India's top court orders refunds for flights cancelled due to lockdown

NEW DELHI (BLOOMBERG) – India’s Supreme Court ordered local airlines to refund tickets booked for travel during a nationwide lockdown earlier this year, dealing a blow to an industry already strapped for cash.

The court’s verdict also mandated airlines to issue credit vouchers even for tickets booked for travel outside the lockdown period if the flights were later cancelled due to virus-related restrictions.

Passengers must also be allowed to use those vouchers until March 31 on any route, and carriers must refund with a monthly interest if those remain unused by then.

The verdict by a three-judge panel headed by Justice Ashok Bhushan reinforces the view of Prime Minister Narendra Modi’s administration.

Many airlines around the world have issued so-called credit notes, instead of cash refunds, to passengers whose flights were cancelled due to the coronavirus pandemic, providing carriers with a temporary revenue source to tide over the slump, even as disgruntled fliers demand their money back.

India’s verdict – which was earlier estimated to cost local airlines more than US$500 million (S$681 million) – may be a precedent for such disputes elsewhere, and make the road to recovery even steeper.

India has the world’s worst virus cases just behind the US, reporting almost 87,000 new infections on Thursday (Oct 1) as the epidemic spreads in its vast hinterland.

While the South Asian nation has indefinitely banned scheduled international flights, local airlines are allowed to operate domestically with a limited schedule.

Still, most airlines struggled to fill even 70 per cent of seats in August, and more than two-thirds of passenger complaints were related to refunds, data from the aviation regulator showed.

The top court verdict, in response to a bunch of petitions filed by passengers, migrant welfare organisations, air travellers’ welfare bodies and travel agents associations, also asked the Directorate General of Civil Aviation to ensure that airlines comply with the order.

Indian carriers have already sought at least US$1.5 billion as an interest-free credit line and deferred loan repayments from the government, and one or more are expected to fail in the absence of any help from the government or airline owners.

The local aviation market in India, until recently the world’s fastest growing, is dominated by IndiGo, operated by InterGlobe Aviation.

State-run Air India, SpiceJet and the local affiliates of Singapore Airlines and AirAsia Group also compete in the market that flew 144 million passengers last year.

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