to make an actual claim in court and wait for a ruling to see if the European Commission’s argument is indeed interpreted as the law of the land, as some countries as well as airlines and travel agencies are likely to play hard.

It could therefore still be the case that for the next months nothing will happen, as I don’t see airlines or travel agencies to suddenly budge unless they are forced to.

Government bailout

The only exception might be the countries in which the government decides to give financial assurances to travel agencies and airlines. This would however require vast amounts of money.

If all affected passengers of Air France-KLM would for example demand their money back and ditch their voucher, it would require the airline a whopping 3 billion euro – which makes it quite clear why so many airlines are hesitant or simply cannot afford to pay everyone back.

This is for sure an interesting situation and I am curious how it will play out!

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