As the world reeled from the significant impact of COVID-19 in early March 2020, something else was brewing in the travel industry - cancellations and how the airline industry, travel agents, and travel management companies (TMCs) would respond.
The International Air Transport Association (IATA) estimated that in Q2 2020 alone, airlines were facing a major cash crisis with one big contributing factor — $35 billion in refundable tickets due to both consumer and business travelers from airlines worldwide.
Today, businesses are looking to the future and planning for when their operations can return to normal. They want to make sure their cash liquidity is in a strong position to operate, so they too want to understand what airline refunds they’re entitled to.
A slow travel recovery
There has been a slow return to both leisure and business travel. However, initiatives such as vaccinations, are increasing the optimism over leisure travel resuming in 2021. According to Expedia Group’s (EG) 2021 Travel Trends report, 42% of those surveyed said positive news about a Covid-19 vaccine made them more hopeful about the future of travel.
What about business travel?
The Global Business Travel Association’s (GBTA) annual Business Travel Index has predicted that 2025 will be the year global business travel would fully recover and beat its $1.4 trillion peak from 2019. Although the study also estimates a reduction in the volume of global business by 51.5% versus the prior year.
The study also predicts that businesses will prioritize sales travel during the early recovery period in 2021, followed by service and repair travel to existing customers.
According to the research, internal meetings will be chosen over external conferences, events and trade shows, while travel for employee training and supplier meetings will be considered less important, thanks to the wide range virtual alternatives.
Unused airline credits and expiration dates
Egencia’s customers were told to take the air credit route after the Global Distribution Systems (GDS) prevented agencies from issuing refunds. To respond to this, most carriers issued credit expiration policies and extended the default one-year rule. Our data shows that in mid-2020, Egencia customers faced $148m USD available air credits. There are also 103,000 air credits available, with approximately 85% of these due to expire, with partial refunds more likely.
Information for airline credit expiry dates is also held by airline companies – not TMCs or travel agencies. This means that the airline credits’ expirations dates first need to be filed by airlines in Airline Tariff Publishing Company (ATPCO), before Egencia, and other travel management companies and online booking tools, can retrieve that information for customers.
Egencia’s initial response
During March and April 2020, our customer services team submitted and processed over 70,000 refund requests online via the GDS and over 35,000 directly to airlines on behalf of customers. We achieved this by drafting an additional 200 colleagues from across our customer services organization to support the processing of unprecedented refund volumes.
Making sure we kept customers’ cash flow and business needs front and center, we released a report to customers in Europe and Asia Pacific, giving them immediate visibility of unused tickets and refunds through Egencia Analytics Studio. This also resulted in better reporting to the existing Analytics Studio capabilities for customers in North America. However, as mentioned in order to do this, TMCs require the airlines to file the credit information first.
The one-time mass refund initiative available EU and APAC
Egencia Product and Tech also built a customized script to check all bookings that were canceled in early 2020 in order to process fully refundable tickets resulting in over 8,000 refunds to customers. However, this one-time automation mass refund automation initiative finished in late 2020.
How are Egencia and the industry tackling the challenges now?
The ‘Airline policy change working group’ was created in 2020 and comprises of airlines, GDSs, Travel agencies, ATPCO, IATA & ARC which meet to discuss and agree a taxonomy for incident specific response policies. Thanks to their expertise, Expedia Group has been an active lead participant of this task force and as a result, progresses on the taxonomy built so far are largely inspired by the schema of their own policy engine.
After review of the agreed draft schema, EG has already recommended the addition of new fields based on their own experience of dealing with new Covid policy related challenges. The objective is for the working group to agree final taxonomy and recommended practices by this summer so it can be presented to the IATA Passenger Standard conference in September 2021 for final adoption by all airlines.
Adapting how we deal with cancellations, refunds and credit
The onset of Covid-19 has meant that we’ve had to radically change how we supported customers with the onslaught of unprecedented cancellations, refunds and credit.
In the first few weeks of the Covid-19 crisis, EG received thousands of special Covid-related policy changes created by airline partners. These Covid policies were created to override the normal fare rules and offer more flexibility to travelers. They were named ‘Flex policies’. The challenge with flex policies, however, is that each airline uses different definitions and vocabulary to describe them (also referred to as 'taxonomy'). This is because there’s no industry standard, yet which has been adopted.
In addition, flex policies override ‘normal fare’ rules but there was no automated process for EG to manage this. What we needed was a central location to load and store these flex policies so that all EG stakeholders could easily (and automatically) update customers, offer self-service experience for customers and process free cancellations.
So, to overcome this challenge, EG built a policy engine. This was designed to automate several use cases while working on enhancing the policy engine so it can solve more challenges for businesses.
So, what’s next?
Proactive refunds in EU / APAC have been set up to mitigate financial loss due to expiry and low travel volumes, resuming proactive refunds of unused tickets in EU & APAC (excludes China). Any tickets not redeemed for travel will be refunded 37 days prior to its expiration date. The refund will be processed in keeping with the airline’s policy of the ticket and to the original form of payment.
UATP cards in North America
In order to streamline and simplify the large number of credits resulting from the pandemic, some airlines have made extensive use of Universal Air Travel Plan (UATP) cards. These cards are a great solution for carrying the credit value from a large number of flight cancellations because they can be used by any member of the client company and can be restricted with regards to which airlines can redeem the credits.
In response to the growth of UATP cards for these credits, Egencia expanded the UATP solution for North America through the introduction of a new “Restricted UATP” capability. By adding the airline credit UATP cards under this new payment type, clients can easily specify which airline(s) can be enabled to use the card for payment. If a booking is made with an enabled airline, the UATP card appears as a payment option during checkout. If a booking is made with a non-enabled airline, the UATP won’t show up as available for use as a payment option.
This “ring-fencing” approach helps reduce confusion for the traveler, encourages the use of the appropriate UATP card for a given booking, improves the payment success rate for bookings, and eliminates the risk of penalties imposed by the issuing airline for attempting to use their UATP card to pay for a different airline’s flights.
So, what should customers do next?
The world has changed. Events like this transform the industry and this means the way TMCs and customers manage credits has fundamentally changed.
Many customers have thousands of dollars in air credits sitting there, ‘banked’, doing nothing and this isn’t financially productive for your business.
Egencia’s CFO, Regi Vengalil: says:
‘Many businesses are looking for opportunities to reduce costs or access untapped resources. Air credits represent a compelling opportunity to access “restricted” cash or redeploy the credits in your first return to travel to save you incremental dollars.
At Egencia for our own credits, we’re proactively working to refund, extend or utilize the credits we have to ensure we’re maximizing the value of our available credits.’
The next steps you can make
If you have unused air credit, below some important next steps you can take to ensure you get the best your unused credit:
- If you have a negotiated agreement, you should work directly with the airline to negotiate an extension or specific terms (meeting the needs of your organization) for unused credits.
- Take advantage of your refunds in advance to make sure there’s no material loss to your business if you aren’t traveling any time soon. This even includes those partial refunds.
- Manage your travel profiles and credits – if employees leave, consider what name change policies are available for open credits so you don’t lose out. Name changes are usually limited to customers that have tickets issued with corporate agreements with airlines – explore this option.
- The airline knows the exact expiry dates and while we try to provide an indication of available credits to use, please consult with the airline directly to confirm their current policy regarding ticket validity.