Why Have Airlines Stopped Offering Refunds?

UPDATE: United Airlines, KLM, and Air France are some of the airlines that are now allowing refunds. Two weeks ago when we first published this article, airlines were in the process of getting government bailouts in order to shore up their finances and have cash flow. Some airlines have come through with tools to refund reservations and others we are still waiting for, but be patient!

Why have airlines stopped offering refunds for canceled flights?

Welcome to the new normal.

With over 1,000,000 flight cancellations requested in the past two weeks, some airlines have inhibited the ability to process refunds. We expect that more will follow suit in the coming weeks. With this sudden change, your clients may have many questions for you. What is the reason for the sudden change? To answer this question, we need to understand the impact that 1,000,000+ cancellations have on airlines.

Airline liquidity and cancellations

What caused The Great Depression of the 1920s? It was not the drop in the stock market that created the depression — it was the RUN on the banks. We now understand full well that banks don’t hold 100% of customer funds in their vault. During the Great Depression, these banks lost their liquidity – and in turn, went bankrupt. This created a downward spiral as other depositors lost their money as well.  It was the instant and immediate lack of liquidity that tore the country apart for a decade.

The same holds true for airlines as of today.

In the last two weeks, major international airlines have received twice the number of refund requests they receive in a normal year — over 1,000,000 canceled flights in just two weeks. They simply do not have the cash in the bank to refund, make payroll, pay for their fleet, and continue to exist as an airline.

Because of this, airlines are trying to stagger the refund over time in order to continue to be in existence. The current government bailouts that are in the process all over the world will help keep airlines in existence as well. Why are they doing this?  Every country knows it needs to save its airlines in order to keep its economy going.

The current list of airlines inhibiting refunds is below – and I expect more in the coming weeks.

What can travel agents do?

Be patient. Be communicative. As a travel advisor, you are the most trusted voice speaking to travelers right now. You can help restore calm and confidence. Remind your clients to avoid trying a credit card chargeback — this would only complicate the matter as credit card companies are likely to back the airline.

What does this mean for Centrav bookings?

Centrav too is in a backlog. As the ticketing agent, liquidity is not our issue as the refunds flow through our company and not TO us. If you have a ticket that is refundable for a fee, we will be able to process legitimate refunds for these airlines in the future. I expect 1 or 2 months from now things will return to normal, and the airlines will have received their government assistance.

Sincerely,

Erik Skoog 
Centrav Owner & Director

List of airlines restricting refunds