(Newswire.net — May 5, 2020) — By law in the European Union, airline companies have to reimburse clients for cancelled flights. However, with losses mounting for all of them, governments are asking the European Commission to suspend their obligation regarding the flights that could not take place because of the coronavirus pandemic.
French Government to Help Its Main Airline
Twelve countries, including France, have asked the European Union to depart from its principles and release airline companies from their obligations of reimbursing all clients who had flights cancelled during the COVID-19 crisis. The problem is simple: Airline companies are already suffocating under cash flow problems since they have been at a complete stop for weeks now. Of course, that would make many customers quite unhappy since they may not need or want to travel in the coming months.
The French government has already announced a 7 billion euros plan to help Air France come out of this crisis. Therefore, it only makes sense for them not to want more constraints on the company in these hard times, hoping that the money they will inject will be sufficient to see them through. For more new from France, visit this online French news magazine.
Asking for a Temporary Amendment
One of the solutions they found to preserve what is left of the airlines cash flow is for them to provide customers whose flights were cancelled with assets they can use on a future flight, instead of a cash refund. These twelve countries (Belgium, Bulgaria, Cyprus, Czech Republic, Greece, France, Ireland, Latvia, Malta, Netherlands, Poland and Portugal) made the request through a joint statement aimed at the European Commission. Since physical meetings have been all but cancelled, they presented it to the European Ministers of Transport via a video conference call.
In their argument, they stressed the current economic fragility of the airlines, stating clearly that if they had to pay back all cancelled flights, they might not be able to financially survive. They stressed that there is an urgency to make a temporary amendment which would allow airlines to reimburse their passengers in other ways than by paying them back the original cost of the cancelled flights.
A Total Approaching $10 Billion
IATA (the International Air Transport Association) indicates that the total amount which would need to be refunded by all European airline companies for the cancelled flight would come to about $10 billion. They believe that it is crucial for all the states of the European Union to do whatever is necessary to preserve the structure of the European air traffic market. They also go on mentioning that it cannot go against the interest and protection of the passengers either.
In the case where taxing assets would be offered to passengers to compensate for the lost flights, there would still be a need to protect these clients from a potential bankruptcy by one or more of the airline companies involved in this process. The solution could come from creating a guaranteed fund, which would act as a safety net to customers waiting to use these assets on a future flight.