Air France-KLM Offers Refunds on Tickets in Policy Reversal

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(Bloomberg) -- Air France-KLM will offer refunds to customers whose flights were canceled due to the coronavirus pandemic in a policy reversal that could put further pressure on the struggling carrier’s balance sheet.

The airline will give travelers a choice between a reimbursement or a voucher for a future flight worth 15% more than the initial ticket value, according to a statement Friday. The incentive linked to the voucher is meant to encourage customers to opt for future flights instead of cash.

Since the start of the health crisis, Air France-KLM has been offering vouchers valid for a year. Through March 31, the value of tickets for flights that may be canceled and for which the airline could be liable for vouchers or refunds reached around 2 billion euros ($2.2 billion), according to the carrier.

Thousands of flights have been scratched in Europe since governments imposed travel bans to halt the spread of the virus. Some carriers are paying customers back, and others have tried to avoid the cash outlay at a time when revenue has evaporated. Consumer groups have pushed European Union governments to guarantee refunds for passengers.

On Thursday, EU Consumer Affairs Commissioner Didier Reynders said in an interview with Les Echos newspaper that airlines must offer customers a choice between refunds or vouchers. Obligatory vouchers are contrary to EU rules on passenger rights, he was quoted as saying.

Vouchers would be a “reasonable way for airlines to move through this crisis,” Air France-KLM Chief Executive Officer Ben Smith told analysts this month, echoing arguments made by carriers lobbying governments to have EU rules changed.

Air France-KLM was granted a 7 billion-euro lifeline in loans and guarantees by the French government that the company has said is essential for its survival. The Dutch state is also expected to provide funding.

©2020 Bloomberg L.P.

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