Air passenger rights: consumers don’t have to accept airline vouchers!

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Consumers and businesses in Germany are not under any obligation to accept a voucher instead of a refund as compensation for a cancelled flight. The legislation that the German government had been planning to introduce allowing airlines to offer vouchers instead of refunds has now been put on ice after it was vetoed by the European Commission.

Not only tourists but also a great many business travellers had booked flights for business trips, meetings and conferences before their travel plans were cancelled at short notice by the global travel restrictions imposed in connection with the Covid-19 pandemic. Many consumers have not been refunded the cost of their flights, even when the flights were cancelled by the airlines or tour operators. The travel companies are telling consumers that refunds are taking longer than usual because of the high administrative workloads associated with the vast number of refund requests they are processing. It is also possible, however, that they are taking their time because of concerns about the major liquidity drain associated with refunds.

This is also the reason why many airlines were hoping for voucher solution. Originally, the German government had intended to introduce vouchers in place of refunds that consumers could exchange for a new flight at any time, but not redeem against a refund until 2022. The objective was to salvage the travel companies’ liquidity. Some airlines, such as Lufthansa and EasyJet, are already offering vouchers in place of refunds. To make the voucher scheme more attractive some of the vouchers being issued have a face value 10% – 20% higher than the original cost of the journey. According to the airlines the vouchers have been well accepted.

The Bundestag vote on the mandatory vouchers had been scheduled for 7 May. However, EU Transport Commissioner Adina Valean responded to an enquiry from three German ministers confirming that the EU will not support the legislation. She said that the protection of consumer rights was the central idea behind the EU’s Flight Compensation Regulation and that the legislation planned by Germany would undermine that. She added that travellers should also retain their right to ask for a refund for the cost of their tickets and that other solutions would have to be found to safeguard the airlines’ liquidity.

Since the German government has categorically ruled out a ‘go-it-alone’ approach, the mandatory voucher scheme for consumers and business travellers is now off the table.

A state fund to support the ailing travel industry is now being advocated as an alternative solution. The state funds would initially be used to help travel companies avoid liquidity squeezes. When the crisis is over the travel industry would replenish the fund within a specific timeframe so that the tax payers don’t end up bearing the burden of the costs. Whether a state fund will be introduced and how exactly it would be set up is not yet clear.

Your contact person:
Marcus Nothhelfer, Partner
+49 173 7291 420
marcus.nothhelfer@arqis.com

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