COVID-19: Force Majeure for airlines will be disastrous for tourism sector, says IAMAI

Internet industry body IAMAI on Monday said there will be significant downstream disruptions in the travel and tourism sector if airlines are allowed to not make refunds to customers on grounds of 'force majeure' amid coronavirus pandemic.

The comments came after reports that suggested 'force majeure' provisions could be put in place for airlines sector in terms of its payments and dues to others, in order to protect the businesses in times of the ongoing crisis.

A force majeure event refers to the occurrence of an event that is outside the reasonable control of a party and prevents that party from performing its obligations under a contract.

Internet and Mobile Association of India (IAMAI), which represents online travel aggregators (OTAs) and other travel-tech services, said such a move may allow airlines to come out stronger but at the cost of destroying the downstream ecosystem and thus, affect the livelihoods of millions.

"The travel and tourism sector is going through one of its worse phase, with all present and future booking activities closed thereby stopping all incoming revenues; coupled with cancellations and demands for refunds which creates major cash flow challenges for everyone involved in the business," IAMAI noted.

Customer refund is the top priority of most OTAs and airlines bookings are one of the most contentious one given the magnitude and complexities involved, it added.

Most of the airlines, including domestic ones, have refused to refund whose flights either got cancelled due to the suspension of all commercial passenger flights in the wake of 21-day lockdown, or because of the visa and travel restrictions by various countries or they themselves cancelled tickets due to the pandemic concerns.

The airlines are asking customers to accept travel vouchers with their validity, in some cases, as long as one year.

IAMAI cited the example of best practices followed by the Department of Transportation in the US mandating airlines to pay all customer refunds.

The association suggested that full cancellation is allowed for international bound travellers, clearing of dues by airlines to downstream partners, and the option of flexible travel vouchers valid for 6/12 months in lieu of refunds.

"This will help in expeditious settlement of refund requests, while at the same time help ease cash flow challenges for the ecosystem. This will also allow the industry to bounce back post normalcy," it added.

IAMAI highlighted that there are over almost two lakh independent travel agents, tour operators, and online businesses and up to seven lakh personnel working in the sector.

This sector directly provides livelihood to over nine lakh of personnel, including self-employed entrepreneurs, on-roll employees, call center agents, retainers, insource and outsourced staff, women, and individuals working part-time from their homes as holiday expert.

"The entire ecosystem, often involving small entrepreneurs and self-employed can crumble if the airlines are allowed force majeure and avoid making payments that eventually percolate down to these agencies," IAMAI argued.