IS THE MIRAGE OF PRO-TRAVELER AIRFARE POLICIES COME TO AN END?

Airlines Were Coerced to Review Cancelation & Rebooking Policies During COVID-19

Air transport is one of the hardest-hit global industries since the very beginning of the COVID-19 pandemic. According to the International Air Transport Association (IATA), global passenger traffic fell by 60.2% year-over-year in 2020, by far the sharpest traffic decline in aviation history – driven by lockdowns, restricted travel movements, and volatile travel bubbles.

Ever since early-2020, Safe Travel Barometer monitored COVID-19 traveler safety and service initiatives announced by over 2,000 travel companies and arrival protocols for 150+ countries worldwide. It is more than evident that the pandemic has changed how we travel, more so with varied guidelines issued by governments and regulatory authorities.

During this gloomy environment, there was a notable change for air travelers – airlines became (relatively) passenger-friendly to address traveler anxiety and uncertainty. Numerous airlines upended their rather rigid and inflexible, now pre-pandemic cancellation and rebooking policies from their rulebooks altogether.

Methodology

Safe Travel Barometer performed an independent analysis of base airfare policies of 299 airlines between August 2020 (98) and July 2021 (299) to quantify this shift and compare the policies today. These are presented from three unique perspectives:

  • Global: How the airline industry stacks up worldwide
  • Regional: Trends across various continents/geographical clusters
  • Airline Business Model: Comparison between full-service carriers & low-cost carriers

Glossary

  • Credit Shell: A credit note created against a cancelled ticket/PNR to use it for future bookings.
  • Full Refund: Amount of money charged against the ticket booking, refunded on cancellations.
  • No Refund: Non-refundable amount charged against the booking in case of cancellations.
  • Standard Cancellation Policy: Fee charged by the airline against cancellation of booking, depending on ticket fare rules.
  • Free Date Change Allowed: Rebooking permitted for future travel without any extra charges based on the timeline decided by airlines.
  • Free Sector Change: No fee charged to rebook ticket to another date, including sector changes. Fare difference on sectors, if any, may be applicable on such changes.
  • Standard Rebooking Fee: Fee charged by the airline against rebooking of ticket, depending on the ticket fare rules.

 

Airline State of Af-fares

During the peak of the pandemic in 2020, ticket cancelations were a nightmare for the entire travel supply chain. Airline and intermediary cash flows were affected, brand equity hurt all across, and travelers were left in a state of uncertainty with countries reopening borders, test requirements and quarantine measures, each inconsistent from destination to destination. In addition, with regulatory interventions across countries, airlines were forced to introduce a series of passenger relief measures.

Among the 98 airlines assessed in August 2020, 61% of airlines issued credit shell in lieu of cancelations for a future booking, while the remainder 39% offered a full refund (see chart 1). But what a difference one year can make. With borders reopening and domestic travel permitted in various capacity worldwide, airlines have returned to their pre-pandemic airfare policies. In July 2021 (assessment of 299 airlines), one in two airlines reenacted a standard cancelation fee, while 22% maintained their credit shell policy. The most dramatic shift, however, was in the case of a full refund – only 7% offered full refunds to travelers upon cancelations, while 16% strictly had non-refundable fares.

A similar assessment of rebooking policies revealed tremendous flexibility on part of airlines during the pandemic. In August 2020, 94% of the airlines analyzed permitted travelers at least one date change with no additional charges, compared to 18% in July 2021. One in two airlines reinstated standard rebooking fees in May 2021, further indicating that airlines have returned to their pre-pandemic strategies. Amid border closure volatility, 29% of airlines now permit travelers to change their sectors to accommodate travel. However, while passengers are not charged to make the sector changes, they are charged a differential between the current and new fare.

Charging Fees are the New Normal

Airline recovery is varied across regions. In general, we can corelate airfare policies to the health of the region’s carriers – the more pro-traveler the policies, the lesser is the demand due to ongoing COVID-19 transmission rates & general impact, and vice versa. Based on the assessment of base airfare, 74% of airlines assessed in Europe issued credit shell while 26% issued full refund on cancellations in August 2020 (see chart 2). By comparison in July 2021 the share of airlines that issued credit shell or full refund on cancellations reduced to 19% and 5% respectively. European airlines which continued issued full refunds were Helvetic Airways, Air Belgium, Rossiya Airlines and Yamal Airlines. As the tide turned, vaccination rates increased and borders reopened, European airlines gradually reversing their traveler-friendly rebooking policies. In August 2020, practically all European carriers allowed travelers flexibility in rescheduling their flights. This dropped to 32% of airlines in July 2021, while another one-third permitted free changes to sectors and imposed a rebooking fee, respectively. South American & Asia Pacific carriers led this trend worldwide.

Three in four airlines analyzed across North America issued credit shell on cancellations in August 2020. The universe flipped over by July 2021 – 51% of airlines in North America restored a standard cancelation fee while 37% airlines maintained issuing credit shell.

By comparison, 39% of airlines analyzed in Asia Pacific issued credit shell in August 2020, which shrunk to 27% in July 2021. Singapore Airlines, AirAsia, Indigo and SpiceJet, among many others APAC airlines issued credit shells in August 2020. Come July 2021, Singapore Airlines (and then some) reinstated a standard cancellation fee. On the other hand, Malaysia-based AirAsia and Indian low-cost carriers (LCCs) Indigo and SpiceJet offered full refunds on ticket cancellations in May 2021 despite returning domestic demand.

Full-Service or Low-Cost: On the Same Trajectory

Notwithstanding the airline business model, full-service carriers (FSC) or LCCs adopted similar fare policies during 2020, and now in 2021. In August 2020, 59% of FSCs issued a credit shell in lieu of cancelations, while the remaining 41% offered full refunds (see chart 3). In the case of LCCs, 66% refunded via a credit shell and 34% issued a full refund during the same period.

Come July 2021, 22% of both FSCs and LCCs retained the credit shell policy and a sizable share of airlines – 58% of FSCs and 49% of LCCs – invoked a cancelation fee.

For more Information: 

Check out airfare policies on Safe Travel Barometer’s Airline Dashboard

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