Insights overview

Cancellations and postponements – Business Perspective – Part 1 – Travel

A large number of travel plans and events have been, and are being, cancelled or postponed due to COVID-19. Following our travel and event articles looking at these issues from a customer perspective, we now look at the issues this could raise from a business perspective.

We will look at travel cancellations and postponements first, followed by events.

Travel – what are your rights?

Flight Cancellations

If an airline cancels a flight for your employee, then the passenger is entitled (at their election) to:

be re-routed at the earliest opportunity;
be re-routed at a later dateat their convenience; or
a refund.

These options are in addition to the airline’s duty to notify you of the passenger’s rights, and the offer and provision of care as is reasonable in the circumstances. This care may include meals and refreshments, hotel accommodation if necessary, and transfer to that accommodation, so these are expenses which could be claimed from the airline, rather than your company.

Frustratingly, we are finding that many companies are making it near impossible to choose the refund option – with a certain airline even (temporarily) removing the refund option from its cancellation form – other than by ringing an overburdened call-centre.

As an alternative to a refund, many airlines are offering passengers the choice to postpone their travel or get travel vouchers (in some cases worth 120% of the travel costs) instead of a refund. This of course is not helpful where a flight had been organised due to a meeting or conference, for example, which has now been cancelled. However, if the meeting or conference has been postponed, this option may be useful.

Your company may wish to send out guidance to its regular travellers setting out its preference between a refund or vouchers, and setting out requests that all those employees with cancelled bookings seek refunds or contact the company’s travel organiser before taking any action.

If the decision is made to opt for vouchers, you may wish to ask that these name your company as the holder/user (although this may not be possible in every case) and are clear as to amount, any restrictions on redemptions and the expiry date – if not, query this with the airline so that you have certainty on when and how it can be used. Vouchers are also risky as the airline may not still be operating by the time there is business need to travel.

It is also important to remember that while you may be offered these options, you must still be offered the choice to refund the flights. Where your company uses a travel agent to manage your flight bookings, these rights will still apply – and you should still be offered these options – but there may be additional fees incurred for their management or services.

Usually, customers who have their flights cancelled at short notice (14 days or less) also qualify for compensation under EU passenger rights regulations. However, on 18 March the European Commission issued Interpretive Guidelines on EU Passenger Rights clarifying that the right to compensation is waived where the cancellation is caused by, or related to, measures taken by public authorities intended to contain the COVID-19 virus. This waiver only relates to the ability to claim compensation, it does not affect the general passenger rights outlined above, and will not apply if the airline cancels flights for their own financial reasons and there are no relevant official restrictions.

These rights do not apply where your company chooses to cancel its booking or does not wish to travel, for example because an event that the company had planned to attend has been cancelled or the company’s travel policies have changed. In this case, you will be bound by the carrier’s terms and conditions and any reimbursement will depend on the ticket type. However, you may still be able to take advantage of any additional flexibility in dates or voucher/credits the airline is currently offering, which could be put towards future travel.

Rail Cancellations

Similarly, in respect of rail travel, where the delay in the journey will be more than one hour, the traveller is entitled (under EU law which still applies in the UK during the post-Brexit transition period) to:

a refund;
continue their journey; or
re-routing.

This is in addition to the rights to receive meals and refreshments within reasonable limits, transfers in certain cases, and even accommodation should overnight stays be required. Admittedly, all these options are more difficult at present.

Where your employee opts to continue or re-route their journey, rather than to be reimbursed, they are still entitled to compensation: 25% of the ticket price for delays between 1 and 2 hours, and 50% of the ticket price for delays of 2 hours or more. Unlike other modes of transport, the existence of extraordinary circumstances does not affect the right to compensation in cases of delay. However, as with the flight cancellations above, it will need to be the passenger who makes the reimbursement and/or compensation claim.

Accommodation

If accommodation has been booked separately to travel, and you no longer wish to keep the accommodation booking (this may be because the flights or event has been cancelled or postponed, or because the applicable government has restricted travel), the first port of call should be the booking conditions or cancellation policy relevant to the booking. These will tell you whether the booking is changeable (if appropriate) and/or refundable.

If you have booked with a provider directly, it will be worth getting in touch with them in the first instance if you wish to cancel or move the booking (even under restrictive cancellation policies). Our experience to date is that providers generally offer full refunds or same value (or more) vouchers (even for non-refundable bookings) where the provider has been ordered to close by the relevant government or authority, or are more than happy to postpone the trip.

It appears that most aggregator sites are also being proactive in waiving cancellation fees and making the change or cancellation process straightforward for consumers. For example, Airbnb are offering to refund guests in full for any stays booked on or before 14 March 2020 with a check-in date between 14 March and 31 May 2020 that they wish to cancel before check-in (this doesn’t apply if the check-in date has passed) and the process is easy online or via the app.

However, if your stay is not imminent, providers appear to be sticking closer to their standard booking conditions, or offering alternative dates, rather than cancelling and offering a refund. This provides little satisfaction should the reason for travel, such as a meeting or conference, be cancelled rather than postponed.

Other considerations

Chargebacks – If you are entitled to a refund, but the refund request is refused or ignored, depending on how you paid, you may have some recourse.

credit card –

If the claim is worth between £100 and £30,000 then you may be able to rely on Section 75 of the Consumer Credit Act 1974 and claim your money back from the credit card company directly. This may be particularly useful if the provider is not responding or has become insolvent. The card company is liable even if you didn’t make the whole payment using your credit card, for example if you only used the credit card to pay the deposit and paid the balance using a debit card.

Please note that a Section 75 claim is unlikely to be successful where the booking has been made via a third party, such as a travel agent, as the direct link between the card provider and the travel provider has been broken.

If the claim is under £100 (and indeed over this amount but in this case Section 75 may be more appropriate), you may be able to rely on a ‘chargeback’, which is a process where you can ask the card provider to reverse a transaction and refund the cost from the provider’s bank. Chargebacks may be useful where the service hasn’t been provided or if the provider has ceased trading. However, it is not a guarantee – for example the provider may dispute the chargeback, or your bank may not be able to recover the money from the provider’s bank.

There’s no time limit on making a Section 75 claim (albeit that the UK has a 6 year limitation period), but chargeback claims usually have to be made within 120 days of the date the transaction was processed or when you expected to receive the service.

debit card –

Unfortunately, Section 75 does not apply to debit cards, but you can look at the ‘chargeback’ process as mentioned above. Again, this is not a guarantee and will depend on your card provider.

Where your employee has made the payment for the travel costs, and claimed this expense back from the company, you will need to address the situation in accordance with your expenses policy. We expect that where the employee can seek a refund of the costs incurred, the company will request that the employee does so (as the company will be unable to do this on behalf of the employee) and it may choose to cancel or reverse the expense claim on that basis. Where there is no legal entitlement to a refund, and a voucher is issued, it will be prudent for the company to ask the relevant provider to issue the voucher in the name of the company, so that it can be used by any employee in the future. However, it is likely that these situations will be dealt with on a case by case basis.

Insurance – If your company is left out of pocket because of travel cancellations or the airline goes bust, it will be worth checking whether you could claim under your companies travel insurance policy.

Policies will differ in how they deal with loss and cancellations due to government advice/orders (and the FCO advice) and pandemics (it is worth noting that COVID-19 was only declared a pandemic by the World Health Organisation on 11 March 2020 so travel bookings after that date may not be covered). However, many travel insurance policies do not cover scheduled airline failure and, unfortunately, pandemics are widely excluded from insurance policies in general. This means that many insured businesses are likely to be left out of pocket where travel has been cancelled.