Airlines will have to pay interest to passengers on credit shell amount: SC

If unused till 31 March, 2021, airlines will have to return the money to passengers

The Supreme Court on Wednesday ordered airlines to pay 0.5 per cent interest per month on delayed refunds of tickets, which were cancelled due to restrictions imposed, to flyers.

The court said the credit shell would be valid till March 31, 2021, and if the passenger didn’t use the amount after that, airlines had to refund the amount with additional interest.

The amount in the credit shell can be used on any route and is transferable. “In all cases where credit shell is issued, there shall be an incentive to compensate the passenger from the date of cancellation up to June 30, 2020, in which event the credit shell shall be enhanced by 0.5 per cent of the amount of fare collected for every month or part thereof between the date of cancellation and June 30, 2020. Thereafter, value of the credit shell shall be enhanced by 0.75 per cent of the face value per month up to March 31, 2021,” a bench of the Supreme Court ruled on Thursday.

Ruling in favour of validating the concept of credit shell, the court supported the arguments of airlines that any order for an immediate refund to passengers would threaten the survivability of airlines, which have been worst hit by the pandemic.

Petitions challenging the concept of credit shell and seeking full refund from airlines on cancelled tickets were filed by various passenger groups like Air Passenger Association of India, and were tagged along with similar pleas filed by the Pravasi Legal Cell, and Travel Agents Federations of India.

Under existing rules, airlines are required to refund passengers for flights cancelled during the Covid-driven lockdown period. However, the aviation regulator DGCA told the court that forcing them to do so may be “counter-productive” in view of the liquidity crunch the sector was facing. 

The DGCA had suggested the concept of paying interest, saying it considers the best interests of flyers and companies.

Industry sources said that while IndiGo and AirAsia said they have refunded the entire amount of cancelled tickets to passengers and travel agents, SpiceJet, GoAir and Vistara still have some amount to pay.

“The concept of paying interest amounts may create further stress on airlines as most of them have little cash left. Passengers may also decide to hold the amount in a credit shell to get interest, rather than utilising it,” said an airline executive. However, travel agents welcomed the court’s decision, saying this was a relief for airlines, as well as passengers.