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How airlines estimate flight ticket cancellation charges? Are they legally valid?

In last few years, Airlines have witnessed huge decrease in airfares which gave normal middle class passengers a chance to experience flying without spending much. However, flight ticket cancellation charges are still exorbitant and you get a negligible refund amount. At times it’s a zero refund which refrains a large number of passengers to experience flying.

The moment, the airline issues a ticket with a PNR, there is a contract between the airline and the  passenger. The airline lays down terms and conditions of the contract and the passenger accepts it while buying the ticket. The terms bind both the parties. The cancellation charges are one of the terms of the contract between the passenger and the airlines. One of the important clauses of this contract is the party who commits breach has to pay damages to the other party. The parties in contract anticipate that there could be a breach and provide for a sum to be paid as damages for the breach. Award of damages is for covering the losses suffered by the party, and not to penalise others and profit from it.

The cancellation charges stipulated by the airlines are to cover the losses arising to the airlines by the passenger terminating the contract. In case the passenger does not show-up for the check-in, he is in breach of the contract in not availing the service. The question here arises “is the cancellation charge a ‘genuine pre-estimate’ of the losses to the airlines?” Most airlines provide that the entire fare will be retained in the case of no show or cancellation one or two hours before the scheduled of the flight. The airline suffers loss if a passenger doesn’t show up as the seat would go unoccupied. Here, the entire fare is a loss to the airline. The entire fare qualifies to be a ‘genuine pre-estimate’ of the losses.

In case of other cancellations by the passengers i.e. two days before the scheduled departure, then are the losses estimated by the airline. If the flight goes full, there is no loss to the airline. On the other hand, if the flight is not full, a cancellation is a full loss of the fare. An airline, however, cannot contract with the passengers with these contingencies/terms. A fixed cancellation charge will need to be stipulated. In the case of a flight, which went full, there was no loss to the airline but a cancellation charge was levied on all the cancellations. The cancellation charge is a surplus for the airline. On the other hand, in the case of a flight which had an empty seat, the loss was of the entire fare but a lower cancellation charge was deducted. The difference between the cancellation charge and the fare is a deficit to the airline. The cancellation charge should be so fixed that the surplus and deficit even out.

The increase in the cancellation charge is arbitrary and profiteering by the airlines. This is an unfair trade practice adopted by airlines which should be stopped by putting a fixed slab on cancellations. A passenger has to lose a significant amount of money for changing a flight as there could always be contingencies and developments for a passenger to change the travel plan.

With these unforeseen events, now is the good news for consumers/ passengers as Aviation Ministry recently proposed to introduce a new reform which states that “no cancellation fee shall be charged from the passenger within 24 hours of cancellation.” This is under the AirSewa initiative.

The proposed charter mentions that the customer will not have to pay cancellation charges within 24 hours of ticket booking on the sole condition that the ticket is bought 96 hours prior to departure. In case the passenger is intimated about the flight cancellation less than 2 weeks and up to 24 hours of the scheduled time of departure, the passenger must be offered an alternative flight, as per the rules. The cancellation fee will be mandatorily printed on the air ticket so that the airline does not levy extra charges other than the basic fee and fuel surcharge. This will allow the consumers/passengers to prevent themselves from paying exorbitant cancellation charges.


Divya Patwal


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