IATA Pens Open Letter To Travel Agents, Backs Airlines Issuing Vouchers
Anna Kroupina, Open Jaw
Alexandre de Juniac
IATA CEO and director general Alexandre de Juniac has written an open letter to travel agents about the "dark days" for the industry and why regulators must ease requirements for cash refunds and allow airlines to issue vouchers instead. He explained that IATA's actions need to be balanced against the “critical liquidity crisis” the sector is experiencing.
Here's what he had to say:
"The global airline industry is going through its gravest crisis. The COVID-19 pandemic and resulting government ordered border closings and mobility restrictions have brought air transport to a standstill. One-third of the global fleet is parked, and we estimate that revenue from passenger ticket sales will fall 44% this year compared to 2019. There simply is no precedent for what our members and you, our travel agent partners, are experiencing.
As the operator of industry financial settlement systems that in normal times process more than $1.25 billion in industry funds every day, IATA faces the enormous responsibility of maintaining the security and integrity of these systems during a period when far more cash is exiting than is coming in. At the same time, we know that our members and business partners rely on us to recognize the extraordinary challenges they are facing and to show as much flexibility as possible under the circumstances. We are doing our best to meet these expectations without risking the viability of the systems that are the financial backbone of the industry.
For travel agents, this means we're allowing settlements to be made a bit later, without penalties. While remittance periods have been kept in accordance with BSP Calendars, we are taking a flexible approach and preliminary figures confirm this, showing that default rates in 2020 are a bit below the year-ago period, despite the stresses on the system in 2020. Further, we are allowing agents to continue selling using secure methods even when they are late with remittances.
We also recognize that in today's environment, when it may be difficult to impossible to get audited financial statements, or arrange a financial guarantee, we are offering to extend deadlines for these statements by up to a month. IATA continues to welcome your suggestions on how we can be more responsive in these areas.
However, on the issue of airlines withholding ticket refunds in the BSP, or issuing vouchers in lieu of refunds, I'm afraid that the message I have to deliver is not one that will provide comfort. Our industry is experiencing a critical liquidity crisis. Most airlines are spending more cash in reimbursing their passengers than they receive in new booking revenues. We recently estimated the industry's liability in this area at $35 billion. In this context, airlines' most urgent need is to keep their remaining liquidity to pay salaries and face their fixed costs. It is practically impossible for industry players to find sufficient financial means to keep the air travel value chain operating in the short time that airlines have before facing bankruptcy.
In this context, we believe the best answer for both airlines and travel agents is for regulators to ease requirements for cash refunds and allow airlines to issue vouchers instead. These vouchers can be managed through the IATA Billing and Settlement Plan (BSP) using processes and procedures that already exist today. This would remove the pressure that is currently on agents to issue cash refunds at a time when airlines are making decisions based on their own need to preserve cash.
IATA is willing to engage in open and collaborative discussions with the travel agency community represented in the Passenger Agency Programme Global Joint Council to formulate a structure for these vouchers that will bring value for airlines, travel agents and consumers. We are grateful that regulators in Canada, Colombia and the Netherlands have recognised the necessity of this approach and we hope others will do the same.
While I know that this is not the answer that you want to hear, it's important that you understand that IATA is working hard to find a solution to this problem that will enable us to endure and move forward. People want to travel, for the horizons it broadens and the connections it enables and maintains. These are dark days for our industry, but we are resilient, and we will get through them, together."
Anna Kroupina Journalist
Anna is OJ's newest member and she joins the team as a writer/reporter. She co-writes the daily news and covers events. Although she's new to the industry, pursuing a career path in travel/tourism has been a goal since her first family road trip to the Florida Keys sparked a desire to discover the world and this exhilarating, fast-paced industry.
Carmine f- April 8, 2020 @ 15:28
i SURELY PREFER TO REFUND OUR CLIENTS THEIR TICKETS RATHER THAN HAVE TO SPEND MY TIME EXCHANGING HUNDREDS OF TICKETS AND THE ONLY THANK YOU i GET FROM THE AIRLINES IS A DEBIT MEMO SINCE THE ENDORSEMENT WAS MISSING 1 LETTER
Luana- April 7, 2020 @ 12:11
FTV's should be treated like a purchased Gift Certificate with No expiry date, and name changes should be allowed by all airlines. This would allow people to transfer or sell it and recover what they can. Some people will be unable to use their FTV even within 2 years due to finances, job, health, marital or family changes.
croozer- April 7, 2020 @ 11:27
Expected nothing less from IATA.
So far only the US DoT has it correct: "You don't provide the service, you give the money back".
Of course airlines are hard hit - everyone in the travel industry is - but airlines (or any other supplier) aren't making any friends with their "once we have the money we don't give it back" intransigence.
"But it's not our fault" "But you should have purchased insurance" are really lame arguments for folks holding those nonrefundable under $1000 tickets.
That's a big deal for someone that's lost their job.
Someone that "go next year instead - just pay the add coll" may not be realistic.
Besides that - how valuable is that voucher if an airline goes under?
Sure, billions in lost revenue, but what's happening with operating costs?
Reduced flights, staff, fuel bills, landing fees must add up to something.
We're none of us out the virus woods yet you would think that an industry that has already started tossing around bailout estimates would engage in a bit more bog picture thinking.