The Supreme Court on Wednesday ordered airlines to pay a 0.5 percent interest per month on delayed refunds of tickets which were cancelled due to restrictions imposed to counter Covid-19 pandemic.
The court said that the credit shell will be valid till 31 March 2021 and if the passenger hasn’t used the amount after that, airlines have to refund the amount with additional interest.
The amount in the credit shell can be used on any route and is also transferable.
“In all cases where credit shell is issued there shall be an incentive to compensate the passenger from the date of cancellation upto 30th June, 2020 in which event the credit shell shall be enhanced by 0.5 percent of the amount of fare collected) for every month or part thereof between the date of cancellation and 30th June, 2020. Thereafter the value of the credit shell shall be enhanced by 0.75 percent of the face value per month upto 31st March, 2021,” a bench of the Supreme Court ruled on Thursday.
Ruling in favour of validating the concept of credit shell, the Supreme Court supported the arguments of the airlines that any order for an immediate refund to passengers will threaten the survivability of airlines which have been worst hit by the Covid-19 pandemic.
Petitions challenging the concept of credit shell and seeking full refund from airlines on cancelled tickets were filed by various passenger groups like Air Passenger Association of India and were tagged along with similar pleas filed by Pravasi Legal Cell and Travel Agents Federations of India.
Under existing rules, airlines are required to refund passengers for flights cancelled during the Covid-driven lockdown period, however aviation regulator DGCA told the court that forcing them to do so may be “counter-productive” in view of the liquidity crunch the sector is facing. DGCA had suggested the concept of paying interest saying that it considers the best interests of flyers as well as companies.
Domestic flight operations were suspended for two months during the nationwide lockdown, and international operations continue to be suspended.
Thousands of passengers were forced to cancel flight tickets booked during the period, and some airlines created credit shells.
Industry sources said that while IndiGo and Air Asia said that they have refunded the entire amount of cancelled tickets to passengers and travel agents, SpiceJet, Go Air and Vistara still have some amount to pay.
“The concept of paying interest amounts can create stress on the already reeling airlines as most of them have little cash left. Passengers may also decide to hold the amount in a credit shell to get interest rather than utilising it,” said an airline executive.
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