April 20, 2024


Delighting finance buffs

Coronavirus: Online travel agencies flag refund hurdle, seek urgent govt aid for airlines

Travel agencies in India have been facing cash flow issues and hurdles in refunding money amid the ongoing lockdown that has directly impacted the aviation and broader tourism sector. Annual targets set by travel agencies such as EaseMyTrip, MakeMyTrip and other smaller firms have gone haywire after their biggest source of revenue, the aviation industry, was taken out of action as part of the nationwide lockdown, imposed to contain the spread of the novel coronavirus.

Speaking to IndiaToday.in, Nishant Pitti, the CEO of EaseMyTrip (EMT), a New Delhi-based online travel agency (OTA), said the company is staring at losing a major chunk of its annual target, which ranges between Rs 60,000 crore and 65,000 crore.

Pitti says it will be impossible now for the company to aim for anything more than 20-25 per cent of the annual target in view of the uncertainties clouding the aviation and travel sector.

Read: IndiGo reinstates pay cut for senior employees from May

When asked how many jobs are at risk in the broader travel, tourism and aviation industry, he said roughly 28 million employees may face difficulties if there is no improvement in the situation.

The cash-strapped aviation industry in India is witnessing major payouts and a large number of layoffs may be unavoidable without a relief package.


With airlines grounded and hotels shut, travel agencies are staring at a bleak future if normalcy does not return soon.

But their immediate concern is the high volume of refund requests that have come in since the government issued a directive on refunds.

Also read: Why delayed relief package makes Covid-19 recovery tougher

It may be noted that the Directorate General of India Aviation (DGCA) had ordered all airlines to refund passengers for tickets booked after March 25, when the nationwide lockdown came into force.

Since then, refund requests received by travel agencies have shot up exponentially. There has also been a social media outrage over delay in airline cancellation refunds.

However, Pitti says, refunding customers as per the government’s order may not be easy in the current situation, especially when airlines do not even have the money to pay their own employees.

While EMT says it has honoured airline cancellation refunds to the tune of Rs 50 crore from its own kitty, market conditions have made it difficult for it to fulfil any more pending refund requests. Several other OTAs, including MakeMyTrip, Yatra.com, and ixigo, are facing similar issues with fulfilling refund requests.


This is because all airlines in India offer virtual wallet credit to online — as well as offline — travel agencies such as EMT, MakeMyTrip and others in exchange for advance cash deposits. This virtual credit is later used by them to buy tickets as and when customers make bookings.

“All travel agents (offline and online) have to deposit money in advance for booking tickets. Airlines take money in their bank account and give virtual wallet credit to agents,” Pitti says. “Agents can book tickets with wallet balance… once wallet balance is over, we have to refill that wallet to keep booking tickets… in case of cancellations, airlines refund money in that wallet.”

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Simply put, travel agents across the country, who book a bulk of airline tickets, do not get any liquid refunds from airlines directly into their bank accounts. Instead, they get a virtual wallet balance.

“At the time of refunds, airlines don’t give money to any agent in their bank account… they load a refund amount in a wallet which is maintained on their website. So, agents can use this balance for booking fresh tickets of any passengers and use this wallet,” Pitti says.

With airline operations completely shut, the virtual wallet balance has been rendered useless for travel agencies, as customers are asking them for a direct cash transfer to bank accounts. “After DGCA directive, airlines are saying that tickets booked post-March 25 for travel till May 3 would be refunded, but interestingly, the fact is refunds are loaded in the same wallet which was used to book tickets,” Pitti explains.

“Another DGCA directive to airlines is not to start bookings for future till further notice. So, our wallet balance with airlines will increase as more people opt for refunds and agents’ money would be blocked till the time we start getting fresh bookings,” Pitti adds.

Therefore, travel agent companies like EMT are left with no choice but to pay customers from their own cash reserve or say no to refunds. But paying refunds seems to be a tricky prospect for travel agencies, who are struggling to even pay employees.

Must read: 5 Indian sectors that need urgent help as coronavirus ravages economy

While EMT has not reduced its workforce yet and has honoured salary commitments, tough decisions have been taken at smaller travel agencies in the wake of the crisis. In the wake of the situation, EMT has now asked airlines to directly refund customers and not send wallet balance to them for cancelled tickets.


When asked whether EMT and other travel agencies have approached the government for help, Pitti said a joint letter will be sent by the company along with MakeMyTrip and the Travel Agent Association of India (TTAI) to the government.

Not only did he urge the Centre to cancellation refund issue, but also asked it to consider the fact that many customers booked advanced tickets for travel in March and beyond since last year. “What about those refunds?” Pitti asked.

While he said no direct government relief is required for travel agencies, he added that they will get relief only when airline operators are healthy and ready for operations. “We do not need any direct help. Just help the airlines sustain operations,” he said.

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Citing the Jet Airways fiasco, Pitti highlighted how the closure of an airline creates chaos for travel agents. The grounding of the airline company resulted in a loss of Rs 10-15 crore for EMT. Some measures that can help airlines right now besides are relief package are waivers on airport charges and extended payment moratoriums to help the sector tide over the crisis, he said.

Like EMT, many other online travel agents are worried about the uncertainties that lie ahead. There could be drastic changes in how the entire industry operates in future, said Pitti. Industry experts say that there could be a boom on short-destination travel or “weekend travel” as norms for international travel may see drastic changes in the post-virus landscape.

Right now, EMT and other travel agencies are actively conducting customer surveys to figure out key travel trends to help them focus on their future strategy. That said, the only thing travel agencies want more than anything right now is relief for the stressed aviation sector.

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