Coronavirus Lockdown: Whether you are entitled to get a full refund or credit shell from the Airline Companies? Know your Rights

Have you recently faced any situation like your flights getting cancelled due to covid 19 lockdown and the airline company instead of a refund issued a credit shell to you?

WHICH BODY REGULATES THE AVIATION SECTOR OR PRESCRIBES RULES RELATING TO DIFFERENT ELEMENTS OF THE AVIATION SECTOR?
The Directorate General of Civil Aviation (DGCA) is the regulatory body in India which is vested with the power to frame rules/policies governing the civil aviation sector. From regulating fundamental aspects of aviation sector such as safety norms, airworthiness of an aircraft to secondary elements such as capping of fares, cancellation policy, refund rules, and other norms that make a seamless flying experience for air travelers in India. It also coordinates all regulatory functions with the International Civil Aviation Organisation.

WHAT ARE THE DGCA GUIDELINES CONCERNING REFUNDS ON THE CANCELLATION OF TICKETS?
The Civil aviation Requirement (CAR) issued in May 2008 broadly regulates the refunds concerning the cancellation of tickets. We will discuss here briefly what are the requirements for a refund of flight tickets purchased by passengers.
Where a passenger purchased a ticket through a credit card refund should be made within 7 days of cancellation to the account of the card-holder.
Where cash was used for purchasing the ticket, the Airline's office where the ticket was booked from shall immediately refund the amount
Where passenger purchases through a travel agent/portal, the Airline must ensure that the travel agent/portal mentioned thereof refunds the amount within 30 days.
Other requirements such as airlines shall refund all statutory taxes and User Development Fee (UDF)/Airport Development Fee (ADF)/Passenger Service Fee (PSF) to the passengers; the Airline shall allow the passengers to make amendments/modification of ticket booked within 24 hours of the ticket booked without charging any additional charges to the respective passenger (except the prevailing fare difference for which the ticket is sought to be booked), the Airline shall conspicuously mention the amount which shall be refunded on cancellation, cancellation charges should be exhibited, the Airline or the agent shall under no circumstance impose a cancellation charge exceeding the basic fare plus fuel surcharge, no additional charge shall be levied for processing the refund.
The most relevant requirement in the context of this article is: The option of holding the refund amount in credit shell by the airlines shall be the prerogative of the passenger and not a default practice of the Airline.

WHAT IS A CREDIT SHELL?
We can think of a credit shell as a voucher issued by the Airline to the respective passenger instead of refunding the cancelled ticket amount to the bank account. The voucher amount is the same as the refund amount which the passenger is eligible to receive. A credit shell has a validity period during which the person to whom it was issued must utilize it.

HOW DID COVID IMPACT THE AIRLINES OPERATING IN INDIA?
As we are aware that to contain the spread of COVID, the government imposed a complete National lockdown. There is a prohibition on Domestic as well as International flight operations during the lockdown. As a corollary to the above, all flights scheduled during the lockdown period stood automatically cancelled.

HOW EXACTLY ARE THE AIRLINES PROCESSING THE REFUNDS FOR THE FLIGHT CANCELLATIONS DUE TO COVID?
After the lockdown was imposed, a quandary ensued the flight cancellations regarding refunds. The airlines, instead of refunding the entire ticket amount into the account used for booking, is transferring the amount mentioned thereof in the form of a credit shell to respective passengers with the validity of credit shell being one year. It essentially meant that the respective passenger must use the credit transferred within one year of such transfer made. Furthermore, the only manner these credits can be redeemed is by purchasing a new ticket with the respective airlines for future travel.
Most of the airlines are offering credit shell to the affected passengers. However, the passengers must still pay any fare difference, if any, which is applicable for the rescheduled date. The only solace the passengers can find here is that the airlines are not charging any cancellation fee.

IS THERE ANY GUIDELINE BY DGCA DIRECTING THE AIRLINES TO PROCESS THE REFUND IN A SPECIFIC MANNER?
As mentioned earlier, CAR,2008, governs the refund regulations. The CAR unambiguously states that the option of holding the refund amount in credit shell by the airlines shall be the prerogative of the passenger and not a default practice of the Airline.
The airlines have presently adopted the practice of credit shelling as the default route without offering the passenger the option to choose between credit shelling or transferring the refund amount into their account. It contradicts the CAR, 2008, and is devoid of any legal justification.

WHAT DID THE MEMORANDUM ISSUED BY DGCA DATED APRIL 16 DIRECTED?

On April 16 this year, the DGCA issued an office memorandum which stated that all airline operators to refund the full amount collected for all tickets booked during the First phase of the lockdown period(March 25 to April 14) for domestic and international air travel.
Besides, the Memorandum directed all the airline operators to refund the full amount collected without imposing any cancellation charge for tickets booked during the first phase of the lockdown for travel during the second phase of the lockdown (April 15 to May 3).

WHAT WERE THE REPERCUSSIONS OF APRIL 16, MEMORANDUM?

The Memorandum created a quagmire for affected passengers(large number) who booked before the lockdown as the Memorandum excludes from its purview, such passengers. Why the Memorandum has only included those bookings made during the lockdown, it defies the rational of a reasonable man, why someone will book tickets for a phase when they can foresee the travel restrictions or flight cancellations during the period mentioned thereof.
Besides, the above Memorandum tacitly approves the airlines' practice of processing refunds through credit shells instead of allowing the affected passengers to decide what they want.
Leaving the passengers who booked before the lockdown from receiving a full refund is irrational and creates an unwarranted predicament for such passengers. There isn't any legal justification for classifying the passengers into two groups, i.e., booking done before lockdown and booking done during the lockdown.

HAS THE MEMORANDUM NOTIFIED BY THE DGCA DATED APRIL 16 CHALLENGED IN THE COURT OF LAW?
There is a plea pending before the Supreme Court challenging the arbitrary nature of the Memorandum and the dubious practice adopted by the Airlines of credit shelling.

Therefore you are entitled to receive a full refund if your flight is cancelled due to covid 19 during the entire lockdown period and the credit shells are optional as per your preference.

HOW CAN OUR LAWYERS HELP YOU ?

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We can help you in identifying the risks, suggesting you better options and discussing a variety of legal remedies as well as insights will be provided on the government measures taken to tackle the issue, giving you an understanding from an industrial perspective, regulatory and competitive challenges, thereby helping you to plan your response and lessen the threat of disputes.
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About the author:

Suryash kumar, working at vidma consultancy, who loves exploring the uncharted territories. He has always been fascinated by the legal field, and he believes writing is one of the ways through which he contribute to the growth of the legal field.