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MisterFly President Nicolas Brumelot on Friday warned in an interview that many of his fellow travel agencies and tour operators faced imminent bankruptcy, due to the devastating impacts of the novel coronavirus on the industry. As Skift reported on March 25, many corporate travel advisors have criticized the refund procedures of global airline trade lobby International Air Transport Association (IATA).

MisterFly, an online travel agency based in Paris, had been a rising star since 2018, when Skift named it one of 20 young venture-backed companies to watch.

Now Brumelot is criticizing what he called unreasonable and unfair demands regarding airline payments, especially those related to canceled flights.

Many member airlines have decided to ignore European regulations requiring cash refunds and are instead issuing non-refundable “credit notes,” Brumelot said. 

Air Europa and TAP Air Portugal did this in recent months. Emirates followed on March 26.

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When we asked IATA about Brumelot’s complaints, a spokesperson said: “While IATA cannot address specific situations, we recognize that these are extraordinary circumstances facing this industry and have taken steps to provide our travel agent partners with additional flexibility in terms of remittances, financial assessments and in exceptional situations, alternatives to bank guarantees.”

Brumelot said his startup could weather the storm. But the travel bans and economic fallout of coronavirus have cut its revenue dramatically.

Last year, MisterFly processed gross bookings of about $600 million (€545 million), a growth of 56 percent year-over-year. It is unlikely to earn the same revenue this year.

To learn more, Skift caught up with Brumelot. We edited the interview for brevity.

Skift: How’s business?

Nicolas Brumelot: Unspeakably bad.

Skift: Are you in danger of going bankrupt?

Nicolas Brumelot: No. We have a solid balance sheet. MisterFly is backed by e-commerce leader Vente Privee and two leading French VC investment funds, Montefiore Investment and Iris Capital.

However, this will only will be true if we exit the worldwide economic closure, or shutdown, in a reasonable time.

Skift: You have criticized IATA for its procedures for billing and the settlement of payments between agencies and airlines. Why?

Brumelot: IATA is light years away from the reality of what is happening around us. It’s not only pushing a whole section of the tourism industry into the abyss, but it’s adding shameful and dubious practices that add torment and agony to the impending death of travel agents.

European Union regulations require airlines to refund canceled flights.

Yet an increasing number of airlines have unilaterally decided, without notice, to instead issue non-refundable credit notes or are proposing for the traveler to benefit from later travel. None of these are cash refunds. Airlines impose them. The end customer, through their agency, doesn’t get a choice.

Skift: IATA told us in a statement: “We have already encouraged our airline members to facilitate any claim for reimbursement, but given the current liquidity situation, this is a business decision for each individual airline and is outside of IATA’s scope.”

Brumelot: This is unacceptable. European Union regulations are clear. It is not an individual business decision to be taken by airlines and to be covered by airlines. IATA should say more during this crisis time.

Skift: IATA told us in a statement: “IATA has also reminded airlines that in some jurisdictions agents are required under law to provide refunds to passengers.” Is there any other step agencies like MisterFly can take to insist on cash instead?

Brumelot: Agents across Europe face the same problem. This is not a fight between MisterFly and IATA, but between the industry of travel agents and tour operators against IATA.

We are working closely with our national professional trade associations and ECTAA [European Travel Agents’ and Tour Operators’ Associations]. Several thousand agencies will individually, collectively, locally, and at European level take legal steps.

Skift: IATA told us it has taken actions to provide its travel agent partners with “additional flexibility in terms of remittances, financial assessments, and in exceptional situations, alternatives to bank guarantees.” Will MisterFly take advantage of this help?

Brumelot: First, MisterFly does not this artificial support. We have our shareholders, we raised some undisclosed financing in the first quarter, and are working on other alternative bridge financing if required.

Second, can IATA explain how agencies will be able to provide bank guarantees at times when I doubt any bank would bet a dime on any travel company? “Exceptional situations” are now the norm.

Skift: Are airlines issuing refunds in a timely way?

Brumelot: No. We’ve recently been issuing about 140,000 tickets a month. But most of those flights are now canceled. Our employees can’t file refunds fast enough.

All agencies face the same problem.

What’s worse is that some carriers have recently changed, without notice, the way they process cancelled tickets.

Let me explain. Until very recently, all airlines provided that cancelled tickets to be refunded through what is commonly known as the “automatic” processing by the agent.

Some airlines have changed the procedure to one that requires a prior approval from the airline before it can be processed by the agent. The only reason to move to this procedure under the current situation is to increase significantly processing time, and so doing, delay as much as possible any refunds.

Skift: On March 25, the French legislature passed new regulations that allow tour operators to issue credits instead of cash refunds to leisure travelers. Will that help MisterFly?

Brumelot: We also operate a smaller part of our business as a tour operator proving pre-packaged products to customers. For these specific products, we will be legally authorized not to refund cancelled bookings and report them to a later date.

Tour operators have a compulsory financial guarantee to fully protect the end customer from all amounts paid, in case of bankruptcy. It’s worth noting that airlines have always refused to give comparable guarantees.

Skift: How many travel partners does MisterFly serve?

Brumelot: More than 4,200 partners, travel agencies, tour operators, white labels, and e-commerce companies.

One way MisterFly has kept its marketing costs low has been by avoiding the high cost of acquiring leisure travelers through Google ads, metasearch, and offline displays. We’ve done this, in part, by making deals with a wide and diversified range of partners who have the customer reach.

Today, we power the travel bookings for many brands, such as for European retail giant Carrefour, flash-sale deal site VeePee (formerly Vente Privee), e-commerce giant Cdiscount, second to Amazon and other partners such as airports, namely Paris Airports.

Skift: The French government has a plan to assist companies financially in providing temporary employment. Can that help MisterFly?

Brumelot: Most definitely, as it enables to reduce at short notice the weight of payload, or cash flow, when sales collapse while keeping all the employees under MisterFly contract.

All those employees who are not necessary in the current times are on this temporary scheme which enables them to keep their employment contract. All non-worked hours are paid 84 percent of normal worked hours! We are lucky and thankful to have this scheme, and the French government is leading the world in policies like this. It benefits both employer and employees.

For more context, see: Corporate Travel Advisors Put Global Airline Group in Crosshairs Over Refunds.

Photo Credit: Nicolas Brumelot, co-founder and president of Misterfly, poses at the Paris headquarters of his online travel agency. Source misterfly MisterFly