Refunding passengers is just one of the problems faced by airlines during the current coronavirus crisis, and many have large backlogs. Recent reports suggest that Finnair may now have over 100,000 refunds in the queue. And as much as airlines don’t want to pay out immediately, European regulations are making it clear that they have to.
Refund backlog at Finnair
According to the Finnish publication Helsingin Sanomat, Finnair currently has over 100,000 unprocessed refund claims waiting, and it is expecting the processing time for these to be around eight weeks.
Commenting on the problem, Satu Toepfer, Group Manager at the Finnish Competition and Consumer Authority, explained to Helsingin Sanomat that although this is a unique and chaotic situation, efforts should be made to process refunds as quickly as possible.
Finnair has tried to improve the situation by offering extra value if passengers choose to take vouchers instead of cash refunds. If a passenger chooses credit for a future flight, they will receive 10% extra (according to the latest policy on the Finnair website). This should be faster to process, and it is unclear whether these refunds are subject to the same delays.
Keeping up with European regulations
European airlines struggling with refunds have already appealed to the EU Commission to allow them to offer vouchers instead. Many fear that the level of refunds needed will leave them with little cash to see them through the ongoing crisis. Simple Flying reported recently, for example, that if Lufthansa were to refund all customers, it would be left with just 25 days of liquidity.
The EU Commission, however, has not supported this and is sticking by its rules that airlines must offer cash refunds. And they must do so within seven days. Finnair is clearly significantly in excess of this timeframe (as are most airlines). Thus, it remains to be seen whether or not the EU will get involved in these longer processing times, despite their firm view on refunds being essential. EU Transport Commissioner Adina Valean said in an emailed statement, and reported by Bloomberg, that:
“Airlines must refund canceled flight tickets. They can of course also offer a voucher but — and this is very important — only if the customer agrees to accept this. If the customer does not want a voucher or other proposed solution, the company must reimburse.”
Problems around Europe
Finnair is far from being alone in facing difficulties. Most airlines have large backlogs and long delays in processing (not to mention challenges in contacting customer service), and some are making it even more difficult. Ryanair, for example, stopped issuing refunds in early April, telling customers they would have to wait until the COVID-19 crisis eased. And some airlines, including Lufthansa, have appealed to their governments for support in stopping cash refunds. There is no indication yet that Finnair has done this.
Finnair is also not alone in offering a voucher alternative. Offering a higher value by taking future credit seems like a sensible option, especially in light of EU support for vouchers as long as the customer accepts.
But as groundings continue, more customers will join the queue for refunds. There are also growing fears of airline bankruptcies, and passengers understandably want their money back before this happens.
Would you accept a voucher if you know that it could save an airline from collapsing? Let us know in the comments.
Simple Flying contacted Finnair for comment on this situation of backlog and refund delay but had not received a response at the time of publication.