Coronavirus: Airlines, travel agents fight over lockdown ticket refunds intensifies

Key Highlights

• Airlines refunding money to OTAs in virtual wallets which cannot be transferred to bank accounts
• An estimated Rs 180 crore of tickets booked during lockdown period
• Citing cash flow issues and fear of airlines going bust, OTAs not refunding money to customers
• IndiGo and SpiceJet claim that they are giving cash refunds to passengers who have booked directly

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The tussle between airlines and travel agents has started to intensify. After the ministry of civil aviation circular on April 16 asking airlines to refund money to passengers, things have not moved in the direction as intended by the government. It seems both airlines and travel agents have been grossly violating the ministry directive. As per industry players, airlines have been refunding amounts to OTAs (online travel aggregators) in their "virtual wallets".

What are virtual wallets? Each travel agent is supposed to maintain such wallets with airlines to book tickets for customers. These wallets have to be topped up by agents to continue bookings.

Since the aviation ministry circular, domestic and international airlines have started refunding money to these wallets. But that's not helping agents, because these are not supposed to refund money back into accounts of travel agents. So even if they are refunded money by the airlines, there's no way agents can pass on refunds to customers (actual passengers).

It's estimated about Rs 180 crore of airline bookings took place (with just domestic carriers like IndiGo, Air India, Vistara, SpiceJet, AirAsia India, GoAir) after the lockdown started on March 25. The amount would be much larger if international bookings are added as some foreign carriers continue to take bookings despite complete ban on international flights in India till further notice.

"At the time of refunds, airlines doesn't give money to any agent in their bank account, they load refund amount in wallets which is maintained at their website. But post the DGCA directive, refunds are loaded in the same wallet which was used to book tickets. Our wallet balance with airlines will go up if the number of passengers opting for refunds increases, and agents' money would be blocked till the time we start getting fresh bookings. Till then, agents have to give refunds to customers from their cash flow or say no to refunds," says Nishant Pitti, the co-founder of OTA EaseMyTrip.

As per the civil aviation ministry order, if a passenger has booked a ticket during the first phase of lockdown (March 25 to April 14), the airline shall refund the full amount, and the refund to be made within a period of three weeks from the date of request of cancellation. Prior to this order, airlines were giving refunds in the form of credit shells which are essentially vouchers that can be used for bookings at a later date. But due to huge backlash from end customers and OTAs, the ministry had to issue fresh directives. "We are sending cash refunds to customers as per DGCA guidelines," says a source at IndiGo.

Vistara spokesperson says that it's processing full refunds on domestic and international bookings upon the request of the passengers. SpiceJet, on the other hand, said that passengers who booked directly with the airline will be refunded within three weeks to their respective mode of payment, and passengers who booked by other sources are requested to get in touch with their source of booking. The problem with this approach, as one travel agent executive says, is that when passenger goes to their source of booking (an agent), the agent is not in a position to refund since their money is stuck in "virtual wallets".

It's estimated that about Rs 55,000 crore of air tickets (domestic and international) are booked annually with travel agents. Initially, some of the foreign carriers associated with global body IATA (International Air Transport Association) refunded money but even they have stopped refunds now.

"IndiGo says that they are returning money but since it goes to the virtual accounts, it's of no use to us. Wherever we have got money from international airlines, we have issued cash refunds," says Jyoti Mayal, President, TAAI, a large travel agents' body with over 2,700 members. Agents say that with almost zero revenues, and airlines not refunding money in the bank accounts, their problems have aggravated further.

At present, more than 95 per cent of air ticket bookings are processed by travel agents, including OTAs like MakeMyTrip and Yatra, while the rest are done directly by passengers.

Industry insiders say large OTAs are not refunding money to their customers fearing that their money will be stuck if the airlines go bust since "virtual wallets" are parked with airlines.

"We are closely working with our airline partners to work out more benign policies for the customers and trying our best to streamline the cancellation and refund process. We are processing refunds as per the policies defined by the airlines," says Dhruv Shringi, co-founder and CEO of Yatra.com.

Email queries sent to MakeMyTrip, IndiGo and GoAir didn't elicit responses. The story will be updated in due course.

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