Comment: Airlines and the question ‘who owns the cash?’

Written by on November 1, 2019 in Perspectives - Comments Off on Comment: Airlines and the question ‘who owns the cash?’

Following on from the sad demise of travel giant Thomas Cook, the usual comments abound regarding the clarity – or lack of – within the industry, about who owns the “cash” of travellers both in the middle of their holiday and also on the yet-to-be-taken holidays.

Which also leads to a deeper question that no-one seems to have asked with regards the modus of operations of airlines: “who owns the cash”?

As a passenger, the airline forces you to hand over your cash now for a flight to be taken in, for example, January. The airline will say that it uses this cash to, for example, spot-buy fuel to use sometime in the future and which will also pay for the flight you will take in x months’ time.

However, buying fuel is only a small part of the total operating cost. So what is the airline doing with the rest of your money? Quite simply, it’s using it to pay for its current operating costs; such as crew or directors’ salaries, to purchase spare parts for planes, to pay for the rental etc. of new aircraft and even the rental of offices around the world. There is a myriad of things that a business needs cash for “now” and an airline is among them.

The difference is, an airline seems to be able to use your cash now and if you cancel the ticket (i.e. the cash loan to the airline operator), they do not want to give you the already spent cash back despite the fact they can easily re-sell the now vacant seat again. In effect, gaining twice the revenue.

It’s hard to think of any industry which operates with such impunity and where it sets its own biased rules which are so clearly anti-passenger and quite possibly illegal!

It would be interesting to see a legal challenge in the EU courts regarding whether an airline (or indeed anyone) has the right to spend its own clients’ money and also provide them no financial protection in the event of closure; here think Adria Airlines, which recently went bankrupt, and also Malev, the Hungarian airline which ceased operations many years ago, leaving many people out of pocket.

Surely some form of escrow account is worthy of consideration, whereby a client’s money is deposited into a holding account and when the airline provides the service it is committed to provide, the funds are released to that airline. If the service is not utilised then the funds can be returned to the originator (the traveller).

Such a move would, on the face of it, be rather radical, but it would in reality only be an extension of how many industries and service providers work today. Legally, morally….and ethically.

(Photo: Griszka Niewiadomski/sxc.hu)

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About the Author

Mark Thomas is Managing Director of Jamadvice HRG Bulgaria, one of Bulgaria’s leading Travel Management Companies with a 20 years market leading presence on the Bulgarian market.