The fragility of trust: Airlines and the COVID dilemma

“Trust is a fragile thing – difficult to build, easy to break. It cannot be bargained for. Only if it is freely given it can be expected in return” – Peter Lerangis

The COVID-19 pandemic has devastated many industries, but perhaps none as swiftly or as severely as the travel industry. As borders shuttered and lockdowns came into effect worldwide this spring, reeling airlines grounded flights across the world. By April, IATA estimated that passenger traffic dropped by 91%, forcing airlines to cancel over 80% of their flights and sending dozens of airlines into bankruptcy. Major carriers including Avianca, LATAM, South African Airlines, and Virgin Atlantic filed for bankruptcy protection or were forced into receivership.

As airlines struggled to cope with the devastation, they reverted to life support mode. They massively laid off staff, grounded entire fleets, and set to work cancelling thousands upon thousands of flights. And they were left with a massive cash flow problem when, suddenly, they had to cancel virtually all of their flights and refund their passengers. So much money going out, with no money coming in? That spelled disaster. And they panicked.

Passengers may have had some sympathy, even some understanding, for the airlines’ situation. Until these airlines did the worst possible thing that struggling businesses could do: They forgot who pays their bills, and they steamrolled over their customers.

Loyalty was already fragile in the air travel business. For years, airlines had been systematically looking for ways to make flying as unpleasant as possible. They devalued their frequent flyer programs year after year, angering the top tier passengers who generated most of their profits. They squeezed in seats and tacked on fees to economy class passengers, charging for everything from carry-on luggage to seat selection to meals to even printing their boarding passes. It wouldn’t have been too surprising to see fees for using the lavatories. (RyanAir reportedly tried this but was shot down by regulators.)  For years, mainline carriers had been trying to compete with the ULCCs (ultra low cost carriers) by driving down fares, and reducing service to match.

So when airlines had to cancel most of their flights this spring, they already faced a customer base that was fed up, angry, pissed off, and had precious little loyalty left. They then threw fuel on that dumpster fire by systematically denying passenger claims for refunds for their cancelled flights, as owed to passengers both legally and morally. In Canada, if you pay for a service that isn’t delivered, you get your money back, plain and simple. But the airlines were scrambling to stay afloat, and to do so, they decided to view their passengers as an unwilling, unwitting source of interest-free loan money.

Viewing passengers as an unwitting bank

Canada’s regulator, the Canadian Transportation Agency, promptly made things worse. Unlike its European or U.S. counterparts, the CTA issued a confusing statement backing the airlines’ decision to issue vouchers in lieu of refunds for cancelled flights. This was not only in violation of the law in all Canadian provinces, but it also gave airlines permission to behave even more badly. Though the CTA later “clarified” the statement by saying it was not a binding ruling, and merely a “suggestion”, the damage had been done.

Major Canadian airlines such as Air Canada, WestJet, Air Transat, Sunwing, and Porter refused to issue the refunds that their passengers were owed by law. They trained their staff to delay, deny, obfuscate, and even hang up on angry or desperate passengers. Passengers, some with thousands dollars of cancelled bookings, many also facing job losses. were left holding the bag.

The Canadian airlines have been so blatant at flouting the law that they refused to even comply with the US or European regulations for flights to and from those destinations, claiming that they don’t apply to Canadian passengers. In June, the US Department of Transportation reported that Air Canada had the most complaints of any non-US airline, and ranked third in complaints overall. To make matters worse, airlines started deliberately scheduling and selling tickets on flights that they never intended to operate, only to cancel them shortly thereafter so they could keep the money as cash flow and issue useless vouchers in their stead.

Travel insurance companies refused to pay, claiming their policies only covered flights cancelled by passengers, not by the providers. Many passengers then turned to their credit card companies to dispute the charges for service not received. Some have been successful, some have not. But most have been battling for months to get their money back.

Some advocates, members of the media, and politicians have called for airlines to comply with the law and give passengers their money back. However, the Trudeau government has consistently backed the airlines, all but giving them permission to treat their passengers this way.

Taking the short term view

This desperate behaviour by Canadian carriers is sadly going to backfire. Any short-term victory that the airlines gain from avoiding paying back their customers will certainly be pyrrhic.

IATA’s latest estimate is that air travel won’t rebound until 2024. That may even prove to be optimistic. By then, many current airlines won’t be around anymore. If demand grows again, new airlines will crop up to take their place. But who will survive this mess and who won’t? These are decisions that are being made right now in the minds of consumers. And Canada’s carriers are losing.

Canadian carriers have exclusive rights to most routes within Canada. But travellers flying internationally have far more choices. And, given the stark difference in how Canadian and foreign carriers have responded to COVID-19, we’re seeing many Canadian passengers declaring that they will never fly with a Canadian carrier again. The loyalty that carriers like Air Canada invested decades and billions of dollars in building is now gone, poof, just like that.

Some European, Asian and US airlines dragged their heels on refunds, to be sure. But most eventually did the right thing. When COVID hit this spring, I had two separate trips booked — one with Delta and the other with WestJet. Delta issued my refunds right away, no questions asked. In contrast, it took me over five months to finally get my money back for my WestJet flights, and that was after fighting and losing battles with both the airline and my insurer, and finally resorting to a credit card dispute, which was ultimately successful. When the pandemic is over, I won’t hesitate to fly Delta again. WestJet, on the other hand, not so much.

In May, Forbes ran an article asking “Which airlines deserve our loyalty?” The answer is that people remember how you behave not in your best moments, but in your worst. Passengers will have long memories about how different airlines behaved at the height of the crisis. And they’ll be making decisions about who to fly with again based on that behaviour.

The Canadian airline industry is being given enough rope to hang itself at the moment. Unfortunately, given their bad behaviour, the Canadian airlines have failed to convince their customers that they deserve our trust. And that trust may never be given freely again.

 

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