Last Updated on June 22, 2020 by tripcentral
Why can’t I just get a refund for the trip cancelled due to COVID-19?
You booked a trip with us. You paid for it. Through no fault of your own, you can’t use it, and so the natural response is “I want my money back”. Logical, and how most of the world works in normal times.
Travel is one of the only things paid in advance…
Airlines and hotels offer higher fares in exchange for the ability for customers to change with no penalty or even higher fares for the ability to refund. It is possible to book a refundable airfare and make a hotel reservation at a rate that allows you to pay when you check out of the hotel – after you use it. For the most part, people don’t want to pay these high fares and room rates in exchange for that flexibility, other than perhaps, business travelers that know their plans are subject to change.
The fares and rates offered are low, especially for packaged bookings and lower cost flights and these fares are rates that are subject to terms and conditions that carry non-refundable and often, no changes, or changes for a penalty, depending on how far in advance they are cancelled. Often within 21 days, any change is deemed to be a cancellation. Low fares and room rates are extended in exchange for the knowledge that there will not be “no shows”. Empty seats and hotel rooms are very costly, as other customers were turned down from booking them. There is a certain fixed cost to fly an airplane and run a hotel, and the low prices we are all accustomed to are based on upper 90% occupancies.
If the money was not paid in advance, the no show rate would be very high, and the fares and room rates would all be higher as well. This is why travel is purchased in advance and non-refundable.
These are not normal times
The entire regime of fares and restrictions never contemplated what we are going through today. 9/11 and other demand shocks were nothing compared to this. As such, travel suppliers are invoking “Force Majeure” which typically applies to things like war and acts of God such as a pandemic. Just as your position as a customer is that this is not your fault, neither is it the airline, hotel, cruise line, attraction, tour guide, etc.
This works both ways. While they are not providing a refund, they are throwing away all other rules and restrictions like change fees, in some cases inventory restrictions, so that everyone can re-book their trip. It would be an unconscionable position to say that they get to keep your money and never provide the service.
tripcentral.ca or any other travel agency does not have your money
We are an agent for our airline, cruise line, and tour operator suppliers. As such, we cannot modify their terms and conditions of sale, nor do we have your money. If you paid by credit card, your card was charged by our supplier. If you paid in any other form of payment, the funds have already been passed to us to our supplier for your trip. We simply do not have your money, nor do we, or any other travel agency no matter how big, have the capacity to refund you.
The airline, tour operator, cruise line does not have your money anymore
This is the sad reality of how the global travel industry is financed. This is something that we as a company and its shareholders, through the Association of Canadian Travel Agencies has been warning Federal and Provincial governments about for years. The fact is, globally, advance customer monies are not held in any sort of trust, or even macro trust. Governments are well aware of this but reticent to regulate in this area. tripcentral.ca’s President had an in-person conversation with Transport Minister Marc Garneau before developing the Air Passenger Protection regulations, where it was clear that the Government was not interested in any financial regulation of the airlines. As such, customers are unsecured creditors in a bankruptcy, well after secured creditors. This was known and decided by past governments as well to be a very rare and “nearly impossible” scenario to burden airlines with this financial constraint. It is the same around the world, and regulation in Canada would have to apply to foreign carriers selling flights in Canada. If you disagree with the way things are, we suggest you write to the federal Minister of Transport, the provincial Minister of Consumer and Business services, and advocate for financial regulations and a passenger protection scheme for bankruptcies – but it doesn’t exist today.
The truth is your money was already spent by the airline or cruise line or passed on to a hotel and they have already spent it. Tour operators and travel agencies in Ontario are required to hold consumer monies in trust, but once they are passed to federally regulated airlines and foreign cruise lines and hotels, the money is no longer held in trust. Cruise lines are heavily indebted and, in most cases, have less than 10% of the money customers have advanced. They have no financial capacity to refund, and their lenders are not about to take second place.
Industry-wide refunds would bankrupt the industry as the process began, and as a result, no one would get their money anyway. Transportation links would be disrupted within Canada and abroad, future travel plans would now be at risk (not only financially), and it would be another blow to the economy overall (and its chain reaction). It’s for this reason that the Canadian Transportation Agency wrote a plain language position that future travel credit is an acceptable remedy due to COVID-19.
Further, the Ontario Government amended regulations to allow for future travel credits as adequate compensation and will allow future travel credit claims in the event of a failure of an Ontario registrant wholesaler. What they don’t say, is that there is currently an event cap of $5M per failure, and a failure of a major tour operator would only give “cents on the dollar.
Travel Insurance takes the position that there is no financial loss when 100% future travel credits offered
The latest we have heard, is that Manulife has taken the position that a future travel credit of 100% of the original value means there is “no insurable loss”. This has also thrown us for a loop, and we are in the process of trying to restore a future travel credit that was originally offered but declined because of an insurance claim. We are also looking at how cancel of any reason insurance (there is some loss when claiming this – you don’t get 100% back) will work, but we find most people, if given the choice of 80% back in cash versus 100% for future travel, they will choose the 100% and move the policy to cover the next trip. Some files are being appealed if there is solid evidence that it is not possible to travel in the future, and these are being reviewed by Manulife on a case by case basis.
It’s easy to say “travel insurance isn’t worth it” but it also covers many more risks, and the premiums will likely go up in the future, especially for cancellation for any reason. We can soldier on and appeal claims, but really, if there is any intention to travel in the future, it’s better to take the credit and re-book.
Frustrated Contracts, Class Actions, Small Claims
We’re well-aware that consumer advocates, class action lawyers, and lawyers of all kinds are ready to gain notoriety and fees from this situation. It’s a free world, but it is very uncertain what judges will think about small claims courts clogged with cases when both the Federal and Provincial Governments have put out statements supporting future travel credits for the greater good. The harms done by forcing travel suppliers through legislation refund will be greater than the refunds that could be processed. So, while these common law arguments and other statutes can be referenced, it is not certain, and even if it was, “you can’t get blood from a stone”. One of the first things you will learn in a law class before suing is to ask, “do they have the money to pay if you win”, and in this case, the answer is no. While it doesn’t absolve the company of paying the judgement, it will likely force the company into bankruptcy, and no one will get their money anyway. In our opinion, this is a waste of time and effort. You are better to rebook and write your letter to the Minister of Transport to try and change things for the future. If you refuse a 100% future travel credit on the hope of a class action that could take years, give “cents on the dollar” in the way of an award, and watching most of that money go to the lawyers…well…you could have enjoyed your next trip instead. And if you fork out money for lawyer’s retainers for the amount of money in question here, it’s just adding to your losses.
While we agree with the sentiment and goals of those advocating and lobbying for changes to avoid these problems in the future, we disagree that a myriad of small claims and class actions will solve anything. It’s one thing to say that things “should be different” and refunds should be offered, but there is the practical reality of the matter. If you look at the financial statements of airlines and cruise lines, you will see that they simply do not have the money anymore, and no amount of litigation can solve that. We suggest that passenger rights advocates shift focus to lobby that future advance purchase funds should be held in escrow or macro trust until the service is rendered, therefore allowing the financial capacity to refund in the future. It would require extending the reach to foreign carriers landing in Canada or it would create an unlevel playing field with our Canadian airlines versus global airlines. There may be limitations by treaty that prevent this. And it may be more difficult to force foreign hotels and cruise lines to hold Canadian’s advance money in trust. Even if this were the case, it would take years for airline financial situations to re-capitalize to fund this, and there may be unintended competitive and pricing responses that stem from this. Any new start-up carrier would be subject to these rules, and maybe not start up at all, leaving incumbent airlines with less competition due to the strict financial regulations. This is not a simple matter for Governments to deal with, which is why it was left unregulated at this time.