November 30, 2023


World Business Inquiries

Stimulus bill tweaks refund rules to help virus-walloped airlines

3 min read

The proposed P1.3-trillion Philippine Economic Stimulus Act (Pesa) will allow local airlines to issue travel vouchers instead of refunds, helping the beleaguered industry fight off a multibillion-peso cash drain and potential bankruptcy but at the expense of flyers hoping to get their money back.

Under the bill, the Department of Transportation (DOTr) and other agencies can intervene and allow the “substitution of [the] refund option to travel vouchers.”

But this could come in conflict with the 8-year-old Air Passenger Bill of Rights, which allows flyers to choose between penalty-free rebooking and refunds in case an airline cancels a flight.

Officials of the Civil Aeronautics Board, which oversees the economic aspects of the aviation sector, did not immediately respond to requests for comment on Wednesday.

Air Carriers Association of the Philippines vice chair Roberto Lim said details would be in the implementing guidelines, to be issued by the DOTr should the bill pass into law.Travel refunds place added pressure on the airlines, which are already losing billions in revenues and fixed-expenses as a result of the lockdown.

From February to early April this year, those refunds have hit P5 billion, Lim aid. This is expected to increase once lockdown measures are lifted as airlines signaled more flight cancellations because of weak demand, at least for the next few months.Philippine Airlines (PAL) president Gilbert Santa Maria said last week they intended to operate 5-10 percent of their international network and 20-30 percent of local flights by June this year. Cebu Pacific CEO Lance Gokongwei provided similar figures during the company’s annual meeting.

PAL and Cebu Pacific have so far refrained from directly discouraging passengers from choosing refunds over rebooking or storing the value of their ticket in a travel fund.

AirAsia CEO Tony Fernandes, however, said in April that he encouraged passengers to “accept credit” as airlines seek to conserve cash.

Some overseas carriers offer incentives for passengers to pick a voucher instead of refunds while other airlines have imposed a no-refund policy.

PAL currently allows passengers to choose a travel voucher option, which is worth the full value of the unused ticket plus a 10-percent bonus, for future trips. It also allows unlimited penalty-free rebooking.

It was unclear what policies the local airlines might implement, but the Pesa bill provides them more flexibility given the unprecedented business environment.

Apart from changing the rules on refunds, the bill will allow the government to step in and grant emergency credit, interest-free loans of up to five years and debt guarantees.

This will help cash-strapped airlines in restructuring their loans or even assist in rehabilitation.

Under the Pesa bill, a total of P70 billion is being set aside for transport businesses, which includes assistance to maritime and public utility vehicle operators. Also included are trucking, shipping and railways.

Another P58 billion will also be allocated for critically impacted businesses under the Department of Tourism.

The International Air Transport Association earlier estimated losses from Philippine aviation and tourism at $4.48 billion, while job losses could reach 548,300 this year alone.

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