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Airlines required to refund passengers, but forcing them may be ‘counter-productive’: DGCA to SC

For carriers facing “financial distress”, DGCA suggested setting up a transferable credit shell with life up to March 31, 2021.

By: Express News Service | New Delhi |
Updated: September 7, 2020 10:23:09 am
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Airlines are required to refund passengers for flights cancelled during the Covid-driven lockdown period but forcing them to do so may be “counter-productive” in view of the liquidity crunch the sector is facing, the Director General of Civil Aviation (DGCA) has told the Supreme Court while suggesting a “workable solution” that considered the best interests of flyers as well as companies.

In an affidavit filed in the SC, the DGCA has said airlines should “immediately” refund the ticket fares of passengers who booked their tickets during the lockdown period — between March 25 and May 3 — and were scheduled to travel in the period. However, for carriers facing “financial distress”, it has suggested setting up a transferable credit shell with life up to March 31, 2021 and a refund if the shell remains unused after that.

According to DGCA, airlines will have to make a full refund immediately to passengers who booked tickets — either individually or through a travel agent — on any domestic or international airlines (when the booking is ex-India) during and for travel in the lockdown period. The affidavit said that “this is being mandated … as the airlines were not supposed to book such tickets”. However, it added that the credit shell facility will not apply to tickets booked on international carriers where booking is ex-India.

“For all other cases, the airlines shall make all endeavours to refund the collected amount to the passenger within 15 days,” the affidavit added. The DGCA made it clear that refund is the rule and added that “non-refund of fares/ creating involuntary credit shell by airlines would be in violation of the CARs (Civil Aviation Requirements) and the passenger charter, which may result in initiation of enforcement action for violation of CARs and also as per provisions of the Aircraft Rules, 1937.”

It added that during meetings between officials of the Civil Aviation Ministry and representatives of airline companies and travel agents associations, “representatives of airlines have submitted that on account of cancellation of flights/Complete suspension of operations due to Covid-19 pandemic, the airlines have run out of liquidity, whereas, despite suspension of the their operations they have been paying salaries to their employees, lease rent, maintenance charge etc. without any turnover whatsoever, and therefore are facing an acute financial crisis in terms of liquidity”.

“The airlines have further submitted that on lifting of the lockdown, the operations though have started to a limited extent, however, in those operations also, the passenger occupancy is limited. Therefore, they are not in position to refund the fares as of now and can only provide a Credit Shell.”

The DGCA told the court that “considering the concerns highlighted by the airlines”, any enforcement action against them at this stage would cause further bottlenecks to the resolution process. “Under such complex circumstances, initiating enforcement action against the airlines may not yield any meaningful result for any stakeholder. Rather, it may prove counter-productive for each stakeholder and thereby, may be against the Indian aviation as a whole,” said the regulator.

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