Airlines evading refunds for cancelled flights

El Al  / Photo: Yochai Mussi

Israeli civil aviation law requires carriers to refund fares for cancelled flights.

When M spent $7,000 on tickets for her family on a flight to the US, it never crossed her mind that an aggressive virus would ground the world's entire commercial aviation industry and thwart her family's vacation plans. M's flight, like that of many others, was canceled as a result of changes in the airlines' flight schedule, which has dwindled to almost nothing. M justifiably believed that she would be able to get her money back, but United Airlines is only offering her future credit.

Israeli civil aviation law clearly gives ticket buyers the right to a refund. The law states that when an airline cancels a flight, it is obligated to give the consumer a refund within 21 days. The consumer also has the right to choose a future alternative flight. This law applies to all of the airlines with offices in Israel.

What is actually happening, however, has nothing to do with any law. More and more complaints are being sent to "Globes" by consumers saying that they are not getting a refund for a canceled flight. One case involved Transavia Airlines and another United Airlines. The consumers claim that instead of a refund, they are being offered only an option of a credit. United Airlines told "Globes" that any passenger who does not use a credit received within twelve months will receive a refund at the end of that period. The airline says that this policy is enabling the airline to continue operating under the difficult circumstances created by the coronavirus.

The same thing happened to A, who bought a ticket for an El Al Israel Airlines Ltd. (TASE: ELAL) flight. The answer that El Al is giving its customers may be candid, but is angering passengers: "Due to the coronavirus events, your flight was canceled. At this stage, we are saving your ticket for future use. A change of the flight date or destination, or processing of a refund, will be possible when activity returns to normal."

A says that when she contacted El Al, she was told that there was no one to handle refunds because most of the airline's employees had been put on unpaid leave. "This is an unacceptable response. Just like many of us are working from home, this is also an activity that should take place from home. El Al is unjustly holding on to huge sums from thousands of canceled tickets at the ticket buyers' expense."

El Al said in response, "From the beginning of the crisis, El Al's commercial policy has been lenient and considerate. Flight tickets can be postponed and destinations changed without any handling or change fee up until early 2021. Since most of the company's staff are on unpaid leave, and the volume of inquiries is huge, we will be able to handle requests when the company resumes normal activity."

In its current form, the law mandates a refund within 21 days, and stipulates additional compensation on top of the refund (NIS 1,300-3,100, according to the flight distance). The question of compensation, however, is something extra that is not even being discussed. What can consumers do when they get such an answer? Unfortunately, other than trying to insist, nothing.

Wait and see who survives the crisis

In addition to passengers whose flights were canceled by the airline, there are also those who canceled their flights and are legally entitled to a refund - when a flight was canceled within 14 days of the booking, or in the case of senior citizens, within four months. The law also requires airlines to refund the fare in these cases, but it is not happening.

Adv. Asher Rotbaum, a specialist in civil aviation law, told "Globes," "The only thing that the consumer can do in these cases is to file a lawsuit. The courts are closed, however, and when they open at some stage, a hearing won't be scheduled immediately. Another option is to wait until the end of the crisis and see which company survived, and then sue it. These cases highlight the gap between the theory, i.e. the law, and what actually happens. For a customer who paid and is entitled to get the money back, the airline's offer of an alternative flight is likely to be outrageous, but the global economy is in dire straits right now, and this is part of the collateral damage caused by the virus."

"Globes": On the other hand, customers are afraid that they will not even get a credit if the airlines do not survive.

Rotbaum: "This is a well-founded fear, because if a company becomes insolvent, the customer can file a debt claim. Since the creditors are classified according to priorities, however, the customers are the last to be paid after the banks, suppliers, and employees, and will get crumbs, if anything. Other than waiting and hoping that the airlines are sound enough to get through the crisis, nothing can be done right now. There are laws protecting the consumer at normal times, but these are extreme and exceptional times, and it is uncertain whether the laws can help."

The fact that times are exceptional led the Ministry of Transport to recently submit a memorandum seeking to change the Aviation Services Law (Compensation and Change of Conditions) by adjusting important clauses to the situation. It is being proposed that a flight be regarded as canceled if it is twelve hours late, instead of eight hours; that the element of compensation be canceled; and that the period of time for a refund to consumers be extended from 21 days to 90 days. One important disputed clause in the revision seeks to apply the revision retroactively from February 28, 2020. The proposed bill explains at great length that the changes are necessary as a result of the catastrophe experienced by airlines, which is jeopardizing their very existence. For Israel Consumer Protection and Fair Trade Authority director Adv. Michael Atlan, this is an anti-consumer proposal that "does not take into account the fact that the extreme change in the situation is not confined to airlines; it also extends to the consumer."

An important point highlighted by Atlan is that "As long as the amendment has not been passed by a cabinet vote, the law's clauses are currently valid, and therefore the refusal to refund money is not only questionable; it is illegal. The message to consumers is that they shouldn't give up. We're willing to swallow the bitter pill of foregoing compensation, but there's a long way from there to giving up the money already paid."

Another possibility proposed by Atlan is that in the event of a deal with time payments, when future payments have not yet been deducted from the consumer's account, the credit company should be contacted and a demand made that the deal should be canceled on the grounds of failure to deliver.

Leaving the money with the airline requires a reward for the customer

The idea of a credit for future use enables the airlines to retain the consumers' money, but a reward must be given for this. The cruise ship companies, for example, are offering consumers 100% of their money back or 120% of the value of the money if they choose a future credit.

Secret Flights founder and CEO Yaneev Lanis explains that this approach was also shared by Wizz Air and airBaltic even before the crisis, in the realization that if the company keeps the money, it has to reward the customer. Lanis says that the airlines' policy is getting worse as the crisis deepens. "The Swiss International Airlines website no longer contains an online form for demanding a refund for a canceled flight. You can no longer do the process simply through the easyJet website; you have to get them on the telephone. Furthermore, their representatives don't offer a refund on their own initiative. They say that the consumer is entitled to a free change or a future credit, but they don't offer a refund. You have to insist. The airlines are trying to make it difficult for consumers to obtain a refund, and this is probably saving them millions of dollars," he says.

Lanis says that Aegean Airlines and Ukraine International Airlines are among the airlines refusing to give refunds, while others have changed their attitude. Royal Jordanian Airlines and Iberia, which originally took a tough stance, are now giving refunds to passengers. "Ryanair, which everyone loves to hate and complain about their service, is crediting people for a canceled flight within a few days through an online request," he says.

Lanis shows tolerance for El Al's answer that refunds will be handled after the crisis, commenting "Saying that you will receive what you are entitled to is better than airlines that simply say that you won't get it. When airlines try to force you to accept a future voucher, I suggest not accepting this, and not to give in to this attempt to illegitimately get money at the consumer's expense. In my opinion, after everything clears up, it will be possible to get a refund."

Another recommendation by Lanis is for people whose flights were not canceled, and for whom the legal time during which they are allowed to cancel their flights under the Consumer Protection Law (14 days) has already expired. He suggests that they wait until the last minute. "As long as the flight appears on the schedule, the option of canceling it depends on the terms of the purchased ticket. In most cases, the tickets cannot be canceled, so if the consumer initiates the cancelation, he or she will pay the full amount, except for airport taxes, which are given back. What they don't take into account is that flights now appearing on the schedule are likely to be canceled, in which case the situation is completely different, and the passenger is entitled to compensation. I recommend waiting, and mainly being patient," Lanis says.

Published by Globes, Israel business news - en.globes.co.il - on March 31, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

El Al  / Photo: Yochai Mussi
El Al / Photo: Yochai Mussi
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