May declare them ‘defaulters’
The government will soon crack the whip on airline companies, travel agents and mainly online travel aggregators, for holding back refunds to passengers.
According to sources, the government has consulted former regulatory officials who have worked in the financial sector. The officials have advised that the government should soon come out with a policy on defaulters in the travel sector, to avert major financial frauds. A former official of the Forwards Market Commission, who recently retired from Indian Administrative Services, has also provided his recommendation to the government.
The problems of refund related frauds accentuated during the Covid-19 lockdown last year. Lakhs of customers who had booked airline tickets and done hotel bookings are fighting for refunds . Also, in many cases clients who had cancelled hotel room bookings did not get refund. This has led to piling up of cases and complaints with the various government departments, the sources said.
Nearly 585 international flights were cancelled to and from India between February 1 and March 6 last year due to Covid and close to 93 daily domestic flights were cancelled during that time. Even today, airlines continue to cancel flights. According to data from RateGain between 9,000 and 13,000 hotel bookings were cancelled each month between March and May 2020. This led to an increase in number of complaints.
IndiGo issued statements claiming it has refunded around 99.95 per cent, or ₹1,030 crore to its customers. Air Asia and GoAir, too followed suit. However, Air India has a high refund burden of around ₹1,000 crore, while SpiceJet owes approximately ₹30 crore to customers.
“People could have purchased tickets in January, for example, for a travel date in March. However, the tickets could be valid only for a year. Because the summer season was at its peak, agents had made numerous bookings, but the airlines were not able to pay for the refunds either because of their losses,” Jyoti Mayal, President, Travel Agents Association of India (TAAI).
In this regard, the association has written a suggestion letter to the MOCA. It has demanded financial security from all airlines against all defaults, a joint Working Group (JWG) to be formed by the Government, among others.
For international refunds, agents were able to get the settlement from IATA. But domestic airlines follow an upfront payment model where they would take upfront money from travel agents for bookings in an escrow account and issue tickets through that. Domestic airlines stopped giving refunds because the amount was huge.
These peaked in September and October, when grievances on refunds made up for over 80 percent of the total complaints. That reduced in the next three months, and came down to 41.3 per cent in January 2021. But in February, it rose to 54.6 per cent of the total complaints.
“What happened was when people started asking for refunds, it was a one way case because we didn’t owe any money to the airline, however, the airlines owed us crores. So when we started asking for refund, the airlines held their hands up because of Covid,” Mayal said.
The Pravasi Legal Cell moved a writ petition regarding refunds over cancellations. The apex court said in its order that the value of an air ticket refunded through credit shell vouchers will be increased by 0.50 per cent per month (6 per cent per annum) till June 30, 2020 and thereafter till March 31, 2021 up by 0.75 per cent per month (9 per cent per annum). However, only airlines in financial distress could issue credit shell vouchers till March-end.
The Directorate General of Civil Aviation (DGCA) too issued a circular addressed to all scheduled Indian airlines and scheduled international airlines operating to /from India in respect of refunds on cancellation of air tickets during Covid -19 lockdown, per directions issued by Supreme Court.
A few airlines said that they had started paying money back, however, it wasn’t upfront money. It was a credit shell. What this did for customers was they were misled to understand that agents did get the money and they were not refunding it.
“Even when they started refunding, they said that it would be only in the credit shell but not upfront money. What that entails is that when you are giving me the money, I cannot use it because there is no travel, it is a dead account. It is my right to get that money back into my personal account and not as a credit shell,” said.Mayal