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Since the crisis began, it’s been one of the biggest areas of contention for agencies and travel buyers: the unused airline ticket.
As far back as March, some agencies have been threatening legal action to receive refunds, or in some cases corporations have explored whether they should charge airlines interest on the outstanding money.
The worst fears are turning out to be true, as the taps still haven’t quite turned when it comes to returning cash, while the credit note isn’t proving all that welcome either.
So where are we now?
Frustrated, seems to be the answer. It looks like more pressure’s being successfully applied to airlines on the leisure side, with better results, leaving a corporate travel sector still waiting, mainly because few imagined the crisis would last so long.
“The common sense approach was, let’s not worry about that for now, as travel managers thought it would be over by July,” one travel manager at a technology consultancy, told Skift. “Now the rumblings I’m hearing are that travel managers are telling the airlines ‘we don’t want to make this a back breaker for you, if you don’t have the cash, however we need some money back.’”
The issuance of credit notes by the airlines is posing a particular annoyance for one corporate travel agency.
“It’s a manual, labor intensive process. I’d like to lobby for cash,” said Simone Buckley, CEO of UK corporate travel agency Fello. “The problem is that airlines have different methods for proving credit notes. Nobody’s systems were built to take note of credit notes. How do you report on that to a client? You have to create all that manually. Airlines shouldn’t have done it because it’s against all the regulations.”
Meanwhile, another administrative burden coming into play, now that new bookings are being made, is that airlines are returning a “partial credit note” rather than cash when a credit note is used to purchase a lower value fare.
Expedia’s corporate travel division Egencia has been working on this area too, similarly wanting to ease the burden for its clients. “We’re focused on enhancing our fully automated air credit (unused ticket and waiver application) solution that both the traveler and the travel manager can access online or through the app,” said Arvind Prakash, vice president of product and technology.
It’s also enhancing redemption capabilities for customers in the US and bringing these to travelers in Europe and Asia-Pacific as part of their booking, it said, and boosting the air credit and refunds reporting feature that its US travel manager customers currently have in its Egencia Analytics Studio and rolling this out to its customers globally.
So far it’s managed 100,000 refunds from airlines to customers since the start of Covid-19.
With or without the data, travel managers need a plan fast to make the most of a bad situation.
“We have upwards of a million unused ticket credits that we’re now going to be developing a strategy around,” said Ann Dery, director of global travel and meetings at market intelligence firm S&P Global. The impetus, she added, is because a lot of the travelers holding these credits aren’t going to be traveling in the near future, or the next few years even.
“The first thing is to leverage your unused tickets, because that’s money outstanding, and the airlines are being very flexible, and I strongly suggest that’s where travel managers start to focus once their programs start to reopen,” she said while speaking at Gett‘s “Explore the delicate new art of defining essential business travel in a Covid-19 world” webinar last week.
Skift understands some corporations are specifying a percentage of the money owed is returned ahead of any route re-negotiations, while some are exploring the possibility that airlines simply offset a percentage of their future fares — fares that are looking likely to rise considerably.
Some travel managers, however, worry their pleas could fall on deaf ears, with airlines generally having the upper hand.
One travel manager at a global pharmaceutical data company, with some $800,000 owed to it by several airlines, is concerned his call is being drowned out by larger companies.
“We’re by no means a big company when it comes to airline spend. Under normal circumstances it’s about $18 million a year, which compared to the likes of EY, Google, Amazon and so on is a drop in the ocean.
“We’re not getting the attention I thought we would. While I know there’s a big long list, I have an inkling that whichever company is threatening to charge airlines interest is getting the majority of the resources put towards them. Whoever shouts the loudest gets the most attention.”
Despite weekly calls with account managers at several of the major carriers, he feels that despite their best intentions those managers don’t actually have the clout to make things happen.
So what are the airlines doing?
Fello’s Buckley praised American Airlines for allowing name changes on its credit notes, while most carriers are becoming more flexible with their expiry dates.
American Airlines told Skift: “As has always been our policy, if American cancels a flight for any reason, a customer can receive a full refund back to their original form of payment. For customers who booked directly with American Airlines or on aa.com, they can visit aa.com/refunds to request the refund back to their original form of payment.”
United Airlines’ travel credit scheme allows passengers to apply the full value of the ticket to any new flight booked within 24 months. It told Skift: “We have always provided refunds for refundable tickets, and these updated guidelines will offer additional flexibility to our customers requesting refunds for non-refundable tickets when flight changes occur. If our customers would like to check on their refund eligibility, they can go to united.com/refunds or call us directly.”
Lufthansa said that in principle reimbursements are possible and will be paid out, and so far this year has reimbursed $1.6 billion, with half of applications already processed.
“We have increased our capacities to enable a faster processing of requests to ticket refunds in the three-digit million range per month,” the carrier said. “For our corporate customers we offer a corresponding product. It is called ‘Pay as you fly’ and is often booked and used by frequent flyers from the management consultancy sector. This is a limited circle of customers.”
And Kevin Sullivan, senior director of Southwest Business, told Skift: “In these challenging times when flexibility is even more important for our partners, Southwest Business has responded to the marketplace by developing new fund management solutions to help both travel managers and travel management companies manage their travel programs. This foundational effort will allow us to better service our corporate customers both today and in the future.”
Following a series of airline bailouts from various governments, including most recently a $10 billion bailout for Lufthansa, refunds are slowly returning — but at the airlines’ own pace.
“This debate has been a moving target,” said Pascal Jungfer, CEO of Areka Consulting. “It’s a dynamic conversation and it keeps evolving on the airline side, not the side of the corporate clients. Clients are also more nervous if it’s a small, independent carrier too, rather than a flagship carrier. The risk is not the same,” he added, alluding to the fact that some airlines have recently entered bankruptcy protection.
But Jungfer is confident airlines will prioritize business travelers over leisure passengers: “They’ll pay the (corporations) first because it’s premium category, in terms of yield and commercial stakes.”
For now, it might not be the sentiment most travel managers share.