Indonesia trade caught in refund spat with airlines

Indonesia's tourism stakeholders are clamouring for airlines to provide cash refunds instead of credits and vouchers

The Indonesian Travel Agents Association (ASTINDO) is the latest in a long line of trade bodies calling on airlines to give cash refunds instead of vouchers or credit values, to enable its member travel companies to maintain cash flows and refund their traveller clients.

This is as several cash-strapped major airlines are refusing to provide refunds for cancelled flights amid the pandemic, and are instead offering customers credit vouchers.

Indonesia’s tourism stakeholders are clamouring for airlines to provide cash refunds instead of credits and vouchers

The massive drop of flight frequencies and the increasing number of partial or full lockdowns applied by destinations have resulted in a major drop in ticket sales. IATA reported a drop of more than 90 per cent in ticket sales between January 26 and April 17.

Pauline Suharno, secretary general of ASTINDO, said in a statement: “Airlines are having liquidity problems due to the minimal sales and they also have to take care of their operational costs, so they have taken the option to refund tickets in the form of vouchers (for international airlines) or a topped-up deposit value (for domestic carriers).”

Pauline added that during the early stages of the Covid-19 outbreak from January till mid-February, airlines advised passengers to postpone their trips, but still allowed them to cancel and get cash refunds.

“However, when Covid-19 was labelled a pandemic (by the WHO) and destinations started taking drastic measures in a bid to break the spread of the virus, airlines have changed their policies. Now, with no cash refunds, passengers have no choice but to postpone their trips,” she told TTG Asia.

And this situation has caused cash flow issues for travel agents, according to Pauline.

She explained that as payments made by corporate and government clients to agents were on credit terms, agents needed to pay for the flight tickets to IATA on their behalf, so the funds in the airlines’ account belonged to the agents.

“Some of our members’ corporate clients had cancelled their trips before they paid us. Understanding that airlines would refund payments we had made then, they only paid us service fees. Now, with the airlines changing the policy, we need to go back to clients with the vouchers,” she said.

However, other issues surface, as some of these credit vouchers are only valid for up to a few months, and will be lost if not used within that period, , explained Pauline.

She elaborated: “On the customers’ end, they may have problems with their businesses due to Covid-19 and will not be able or need to travel again later. What happens if the ticket holders, who were initially scheduled to go on a business trip to a destination do not need to go there anymore and instead, to a different city, which is not served by the airline? Or what if these travellers are not working at the same company anymore?”

On the domestic front, Pauline said the agents risked losing their top-up deposits in the case that an airline declares bankruptcy.

“What if the airlines cannot withstand the onslaught of (Covid-19)? Is there any guarantee that (if the airline were to collapse) that consumers and travel companies can get a full refund? Looking at past experiences, when Linus Air, Batavia Air, and Adam Air collapsed, no funds were returned to either consumers or agents. Tens of billions of rupiah belonging to consumers and travel agents became part of the airlines’ assets as the funds were settled in the airlines’ bank accounts,” Pauline said.

ASTINDO has sent letters to Indonesian airline companies, including Garuda Indonesia, Citilink, Sriwijaya Air, Lion Air and AirAsia, to request the transfer of funds to travel agents but has received no positive response.

“ASTINDO, therefore, is requesting all airlines to refund the ticket payments in cash as under the current circumstances, all sectors of the industry, especially travel agents, are in need of cash flow,” she said.

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