Issue of Airline Refund amid COVID-19 reaches Supreme Court of India

Background & Issue

The Ministry of Civil Aviation released an Office Memorandum[1]on April 16, 2020 in light of the coronavirus-forced lockdown, with regard to refund for cancellation of flights. The Ministry has ordered the Airline companies to refund the booking amount to the passengers concerned within three weeks. There are two issues in the present scenario.

Firstly, the memorandum issued states that if a passenger has booked a ticket during the lockdown phase i.e. March 25 to May 3, 2020 for travel between these dates and has made full payment to the said airline company, then the passenger is eligible for full refund. The direction would be applicable to both domestic and international travel. Further clarifying that the companies cannot levy any cancellation charges.

Secondly, the airlines had earlier decided and announced on their respective websites that they do not intend to refund the said payment to the customers and instead offer them the option of reschedulingof tickets for a future date without levying any extra charges.

Plea before Supreme Court

A plea was filed before the Supreme Court by the NGO – Pravasi Legal Cell expressing concerns over the Civil Aviation Ministry’s memorandum. They put forth that the said memo only covers refund of tickets that were booked “during” the lockdown. This means that all those customers who had made travel plans prior to the lockdown being imposed were unjustifiably left out of the scope of such a policy. This was regarding the first issue. Secondly, they argued for reimbursement of the full amount paid to the airlines as per the direction of the memorandum and disregarding the airlines’ unwillingness of doing as such.

The Court’s Ruling

The Supreme Court in its three-Judge bench heard the matter and made an observation that the memorandum was “arbitrary” in nature. Further citing that all tickets booked for journeys cancelled due to the lockdown should ideallybe reimbursed.

It added that the companies instead of providing a full refund to the affected, was providing ‘credit shell’ for up to one year violating the Civil Aviation Requirement (CAR) of May 2008[2]as issued by the Directorate General of Civil Aviation (DGCA) which lays down the cancellation rules therein. The CAR states that the option of holding the refund amount in credit shell by the airlines shall be the prerogative of the said passenger(s) and not a default practice followed by the airline which is what is happening in the present case. Further, the aforementioned Requirement adds that refunds are to be done within 7 days from date of cancellation in case of credit card payments and in case of cash, it should be done immediately. It sets a limit of 30 working days for airlines to complete the refund process for tickets booked through travel agents/portals. Even though it states that the government is committed to refrain from interfering in commercial practices of the airlines, the volume of complaints necessitates some affirmative action to safeguard the interests of the travelling public. Hence, it issued a notice to the Centre and DGCA seeking a response in the matter.[3]Two issues discussed in the court have been dissected below.

Credit Shell - The Court quoted that the airline companies are creating credit shells in distaste at such a dire time. The website of one the airlines has put up a notice in this regard as well. “For flights suspended until May 3, 2020, your money is safe in the form of a credit shell in your PNR”

A credit shell refers to a credit note created against a cancelled PNR to be used for a future booking, for the same passenger(s). It is to be used in case a passenger’s flight is suspended due to the COVID-19 outbreak, in which case, a ‘credit shell’ has automatically been created by the Airline against the said PNR. It can be redeemed for up to 1 year from the date of issuance and it cannot be transferred in the name of another person.[4]

Unlawful gains - The Court further went on to exclaim that the airline companies are being opportunistic even at such times of extreme distress among the masses and trying to achieve unlawful gains from those in misery. Finally, stating that the current policy of creating credit shells is extremely harsh on the concerned passengers. Unlawful gains is derived from the term “wrongful gains” which refers to gain by unlawful means of property to which the person is not legally entitled. A person can be said have gained wrongly if he/she has retained wrongfully or acquired wrongfully.[5]In this case, what the Court means is that the airlines are trying to gain unlawfully from the plight of the customers by not refunding their money and keeping them in their loop through credit shells.

The IAAI Gets Involved

The International Air Transport Association (IATA) Agents Associations of India (together, “IAAI”) has also filed an application before the Supreme Court of India in the present case. The Association under its initiative “IAAI Air Passenger Rights Forum” seeks appropriate direction to be given to Airlines by the Central Government and the DGCA with regard to the full refund of all tickets issued before or after March 24, 2020 for the flights which stopped operations or got cancelled due to the COVID-19-led lockdown and the ensuing advisories.

Around the World

Since the COVID-19 is a global pandemic, India is not the only country going through the ordeal. Especially in aviation matters as world travel has been suspended during the lockdown imposed almost throughout the world. Hence, airline operators everywhere have had to come out with a policy with regard to the same matter. The US Department of Transportation in its regulations holds that if any airline that operates within the US, cancels or significantly changes the timing of a flight, it cannot offer travel credit and must offer the aggrieved customers a cash refund.

The British Airways on the other hand is allowing ‘fee-free’ date changes for bookings that have been made between March 3 and May 31 with regard to any travel arrangements made till December, 2020. This means that passengers who wish to alter their destinations, have the option of requesting for their tickets to be converted to a travel voucher and rebook using the same until 30 April, 2020. While those who want to cancel can also claim a credit note for the value of the said ticket.[6]

Qatar airlines has offered customers who shall be booking flights through September 30, the opportunity to alter their travel dates or instead exchange their tickets for a travel voucher with ten per cent additional value which would be valid for up to one year. Passengers on flights that are cancelled or altered can request a travel voucher or even a cash refund.

Thus, these examples illustrate that each country is dealing with air travel issues in their own way, though it must be added that generally, providing credit notes is a norm. However, it remains to be seen how the Indian Supreme Court with the help of the DGCA and the Centre concludes on the matter.

[1]Office Memorandum accessible here. [2]CAR can be accessed here. [3]Order accessible here. [4]Available on Online Travel Agencies (OTAs) platforms. Check here. [5]Section 23 Indian Penal Code, 1860. [6]Official notice can be accessed here.