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VSMUT
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Fri Jul 10, 2020 4:27 pm

Jomar777 wrote:
I think the problem here is non-compliance rather than changing the system. If you make tickets to be booked like hotel stays, you might end up with other issues which might be unforeseen at present.
The best outcome right now is to actually enforce what we have in place in matters of law. In other words, airlines will HAVE TO refund within 7 days - provided merit - otherwise, face aircraft impounding, partial/total bans on flying and/or very heavy fines.

I know that they use their ticket revenue as working capital but they will never change their business mode if we do not enforce the currently active law.

Once they are obliged to comply, they will adapt and either come with a solution themselves or at least work based on the correct present set of laws and procedures.

It is pointless to come up with a new idea, procedure if it is not to be enforced...


The system as it is, is already rotten. There shouldn't be any money handed over in advance. It puts the risk on the customer, which is just wrong. The risk of the airline going bankrupt or otherwise being unable to pay or deliver the product should lie with the owners (investors) and management. They are the ones who run the company and take the decisions that could make or break it.
 
jimbo737
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Fri Jul 10, 2020 5:01 pm

CFWAD wrote:
GLANKG wrote:
I know in British Columbia seaplane operators only charge your card on the day of travel rather than the day of purchase.


They also charge a premium for that service. No such thing as "just a seat" on Harbour Air or Sea Air...

..And a lot of their off-peak revenues are come from the fact the capital city is on an island, which help to protect their cash flows.



They also have a defacto monopoly on harbor to harbor air travel, unless you use Helijet which isn't cheap.

Advance purchase allows for a discount off the full rack rate. If it becomes a “pay and go” system, it’ll be at the full fare.

Given that travel costs are a highly discretionary budget line item, (and the first to be cut in times of economic malaise), Poindexter in Accounting will quickly realize that if he wants to stretch his travel budget, advance purchase is the way to go.

Otherwise, he can take his chances that a), they’ll actually be a seat available when his sales people who generate revenue that keeps him employed, need to immediately go visit a client or potential client or b) gamble that his sales people will win the deal remotely over the competitor, without dropping their drawers rather than spending the time to visit the customer, meet eye to eye and build a relationship.

Sorry Zoom, but nothing beats a face to face relationship in business.
 
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DocLightning
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Fri Jul 10, 2020 5:08 pm

MIflyer12 wrote:
Wouldn't it just be easier to clarify in law that carriers are obligated to provide cash refunds with flight cancellation or change in schedule of xxx minutes? To require carriers to place funds in escrow until the segment is flown?


That's all well and good until the airlines either just refuse to comply, which means a lawsuit, which might cost more than the ticket, or the airlines simply run out of money, and now you cannot get blood from stone. The requirement to place the funds in escrow might work because the whole point of advance payment was that if you no-showed a flight, they had your money. So this added uncertainty caused by pay-as-you-check-in would upend the system and wind up in fare increases. That said, the hotel industry, which operates under similar constraints as the airline industry (fixed inventory, low margins) does operate under pay-as-you-check-in in many cases, as does the car rental industry.
-Doc Lightning-

"The sky calls to us. If we do not destroy ourselves, we will one day venture to the stars."
-Carl Sagan
 
kalvado
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Fri Jul 10, 2020 7:49 pm

DocLightning wrote:
MIflyer12 wrote:
Wouldn't it just be easier to clarify in law that carriers are obligated to provide cash refunds with flight cancellation or change in schedule of xxx minutes? To require carriers to place funds in escrow until the segment is flown?


That's all well and good until the airlines either just refuse to comply, which means a lawsuit, which might cost more than the ticket, or the airlines simply run out of money, and now you cannot get blood from stone. The requirement to place the funds in escrow might work because the whole point of advance payment was that if you no-showed a flight, they had your money. So this added uncertainty caused by pay-as-you-check-in would upend the system and wind up in fare increases. That said, the hotel industry, which operates under similar constraints as the airline industry (fixed inventory, low margins) does operate under pay-as-you-check-in in many cases, as does the car rental industry.

A bit picky - but hotel industry has a much better resell potential, especially on longer stays where only first night is lost on no-show
 
RvA
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Fri Jul 10, 2020 8:45 pm

max999 wrote:
RvA wrote:
max999 wrote:

I absolutely agree that the relationship between airlines and consumers is very one sided.

I find it ironic that Lufthansa, a German company, is withholding 1.8 billion euros of debt against its customers. In German culture, debt is considered to be very bad and repaying debt is a sacred duty. If fact, the German word for debt (Schuld) is the same word as guilt (Schuld)!

As a result of this cultural hate of debt, German companies are very aggressive when they chase consumer debt. But now, the German government is allowing LH to illegally withhold this huge amount of money from consumer. Big corporations in Germany can abuse the system while consumers are punished for the smallest infraction.


1.8 billion is a lot. Is there a source for that figure I’d be interested to learn more. Thanks


The figure is from the article posted by the thread starter.

https://www.handelsblatt.com/unternehme ... re=twitter


Cheers
 
smartplane
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Fri Jul 10, 2020 8:48 pm

bnatraveler wrote:
Generally, the credit card companies are who are regulating when the airline gets payment. If the credit card company thinks there is risk that the seller (airline) may not deliver, they will hold higher reserves (as high as 100%) until the flight date. I think the big airlines have largely been able to get virtually all of their funds made available to them upon purchase. No need for a new system to manage this - the credit card company can already handle the "escrow" function.

The credit card companies also control / regulate refunds.

If an airline's refunds exceed incoming credit card receipts, then the airline (or any merchant) requires a credit line or bank guarantee, usually a minimum 3x greater than the daily difference. If refunds exceed receipts on multiple days, the guarantee balloons.

Don't forget the credit card company also refunds most (but not all) of their commission when a refund is actioned.

Most airlines 'held' funds for prepaid travel will exceed those currently disclosed, as once the flight date has occurred, the prepayment is treated differently, especially if the airline contests the reasons for not travelling.

In the current economic environment, neither airlines or credit card companies want to make refunds.
 
RvA
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Fri Jul 10, 2020 8:50 pm

What is the proposed new solution? Pay on day of departure or at check in but what happens to no show or cancellations outside a certain window or whatever that carry a penalty? How does that get collected? Send the customer an invoice and then end up chasing it when it doesn’t get paid?

There is a need to secure seats in advance to make a flight viable so what is the proposal to not have airlines have cash flow problems? When you have a new house built you also don’t pay upon completion right? There are costs already made in advance that need to be covered. Same with an airline they can’t perform optimally if it’s hard to plan what flow of incoming money to expect on departure day.

The current system could do with an overhaul but curious to see what proposal can work for everyone.
 
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SamYeager2016
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Fri Jul 10, 2020 9:33 pm

In principle escrow until date of travel seems a good solution although I wonder which entity gets the benefit of the interest on the sums held? Perhaps the state should run these escrow funds although I grant you many states are not the most efficient at running things.
 
smartplane
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Fri Jul 10, 2020 9:37 pm

SamYeager2016 wrote:
In principle escrow until date of travel seems a good solution although I wonder which entity gets the benefit of the interest on the sums held? Perhaps the state should run these escrow funds although I grant you many states are not the most efficient at running things.

The IATA proposal was they run the escrow / trust accounts, and after deducting a margin to operate the service, members would share interest based on USD value of business, less transfers and deductions.
 
smartplane
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Fri Jul 10, 2020 9:43 pm

RvA wrote:
What is the proposed new solution? Pay on day of departure or at check in but what happens to no show or cancellations outside a certain window or whatever that carry a penalty? How does that get collected? Send the customer an invoice and then end up chasing it when it doesn’t get paid?

There is a need to secure seats in advance to make a flight viable so what is the proposal to not have airlines have cash flow problems? When you have a new house built you also don’t pay upon completion right? There are costs already made in advance that need to be covered. Same with an airline they can’t perform optimally if it’s hard to plan what flow of incoming money to expect on departure day.

The current system could do with an overhaul but curious to see what proposal can work for everyone.

The IATA proposal was for the customer to pay as now, securing the seat and price, with funds held in escrow / trust, with the airline notified. The airline would receive either 100% on check in, or 50% on check in and 50% on arrival at destination. If the customer cancelled, disbursement of the funds held to the customer and airline, were based on the airline's cancellation / refund policy. If the customer was a no show, the 50% (or 100%) was credited to the airline.

The three alliances were keen to get a piece of the action, but were deemed not to be impartial enough.

In the event of another COVID, it would mean passengers who paid in advance for a flight, didn't become an unsecured creditor and by default, a banker to the airline. Still issues with credit card payments and especially refunds, but not insurmountable given the effective IATA global buying power. Some countries with onerous foreign currency controls would be unable to participate unless they updated.
 
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lightsaber
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Fri Jul 10, 2020 10:37 pm

Every system I read means someone gets a cut of the revenue. If airlines allow this to happen, they will regret it.

The previous system worked until this unfortunate downturn. Yes, hickups in bankruptcy.

But what business forfeits its income stream? Airlines need to lower overhead, not increase it.

Lightsaber
Winter is coming.
 
davidjohnson6
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Fri Jul 10, 2020 10:55 pm

If airlines want to simplify systems and cut costs... then they need to show they can be trusted to refund money when due as per the law, in a timely manner without customers having to go to court. No, I don't mean 7 days when something like a pandemic happens - but it should certainly be possible within a month.
It would be preferable to pass laws to enforce refunds are paid promptly and not need to create big, complex and expensive systems to solve reluctance to provide refunds when a pre-paid service cannot be provided. A big complex escrow system would almost certainly end up being paid for by passengers

If airlines and travel companies (or any other industry which takes payment in full, months in advance of even beginning to provide a service that is usable by a customer) can't demonstrate both the willingness and capability, then a more punitive solution will end up being found
 
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lightsaber
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Sat Jul 11, 2020 2:36 am

davidjohnson6 wrote:
If airlines want to simplify systems and cut costs... then they need to show they can be trusted to refund money when due as per the law, in a timely manner without customers having to go to court. No, I don't mean 7 days when something like a pandemic happens - but it should certainly be possible within a month.
It would be preferable to pass laws to enforce refunds are paid promptly and not need to create big, complex and expensive systems to solve reluctance to provide refunds when a pre-paid service cannot be provided. A big complex escrow system would almost certainly end up being paid for by passengers

If airlines and travel companies (or any other industry which takes payment in full, months in advance of even beginning to provide a service that is usable by a customer) can't demonstrate both the willingness and capability, then a more punitive solution will end up being found

Today if the refunds were made, most Airlines would break bank covenants and probably fold.

A big complex escrow system would become such a high cost that any airline outside of the system would have a competitive costs advantage.

This is a black swan event.

Any solution creates higher transportation costs. As long as everyone knows high transport costs are a severe competitive disadvantage.

Lightsaber
Winter is coming.
 
ikramerica
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Sat Jul 11, 2020 5:07 am

Non-refundable deposits could be a thing. Hotels do this for no shows.
Of all the things to worry about... the Wookie has no pants.
 
AngMoh
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Sat Jul 11, 2020 5:39 am

RvA wrote:
What is the proposed new solution? Pay on day of departure or at check in but what happens to no show or cancellations outside a certain window or whatever that carry a penalty? How does that get collected? Send the customer an invoice and then end up chasing it when it doesn’t get paid?

There is a need to secure seats in advance to make a flight viable so what is the proposal to not have airlines have cash flow problems? When you have a new house built you also don’t pay upon completion right? There are costs already made in advance that need to be covered. Same with an airline they can’t perform optimally if it’s hard to plan what flow of incoming money to expect on departure day.

The current system could do with an overhaul but curious to see what proposal can work for everyone.


The hotel industry already has this: if you don't turn up, 1 night accommodation is charged. FinTech offers many options: credit cards happily can block credit for future purchases, allow partial refunds, allow for cancellation fees. A big problem is that Germany is running behind big time in this area and neither business nor banking industry is ready.

I used to fly a lot with Thai Airways and they had a scheme where to higher the fare class, the later the payment deduction was from the credit card. You fly fully flexible business class long haul, the seat would be booked, but credit card only charged 2-3 weeks ahead of the flight. For a tourist class cheap non-refundable economy seat, credit card deductio would be immediate. Flexible economy booking something like 6 weeks.

The transition to such a system would be painful as accountants have built in longer and longer deposit times to make results look better while having the same amount of revenue, but once it is in place there is no difference from today's cashflow. But an event like the COVID pandemic would be far easier manageable as the whole setup is more conservative.

I have worked in a business where deposits on billion dollar projects were 20%-30% and projects completed 2-4 years later. Good times - we were having fun on future earnings. But in 2008/9 the market changed, it became a buyers market and deposits went to 0%. We almost went bust, laid off 40% of staff because we already spent the money received as deposit for future projects while new projects brought in no immediate cashflow. However, once that transition was done 5 years later, the company is highly profitable again while deposits are still at 0%.
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Chasensfo
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Sat Jul 11, 2020 7:12 am

I think those of you in support of this are thinking like angry consumers and not informed airline enthusiasts. You guys do understand that this model would not allow for the very cheap ULCC flights to work, right? If a flight sells out 2 months out, but day of, 40 people decide not to go and pay no penalty, that flight is leaving with open seats for no reason and the airline is out all the money for the reservations. That is why refundable Y class tickets are so much more expensive, they are unrestricted. If you want to make ALL tickets unrestricted and everyone has the right to just not show up day of AND keep all their money, that is going to not only create huge day to day cashflow problems for the airlines but also screw the consumer because ticket prices will have to cover the calculated estimation of no show rates on a given flight. My friends flying at Spirit and Frontier often tell me that they will commonly have 30+ noshows, even in normal times, because people book the cheap tickets in advance, can't make the flight, can't afford the change fee, so they eat the cost. This is fine, because this is the same model that allowed me to book Spirit/Sun Country from OAK-LAS-DFW for $200 after tax in their first class products round trip(would have been $80USD if I did coach with no seat assignments). The airlines keep that money, it opens up more seats giving people space and even making standby passengers happy, and the cheap fares keep coming. Personally, I've booked tickets on Spirit/Allegiant/Frontier and not been able to make the trip and just let them keep my money at least 10 times by now. Never once was my reaction "This isn't fair", I knew what I was getting myself into when I paid $58 r/t for SFO-IAH or something.

Now, I do 100% agree with the notion that Lufthansa and the other airlines should absolutely be fined up the arse for dragging their feet in refunding eligible tickets in order to ensure that the next time we have a major travel disruption, the airlines would rather oblige than pay the huge fines. What are laws in place for if the airlines can just choose to ignore them without major penalty? Those laws are in place to protect the consumer and I totally support that. But really, think about what some of you are asking. Sorry,but you'll find that most consumers will think losing their ability to travel with a backpack and fly for $20-100USD all over the country is not worth paying exorbitant airfare to ensure zero risk of a lengthy wait for a refund. These are unprecedented times. Maybe once per every 10-15 years will an event cripple aviation like this, and next time hopefully the airlines will be better prepared, if only because of punitive action taking by the governments of the world against them. But in the meantime, let's not pretend that ANY airline is in a position to refund 80% of the tickets they sold from March to December in a single year...

Also important that some of you remember that the number of people who show up to a hotel day of hoping to get a room is exponentially higher than the number of people who stumble into an airport day of looking for a ticket at the airport ASAP. I worked airline customer service for a major airline at one of their largest hubs for years and only saw this a small handful of times.
 
AngMoh
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Sat Jul 11, 2020 7:43 am

Chasensfo wrote:
I think those of you in support of this are thinking like angry consumers and not informed airline enthusiasts. You guys do understand that this model would not allow for the very cheap ULCC flights to work, right?
...
Now, I do 100% agree with the notion that Lufthansa and the other airlines should absolutely be fined up the arse for dragging their feet in refunding eligible tickets in order to ensure that the next time we have a major travel disruption, the airlines would rather oblige than pay the huge fines. What are laws in place for if the airlines can just choose to ignore them without major penalty? Those laws are in place to protect the consumer and I totally support that. But really, think about what some of you are asking. Sorry,but you'll find that most consumers will think losing their ability to travel with a backpack and fly for $20-100USD all over the country is not worth paying exorbitant airfare to ensure zero risk of a lengthy wait for a refund. These are unprecedented times. Maybe once per every 10-15 years will an event cripple aviation like this, and next time hopefully the airlines will be better prepared, if only because of punitive action taking by the governments of the world against them. But in the meantime, let's not pretend that ANY airline is in a position to refund 80% of the tickets they sold from March to December in a single year...

Also important that some of you remember that the number of people who show up to a hotel day of hoping to get a room is exponentially higher than the number of people who stumble into an airport day of looking for a ticket at the airport ASAP.


Cheap tickets are always non-refundable. Unless cancelled by the airline because they cancelled the flight, they need to be refunded by the travel insurance company, not airline. Nothing changes for an (U)LCC. The issue is fully flexible, fully refundable business tickets issued by full service airlines. Businesses in Germany are owed very large amounts of money by Lufthansa on fully refundable tickets which were cancelled as per ticket conditions. They need to be refunded by law and Lufthansa is not able to.

While your cheap SFO-IAH ticket is $58, a fully refundable ticket might be $200-$500. It is the same seat, same service, but you pay double or more for flexibility and refund-ability. If an airline does not refund such a ticket because they can't, then people buying such tickets need to be protected another way.
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Westerwaelder
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Sat Jul 11, 2020 7:54 am

Kilopond wrote:
The discussion ignited by those airline customers is just dumb, dumb, dumb! For many reasons.

First of all, they could pay full fares instead of heavily discounted ones. In this case, no advance payment would be required, according to the ticketing rules. Railways work the same way: it is your choice whether you pay SNCF, DB and the likes € 19 in advance and risk to loose your investment completely if you miss the train. Or you pay the undiscounted walk-on fare which might be higher by a factor of 20, 30, 40...

And then, airlines that failed to c6ash back the refunds instantly, all violated the code cilvil/"BGB". No additional regulations are needed.


If no additional regulations are needed, then why are customers not seeing their money refunded within 7 days in the EU? Airlines have the technical capability of automating the refund d process for cancelled flights. There is a massive need for regulation if you ask me. If airlines can sit on €2 billion of their customers money for months like LH, then the government needs to step in.

This conversation is deliberately confusing issues. This is not about customers being able to cancel free of charge just because their credit card is only charged on the day of travel. On tickets purchased in advance, you lock in a lower fare as the airline can plan with your revenue. Your card will be charged on the day of travel, regardless if you fly or not if you bought a non refundable fare. If your fare is refundable, there is no need to charge your card.

Of course airlines make considerable profits on tickets never handed in for refunds even if they are refundable and on not refunding taxes and charges on non refundable tickets that are not used. So changing the system is not in their interest.

The interest free credit argument is a bit of a smoke screen. Money is cheap to the point that it is almost free. Being able to bank your €1,000 for a ticket six months before saves the airline very little in interest if they had to borrow the money (as they would since they fund their day to day operation this way). It would add in the region of 1 - 2% to the ticket price at most.

The simple fact is that airlines have become used to finance their operation by money they collect for future travel and by shifting the entire burden of refunding/non payment etc. to thrive customers. And now they have been caught with their pants around d their ankles...
 
Westerwaelder
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Sat Jul 11, 2020 8:01 am

lightsaber wrote:
davidjohnson6 wrote:
If airlines want to simplify systems and cut costs... then they need to show they can be trusted to refund money when due as per the law, in a timely manner without customers having to go to court. No, I don't mean 7 days when something like a pandemic happens - but it should certainly be possible within a month.
It would be preferable to pass laws to enforce refunds are paid promptly and not need to create big, complex and expensive systems to solve reluctance to provide refunds when a pre-paid service cannot be provided. A big complex escrow system would almost certainly end up being paid for by passengers

If airlines and travel companies (or any other industry which takes payment in full, months in advance of even beginning to provide a service that is usable by a customer) can't demonstrate both the willingness and capability, then a more punitive solution will end up being found

Today if the refunds were made, most Airlines would break bank covenants and probably fold.

A big complex escrow system would become such a high cost that any airline outside of the system would have a competitive costs advantage.

This is a black swan event.

Any solution creates higher transportation costs. As long as everyone knows high transport costs are a severe competitive disadvantage.

Lightsaber


It's not the consumers job to finance the airline with what is essentially an interest free loan. Who are the airlines to judge if their customers don't need this (their own) money to pay their bills, put food on the table etc.?

I agree on the escrow argument but charging on the day of travel feels a just balancing of risk. At the moment, the entire risk I'd with the customer. The airline takes the money, breaks the law by not refunding on time and has the front to push people into accepting vouchers?
 
LJ
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Sat Jul 11, 2020 8:05 am

Chasensfo wrote:
I think those of you in support of this are thinking like angry consumers and not informed airline enthusiasts. You guys do understand that this model would not allow for the very cheap ULCC flights to work, right? If a flight sells out 2 months out, but day of, 40 people decide not to go and pay no penalty, that flight is leaving with open seats for no reason and the airline is out all the money for the reservations. That is why refundable Y class tickets are so much more expensive, they are unrestricted. If you want to make ALL tickets unrestricted and everyone has the right to just not show up day of AND keep all their money, that is going to not only create huge day to day cashflow problems for the airlines but also screw the consumer because ticket prices will have to cover the calculated estimation of no show rates on a given flight. .


You do not understand the issue we talk about. It's not about making all tickets refundable, it's about airlines getting money for service not yet provided. As mentioned before, in case of cancellation by the client the airline will still get its money in accordance with the contract (thus in case of fully non-refundable tickets it will still gets the full amount). It's the fact that an airline receives money when they actually deliver the service. We've seen many times (even pre-COVID-19) in Europe that airlines sell tickets and go bankrupt in the Summer and thus ruining peoples Summer holiday. The customers have already paid in advance (sometimes months ago) whereas the airline has to pay its bills when delivering the service (or a few weeks before). The idea is that the client pays and the money to be put in an escrow account. This means that the airline receives the cash when it delivers the service.The only reason that this idea receives some traction is because some airlines have been very reluctant to follow the EU refund policies and gave customers no option but to accept vouchers. As such this has nothing to do with the situation you describe.
 
Westerwaelder
Posts: 241
Joined: Fri Apr 03, 2020 12:27 pm

Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Sat Jul 11, 2020 8:05 am

Chasensfo wrote:
I think those of you in support of this are thinking like angry consumers and not informed airline enthusiasts. You guys do understand that this model would not allow for the very cheap ULCC flights to work, right? If a flight sells out 2 months out, but day of, 40 people decide not to go and pay no penalty, that flight is leaving with open seats for no reason and the airline is out all the money for the reservations. That is why refundable Y class tickets are so much more expensive, they are unrestricted. If you want to make ALL tickets unrestricted and everyone has the right to just not show up day of AND keep all their money, that is going to not only create huge day to day cashflow problems for the airlines but also screw the consumer because ticket prices will have to cover the calculated estimation of no show rates on a given flight. My friends flying at Spirit and Frontier often tell me that they will commonly have 30+ noshows, even in normal times, because people book the cheap tickets in advance, can't make the flight, can't afford the change fee, so they eat the cost. This is fine, because this is the same model that allowed me to book Spirit/Sun Country from OAK-LAS-DFW for $200 after tax in their first class products round trip(would have been $80USD if I did coach with no seat assignments). The airlines keep that money, it opens up more seats giving people space and even making standby passengers happy, and the cheap fares keep coming. Personally, I've booked tickets on Spirit/Allegiant/Frontier and not been able to make the trip and just let them keep my money at least 10 times by now. Never once was my reaction "This isn't fair", I knew what I was getting myself into when I paid $58 r/t for SFO-IAH or something.

Now, I do 100% agree with the notion that Lufthansa and the other airlines should absolutely be fined up the arse for dragging their feet in refunding eligible tickets in order to ensure that the next time we have a major travel disruption, the airlines would rather oblige than pay the huge fines. What are laws in place for if the airlines can just choose to ignore them without major penalty? Those laws are in place to protect the consumer and I totally support that. But really, think about what some of you are asking. Sorry,but you'll find that most consumers will think losing their ability to travel with a backpack and fly for $20-100USD all over the country is not worth paying exorbitant airfare to ensure zero risk of a lengthy wait for a refund. These are unprecedented times. Maybe once per every 10-15 years will an event cripple aviation like this, and next time hopefully the airlines will be better prepared, if only because of punitive action taking by the governments of the world against them. But in the meantime, let's not pretend that ANY airline is in a position to refund 80% of the tickets they sold from March to December in a single year...

Also important that some of you remember that the number of people who show up to a hotel day of hoping to get a room is exponentially higher than the number of people who stumble into an airport day of looking for a ticket at the airport ASAP. I worked airline customer service for a major airline at one of their largest hubs for years and only saw this a small handful of times.


This is not about people on non refundable tickets not paying on the day. Your card will be charged even if you decide not to fly. But if the flight is cancelled, you won't be charged.

The ticket price can be handled like a holding deposit on rental cars for any potential damage. It is deducted from your credit limit but is not charged to your account unless you return the car damaged. This is the 21st century.
 
frmrCapCadet
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Sat Jul 11, 2020 2:37 pm

Flyers should have the right to effective representatives in the writing the contracts of carriage. Now it is one person fighting the whole industry. Guess who generally loses? An effective solution is usually a government backed commission who would represent customers or it can be done by regulation. Currently there is no 'free market' on this. Airlines, like hospitals, tend to operate on a mafia basis, Here is the Deal, take it, or Die.
Buffet: the airline business...has eaten up capital...like..no other (business)
 
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klm617
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Sat Jul 11, 2020 3:09 pm

lightsaber wrote:
Every system I read means someone gets a cut of the revenue. If airlines allow this to happen, they will regret it.

The previous system worked until this unfortunate downturn. Yes, hickups in bankruptcy.

But what business forfeits its income stream? Airlines need to lower overhead, not increase it.

Lightsaber


But again customers gave their money in good faith. In these difficult times the airlines should have allowed zero reservations agents to be laid off and cross train CSA agents to help during this crises. On the flip side they could have just operated all the flights they said they were going to and then there is no need to issue refunds to all the no shows. For what it's worth this is what happens when you allow these airlines to get so big and powerful that they can basically leverage what ever actions they want on the customer with little or no punishment when they don't comply. It takes one second or less to collect their funds when you buy a ticket so there should be a function that does exactly the same in reverse. A refund or cancelation selection when my flight no longer exists in the system or I am rescheduled without my consent. IT could easily set up a function for self refunds that meet a certain prescribed criteria that is monitored by an overseeing authority
the truth does matter, guys. too bad it's often quite subjective. the truth is beyond the mere facts and figures. it's beyond good and bad, right and wrong...
 
chonetsao
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Sat Jul 11, 2020 7:03 pm

Well, Germany lobby group successfully made hotels to refund partial of the stay that booked under non-refundable rate, generally 10% of the rate as 'saved hotel cost'. So don't underestimate the lobby power. Especially now LH accepted state buy out and it is in a morally degraded position to argue the powerful consumer lobby groups (I know it is not a nice way to put it, but I can not think of another better way to describe).

In another hand, I don't understand airlines that offer ultra cheap non-refundable rate now (I get it, cash flow). Anyone who is buying ticket are captured audience who needs to travel, or has the urge to travel. It is a win for airline if they only offer semi-flexible and flexible fares. After all there is no demand to stimulate. Anyone had to travel will accept the market price.

So I can see that if the lobby is successful, airline may adopt a seven days or 14 days advance purchase policy, to allow travellers to cancel or change 7 days or 14 days before departure. Ultra cheap tickets can be a past, which is not necessary a bad thing for airlines and consumer. In the long run, travel will become more expensive.
 
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zeke
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Sat Jul 11, 2020 10:36 pm

chonetsao wrote:
Well, Germany lobby group successfully made hotels to refund partial of the stay that booked under non-refundable rate, generally 10% of the rate as 'saved hotel cost'. So don't underestimate the lobby power. Especially now LH accepted state buy out and it is in a morally degraded position to argue the powerful consumer lobby groups (I know it is not a nice way to put it, but I can not think of another better way to describe).

In another hand, I don't understand airlines that offer ultra cheap non-refundable rate now (I get it, cash flow). Anyone who is buying ticket are captured audience who needs to travel, or has the urge to travel. It is a win for airline if they only offer semi-flexible and flexible fares. After all there is no demand to stimulate. Anyone had to travel will accept the market price.

So I can see that if the lobby is successful, airline may adopt a seven days or 14 days advance purchase policy, to allow travellers to cancel or change 7 days or 14 days before departure. Ultra cheap tickets can be a past, which is not necessary a bad thing for airlines and consumer. In the long run, travel will become more expensive.


This thread has nothing to do with retail sale of tickets. It’s about corporate supply contracts.

Airlines that have supply contracts for fuel are still paying for that fuel if they use it or not.
Human rights lawyers are "ambulance chasers of the very worst kind.'" - Sky News
 
prebennorholm
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Sun Jul 12, 2020 12:33 am

Westerwaelder wrote:
If no additional regulations are needed, then why are customers not seeing their money refunded within 7 days in the EU?

The customers don't see their money because the money isn't there. Practically all airlines are today technically bankrupt, and they are only kept floating because the leasing companies - the banks - feed them the minimum money to keep floating. That way the banks get a minor part of the nominal leasing fees instead of zero.

In old days, when an airline folded, then the leasing company could place the plane with another airline. Not so today with thousands of planes COVID-parked.

The banks do not allow the airlines to refund for cancelled flights. Nobody knows where the COVID-crisis ends. If the bank have to close an airline, then the banks will lose more money if the airline refunded cancelled flights.

Westerwaelder wrote:
Airlines have the technical capability of automating the refund process for cancelled flights. There is a massive need for regulation if you ask me. If airlines can sit on €2 billion of their customers money for months like LH, then the government needs to step in.

There is no need for new regulation. Any decent company, when taking advance payments, shall place that on an "Advance payments account" and book the money as revenue when the product is created or delivered.

All airlines by nature take a lot of advance payments. Many airlines - including LH - took that money to pay profit to the shareholders. That is in reality theft. Stealing money is already a criminal act, so no new regulation is needed. Procecution of the thieves is all that is needed. But that will hardly happen.

Nevertheless, even if the offenders will likely avoid procecution, then it is relevant to know exactly what happened. But please don't expect any refund for cancelled flights. The money just isn't there.
Always keep your number of landings equal to your number of take-offs
 
strfyr51
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Sun Jul 12, 2020 12:49 am

bennett123 wrote:
Given that there would be no payment until check in, presumably the price would be set at that point.

More importantly, you could get to check in, and be told there are no tickets available.

Not a terribly good outcome for the corporates.

I can see their point but, if they won't pay until the check in of the flight? then there's No reason to give them any discount is there? They should pay the highest listed fare for the flight. I know this is in Europe but that's what it looks like they're trying to get. Unless? I'm mistaken? And I would welcome being set straight if I am mistaken.
 
max999
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Sun Jul 12, 2020 4:44 am

prebennorholm wrote:
Westerwaelder wrote:
If no additional regulations are needed, then why are customers not seeing their money refunded within 7 days in the EU?

The customers don't see their money because the money isn't there. Practically all airlines are today technically bankrupt, and they are only kept floating because the leasing companies - the banks - feed them the minimum money to keep floating. That way the banks get a minor part of the nominal leasing fees instead of zero.

In old days, when an airline folded, then the leasing company could place the plane with another airline. Not so today with thousands of planes COVID-parked.

The banks do not allow the airlines to refund for cancelled flights. Nobody knows where the COVID-crisis ends. If the bank have to close an airline, then the banks will lose more money if the airline refunded cancelled flights.

Westerwaelder wrote:
Airlines have the technical capability of automating the refund process for cancelled flights. There is a massive need for regulation if you ask me. If airlines can sit on €2 billion of their customers money for months like LH, then the government needs to step in.

There is no need for new regulation. Any decent company, when taking advance payments, shall place that on an "Advance payments account" and book the money as revenue when the product is created or delivered.

All airlines by nature take a lot of advance payments. Many airlines - including LH - took that money to pay profit to the shareholders. That is in reality theft. Stealing money is already a criminal act, so no new regulation is needed. Procecution of the thieves is all that is needed. But that will hardly happen.

Nevertheless, even if the offenders will likely avoid procecution, then it is relevant to know exactly what happened. But please don't expect any refund for cancelled flights. The money just isn't there.


The German government just bailed out LH with 9 billion. LH Management Is still slow walking refunds. So lack of cash is not the problem now. I think it's bordering on theft
All the things I really like to do are either immoral, illegal, or fattening.
 
Westerwaelder
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Mon Jul 13, 2020 6:30 am

strfyr51 wrote:
bennett123 wrote:
Given that there would be no payment until check in, presumably the price would be set at that point.

More importantly, you could get to check in, and be told there are no tickets available.

Not a terribly good outcome for the corporates.

I can see their point but, if they won't pay until the check in of the flight? then there's No reason to give them any discount is there? They should pay the highest listed fare for the flight. I know this is in Europe but that's what it looks like they're trying to get. Unless? I'm mistaken? And I would welcome being set straight if I am mistaken.


Advanced sales enable airlines to plan better. If you look at pricing models of low cost carriers, they are based on demand, not the rigid automatic timeline of the closer to departure the more expensive. The monetary advantage (working capital) of advance payment for airlines would be negligible if they didn't operate a system where the advance bookings pay for today's operation. There has to be a better way as the current system leaves all of the risk with the consumer.
 
RvA
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Mon Jul 13, 2020 7:56 am

In the world where you don’t pay for tickets in advance but at time of travel, would the traveller not be opening themselves up to:

- currency fluctuations between time of booking and time of payment
- increased risk of oversold flights
- increased penalties for cancellations etc. maybe not increased moneywise but just more frequent usage of these penalties as there will be many people “unaware” and they just book given that costs nothing to find out later they’ve to pay for late cancellation or no show etc.

Just a few things that came to mind. I’m not sure how beneficial that is. Corporations always want to pay as late as possible and many today are able to hold tickets for much longer than regular customers and pay later. Given how extreme this current situation is the notion this would only be to avoid these refund situations is a bit absurd unless people expect airlines from now on to take months to refund as the new norm. The same then should apply to all ticket based businesses as they’ve had the same issues. I still have concert and theatre tickets for months that haven’t been refunded yet.

Maybe a middle ground like with hotels can happen. A slightly lower price but pay now or a slightly higher price to pay later?
 
DUSZRH
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Mon Jul 13, 2020 3:42 pm

It’s not about not buying in advance, but about the time of payment. Actually it’s way more common to pay when you receive a product. If you order a new aircraft or your travel package, you don’t pay everything at Time of booking.

And it’s about changing future business conduct. If airlines hadn’t all the future cash lying around, they’d had more liquidity now and weathered this crisis much better.
 
RvA
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Mon Jul 13, 2020 3:46 pm

DUSZRH wrote:
It’s not about not buying in advance, but about the time of payment. Actually it’s way more common to pay when you receive a product. If you order a new aircraft or your travel package, you don’t pay everything at Time of booking.

And it’s about changing future business conduct. If airlines hadn’t all the future cash lying around, they’d had more liquidity now and weathered this crisis much better.


How would they have weathered better? Wouldn’t it have been even worse as they’d have even less liquidity? A slowed down refund process and having money for future bookings (made now and already made before) provides more liquidity right now instead of less or am I misunderstanding something?
 
DUSZRH
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Mon Jul 13, 2020 3:54 pm

There wouldn’t have been any refunds (as the money would have been with the customer). Thus they would have needed more liquidity to operate and hence have more cash at hand.
 
Galore
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Mon Jul 13, 2020 4:06 pm

This is an understandable reaction to the refund delays. I just got two refunds from LH for flights that were canceled in April 2020. Three months for several thousand $ without any communication. I think this is really poor customer service - I mean, it’s not about a small cheap item but two transatlantic business class round trip tickets for a lot of money. If I did that to a creditor of mine, my credit score would tank below 400.
 
RvA
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Mon Jul 13, 2020 9:08 pm

DUSZRH wrote:
There wouldn’t have been any refunds (as the money would have been with the customer). Thus they would have needed more liquidity to operate and hence have more cash at hand.


Cash that comes from where?
 
prebennorholm
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Mon Jul 13, 2020 10:11 pm

RvA wrote:
Cash that comes from where?

Cash that comes from not giving advance payment money to the shareholders as "profit".

It really is so simple and easy. Advance payments are kept on an advance payment account until you deliver the product. All the money is there ready to be refunded immediately in case you for some reason don't deliver your product.

So simple and easy. Until you decide to steal the money on the advance payment account and spend it on something else - not on delivering your product or refunding.
Always keep your number of landings equal to your number of take-offs
 
RvA
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Tue Jul 14, 2020 6:18 am

prebennorholm wrote:
RvA wrote:
Cash that comes from where?

Cash that comes from not giving advance payment money to the shareholders as "profit".

It really is so simple and easy. Advance payments are kept on an advance payment account until you deliver the product. All the money is there ready to be refunded immediately in case you for some reason don't deliver your product.

So simple and easy. Until you decide to steal the money on the advance payment account and spend it on something else - not on delivering your product or refunding.


So this means the shareholder dividend etc. is equal to the cash they have up front from bookings? So, one would balance out the other?
 
LJ
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Tue Jul 14, 2020 6:56 am

zeke wrote:
This thread has nothing to do with retail sale of tickets. It’s about corporate supply contracts.

Airlines that have supply contracts for fuel are still paying for that fuel if they use it or not.


Yet corporate supply contracts may be different than fuel supply contracts. Our company (large financial firm in Europe) has contracts whereby the actual price depends on the actual number of flown segments. However, we don't always use the airline with whom we have a contract as we're required to use another airline when the price difference is above certain percentage and schedule is identical (LCC are excluded for this comparison). If our company fails to provide the volume it agreed with the airline, we need to pay more than the agreed amount for each segment flown.
 
Westerwaelder
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Tue Jul 14, 2020 7:02 am

RvA wrote:
prebennorholm wrote:
RvA wrote:
Cash that comes from where?

Cash that comes from not giving advance payment money to the shareholders as "profit".

It really is so simple and easy. Advance payments are kept on an advance payment account until you deliver the product. All the money is there ready to be refunded immediately in case you for some reason don't deliver your product.

So simple and easy. Until you decide to steal the money on the advance payment account and spend it on something else - not on delivering your product or refunding.


So this means the shareholder dividend etc. is equal to the cash they have up front from bookings? So, one would balance out the other?


It almost feels as if you are deliberately trying to confuse the issue. If payments (and we are only talking about the actual debuting of the card, not the obligation to pay) were made at the time of travel, airlines (like most businesses btw) would not be able to finance today's operating expense with payments for next week's service delivery. They would have to fund operating expenses with their own money. This is how most businesses run. They get paid at the time of delivery and in many cases after.

We can plainly see where the current system leads. The risk is all with the customer which simply can't be right.
 
DAL763ER
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Tue Jul 14, 2020 10:17 am

bennett123 wrote:
Given that there would be no payment until check in, presumably the price would be set at that point.

More importantly, you could get to check in, and be told there are no tickets available.

Not a terribly good outcome for the corporates.


That’s not what that means at all. It would be just like a hotel booking - you book now (thus securing your rate) but don’t pay until you stay. Your credit card is still on file to be charged if you no-show or want to make any changes. The difference is the airline doesn’t get a penny from you until the day of departure. I like it and I’m sure most others do as well.

What airlines have been doing during COVID by avoiding refunds (Eg: AF/KL) or delaying refunds pure sleaziness due to poor cash flow management.
 
RvA
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Tue Jul 14, 2020 12:18 pm

Westerwaelder wrote:
RvA wrote:
prebennorholm wrote:
Cash that comes from not giving advance payment money to the shareholders as "profit".

It really is so simple and easy. Advance payments are kept on an advance payment account until you deliver the product. All the money is there ready to be refunded immediately in case you for some reason don't deliver your product.

So simple and easy. Until you decide to steal the money on the advance payment account and spend it on something else - not on delivering your product or refunding.


So this means the shareholder dividend etc. is equal to the cash they have up front from bookings? So, one would balance out the other?


It almost feels as if you are deliberately trying to confuse the issue. If payments (and we are only talking about the actual debuting of the card, not the obligation to pay) were made at the time of travel, airlines (like most businesses btw) would not be able to finance today's operating expense with payments for next week's service delivery. They would have to fund operating expenses with their own money. This is how most businesses run. They get paid at the time of delivery and in many cases after.

We can plainly see where the current system leads. The risk is all with the customer which simply can't be right.


I am trying to understand how this would work in the real world, not in an ideal one. Looking to understand how the solutions being thrown around would actually work given not just the situation we are in but how the industry itself is structured. Thanks
 
FluidFlow
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Tue Jul 14, 2020 1:01 pm

The real steal is actually that we as customers give the airline an interest free loan. The airlines borrow our money for a possible future service at no cost. Even the risk is not shared but we carry that too.
A really good business to be in, if you can manage it. The problem is that most airlines are actually managed really bad compared to other companies in highly competitive markets.
 
RvA
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Tue Jul 14, 2020 1:12 pm

[twoid][/twoid]
FluidFlow wrote:
The problem is that most airlines are actually managed really bad compared to other companies in highly competitive markets.


I would be interested to understand that statement better. All airlines? Or some? And what companies in comparable situations perform better and why is that? Thanks!
 
FluidFlow
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Tue Jul 14, 2020 1:46 pm

RvA wrote:
[twoid][/twoid]
FluidFlow wrote:
The problem is that most airlines are actually managed really bad compared to other companies in highly competitive markets.


I would be interested to understand that statement better. All airlines? Or some? And what companies in comparable situations perform better and why is that? Thanks!


A lot of airlines came into this pandemic with massive liabilities and debts that were barely sustainable in the first place. Look at all the bankruptcies of airlines in the last few months around the globe. There was an unsustainable will for more expansion and growth. An unbelievable amount of new aircraft were ordered and taken ob (look at the ridiculous explosion of aircraft produced in the last 10 years). Not at one point did the management ever made any preparations for a downturn or reduction in traffic.

I would love to see the risk reports that were presented to the management and definitely not looked through properly. The airline business faces a high exposure to a lot of risks that can halt regionally or globally flights and end revenue stream abruptly. Wars, natural disasters, terrorism, pandemics, political decisions, etc. Any of them can ground an airline for longer periods of times and all of them already happened in the past. At no point I thought any airline was able to weather the storm without government aid.

Then lets look at another highly competitive field with lots of global players, the need for high investments and high fixed costs: The chemical industry. Massive potential for disasters, strong exposure to political decisions (for example ban on pesticides), huge liability claims, etc. and still they never seem to be in any real troubles that would threaten their existence. Why is that? Because the management actually prepares for a lot of sh*t and they are always ready for the next crisis.

Look at the insurance industry, especially the re-insurance industry. The ones that are at the end of every catastrophe. Ever had the impression that a MunichRe could not live up to its commitments? Billions of damages here and there and still, and I know its their job, they are prepared for it.

Now look at aviation, every event (9/11, financial crisis in 2008 and now Covid) killed of multiple large airlines. Almost all of the time it is because there is no preparedness and no pre-investment into tools to have a lot of liquidity ready in short amount of times.

Just ask yourself, which stock would you buy; Novartis, MunichRe or Delta.
 
kalvado
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Tue Jul 14, 2020 2:09 pm

FluidFlow wrote:
RvA wrote:
[twoid][/twoid]
FluidFlow wrote:
The problem is that most airlines are actually managed really bad compared to other companies in highly competitive markets.


I would be interested to understand that statement better. All airlines? Or some? And what companies in comparable situations perform better and why is that? Thanks!


A lot of airlines came into this pandemic with massive liabilities and debts that were barely sustainable in the first place. Look at all the bankruptcies of airlines in the last few months around the globe. There was an unsustainable will for more expansion and growth. An unbelievable amount of new aircraft were ordered and taken ob (look at the ridiculous explosion of aircraft produced in the last 10 years). Not at one point did the management ever made any preparations for a downturn or reduction in traffic.

I would love to see the risk reports that were presented to the management and definitely not looked through properly. The airline business faces a high exposure to a lot of risks that can halt regionally or globally flights and end revenue stream abruptly. Wars, natural disasters, terrorism, pandemics, political decisions, etc. Any of them can ground an airline for longer periods of times and all of them already happened in the past. At no point I thought any airline was able to weather the storm without government aid.

Then lets look at another highly competitive field with lots of global players, the need for high investments and high fixed costs: The chemical industry. Massive potential for disasters, strong exposure to political decisions (for example ban on pesticides), huge liability claims, etc. and still they never seem to be in any real troubles that would threaten their existence. Why is that? Because the management actually prepares for a lot of sh*t and they are always ready for the next crisis.

Look at the insurance industry, especially the re-insurance industry. The ones that are at the end of every catastrophe. Ever had the impression that a MunichRe could not live up to its commitments? Billions of damages here and there and still, and I know its their job, they are prepared for it.

Now look at aviation, every event (9/11, financial crisis in 2008 and now Covid) killed of multiple large airlines. Almost all of the time it is because there is no preparedness and no pre-investment into tools to have a lot of liquidity ready in short amount of times.

Just ask yourself, which stock would you buy; Novartis, MunichRe or Delta.

Well, market is different industries. For one, airlines have pretty expensive product to sell - so customers are pretty price sensitive. Makes competition tough.
Second - product is inheritingly short term, so in many cases, reputation doesn't mean as much as in insurance.
Last, but not the least - different margins on different routes make it easier for competition to grab higher profit routes (such as DC/NY - LA/SF) , leaving larger networks struggling.

Bottom line - part (significant part) of not being prepared is not having capital for doing so. Large debt load is another side of lack of capital.
 
RvA
Posts: 387
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Tue Jul 14, 2020 2:13 pm

FluidFlow wrote:
RvA wrote:
[twoid][/twoid]
FluidFlow wrote:
The problem is that most airlines are actually managed really bad compared to other companies in highly competitive markets.


I would be interested to understand that statement better. All airlines? Or some? And what companies in comparable situations perform better and why is that? Thanks!


A lot of airlines came into this pandemic with massive liabilities and debts that were barely sustainable in the first place. Look at all the bankruptcies of airlines in the last few months around the globe. There was an unsustainable will for more expansion and growth. An unbelievable amount of new aircraft were ordered and taken ob (look at the ridiculous explosion of aircraft produced in the last 10 years). Not at one point did the management ever made any preparations for a downturn or reduction in traffic.

I would love to see the risk reports that were presented to the management and definitely not looked through properly. The airline business faces a high exposure to a lot of risks that can halt regionally or globally flights and end revenue stream abruptly. Wars, natural disasters, terrorism, pandemics, political decisions, etc. Any of them can ground an airline for longer periods of times and all of them already happened in the past. At no point I thought any airline was able to weather the storm without government aid.

Then lets look at another highly competitive field with lots of global players, the need for high investments and high fixed costs: The chemical industry. Massive potential for disasters, strong exposure to political decisions (for example ban on pesticides), huge liability claims, etc. and still they never seem to be in any real troubles that would threaten their existence. Why is that? Because the management actually prepares for a lot of sh*t and they are always ready for the next crisis.

Look at the insurance industry, especially the re-insurance industry. The ones that are at the end of every catastrophe. Ever had the impression that a MunichRe could not live up to its commitments? Billions of damages here and there and still, and I know its their job, they are prepared for it.

Now look at aviation, every event (9/11, financial crisis in 2008 and now Covid) killed of multiple large airlines. Almost all of the time it is because there is no preparedness and no pre-investment into tools to have a lot of liquidity ready in short amount of times.

Just ask yourself, which stock would you buy; Novartis, MunichRe or Delta.


If you compare the chemical industry average profit margins vs the aviation industry, I suspect there may be some differences there...
 
FluidFlow
Posts: 710
Joined: Wed Apr 10, 2019 6:39 am

Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Tue Jul 14, 2020 5:36 pm

RvA wrote:
FluidFlow wrote:
RvA wrote:
[twoid][/twoid]

I would be interested to understand that statement better. All airlines? Or some? And what companies in comparable situations perform better and why is that? Thanks!


A lot of airlines came into this pandemic with massive liabilities and debts that were barely sustainable in the first place. Look at all the bankruptcies of airlines in the last few months around the globe. There was an unsustainable will for more expansion and growth. An unbelievable amount of new aircraft were ordered and taken ob (look at the ridiculous explosion of aircraft produced in the last 10 years). Not at one point did the management ever made any preparations for a downturn or reduction in traffic.

I would love to see the risk reports that were presented to the management and definitely not looked through properly. The airline business faces a high exposure to a lot of risks that can halt regionally or globally flights and end revenue stream abruptly. Wars, natural disasters, terrorism, pandemics, political decisions, etc. Any of them can ground an airline for longer periods of times and all of them already happened in the past. At no point I thought any airline was able to weather the storm without government aid.

Then lets look at another highly competitive field with lots of global players, the need for high investments and high fixed costs: The chemical industry. Massive potential for disasters, strong exposure to political decisions (for example ban on pesticides), huge liability claims, etc. and still they never seem to be in any real troubles that would threaten their existence. Why is that? Because the management actually prepares for a lot of sh*t and they are always ready for the next crisis.

Look at the insurance industry, especially the re-insurance industry. The ones that are at the end of every catastrophe. Ever had the impression that a MunichRe could not live up to its commitments? Billions of damages here and there and still, and I know its their job, they are prepared for it.

Now look at aviation, every event (9/11, financial crisis in 2008 and now Covid) killed of multiple large airlines. Almost all of the time it is because there is no preparedness and no pre-investment into tools to have a lot of liquidity ready in short amount of times.

Just ask yourself, which stock would you buy; Novartis, MunichRe or Delta.


If you compare the chemical industry average profit margins vs the aviation industry, I suspect there may be some differences there...


Then you better dont have a pile of depth and liabilities around if your profit margin is slim. Walmart and every other grocery retailer has a really small profit margin and they survive.
I am sorry but airlines are too easy going with their risks assuming help will be there whenever something happens. Otherwise just screw the employees and shareholders and have a little chapter 11. Try this with an industry that has actual i herent value and your company will be split up with the profitable stuff gone forever to the competitor.
 
dampfnudel
Posts: 590
Joined: Wed Oct 04, 2006 9:42 am

Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Tue Jul 14, 2020 6:45 pm

One possibility could be tickets are fully refundable until 7 days prior to departure. That would definitely make the customer experience significantly better.
A313 332 343 B703 712 722 732 73G 738 739 741 742 744 752 762 76E 764 772 AT5 CR9 D10 DHH DHT F27 GRM L10 M83 TU5
 
Sokes
Posts: 1675
Joined: Sat Mar 09, 2019 4:48 pm

Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Sat Aug 08, 2020 7:34 am

LJ wrote:
We've seen many times (even pre-COVID-19) in Europe that airlines sell tickets and go bankrupt in the Summer and thus ruining peoples Summer holiday. The customers have already paid in advance (sometimes months ago) whereas the airline has to pay its bills when delivering the service (or a few weeks before). The idea is that the client pays and the money to be put in an escrow account. This means that the airline receives the cash when it delivers the service.

Airlines going bankrupt is the main point. I disagree though to entrust the credit card company with the money.
FluidFlow's statement is excellent. But I do understand the airline owners. Because the industry is so high risk, it's better to have little equity that one may loose on average after let's say 25 years.
If one get's 10% return on equity, that's an acceptable risk. If one has 12 % equity and 88% liabilities in form of bank credits, unpaid bills of the last 90 (?) days and already paid tickets that shouldn't be difficult.
What if the owner keeps 25% instead of 12 % equity?

I believe in a Black Swan event the outcome is the same, all equity is gone. Maybe owners would be willing to keep more equity if they could fire employees on two weeks notice?
But even then there are a lot of fixed costs left.

I believe the airline industry needs variable work contracts. E. g. a mechanic has 30 -42 hours work in a week depending on the health of the industry.
He is paid per hour, but above 36 hours there should be a 20% increase. Same is needed for suppliers.
Similar leases should be more by hours flown, of course with a minimum requirement.

If the economy goes down, business class ticket sales go down. People may decide to skip a weekend holiday. This industry has too much discretionary spending, it will always be a roller coaster industry.

So who is to take the risk?
The owners by more equity?
The banks by giving more credit?
The consumer by paying tickets six months in advance?
Employees by having variable work contracts?
Suppliers by accepting delayed payment?

Being so high risk there is moreover the added risk of self fulfilling prophecy. If suppliers are paid within ten days of delivery there is little risk that they will stop delivering.
Would you deliver on 90 days payment terms if there are rumours of financial difficulty?
What if a supplier with critical technology gets into trouble because bills remain unpaid?

Similar if an airline depends on customer advances to manage cash flow, rumours are not helpful.

So who should take the risk then? Banks? Taxpayers?

I believe variable work contracts are a must for roller coaster industries. But then there are limits with how little work/ income employees can still pay their non-discretionary spending.

I believe the government has to put a surcharge on tickets which goes on an account specific to this airline. I can't judge how high this surcharge has to be.

What if in a black swan one airline uses up all money on that account, but another airline has money on its account to pay 50% of it's liabilities?
Somehow this surcharge has to be related to equity and liabilities.

How to handle a foreign airline that has only a few percent turnover in one's country?
They will empty their account even to pay for losses in other countries. Do consumer in the country with proper regulation therefore pay for losses in other countries?
If it's a EU wide system one could exclude flights beyond EU borders. But then consumers of EU flights have to pay for losses of those who fly outside the EU. So I believe a 3% fixed surcharge on long range flights takes care of most black swan risks concerning long range flights. Within the EU flight surcharge should depend on equity/ debt.

As this system takes care of most risk it is tempting for owners to reduce equity further. Getting all chances without taking risk doesn't sound right to me. See banking. If equity is only 3 % why not to gamble with other people's money? If I own a billion, why not risk 100 million if potential profits are huge? So I believe 10% equity in normal times is an absolute must. The accounts managed by the government is for black swans, not ordinary business cycles. So once equity falls below 10%, dividends to shareholders or share buybacks must be prohibited. Below 0% equity the surcharge on tickets has to increase strongly.
In case equity falls below -10% bankruptcy proceedings are initiated. The money on the government account is released to pay unpaid bills. If any money remains it stays as cash and the airline is sold to the highest bidder.
That system is meant to protect suppliers, customers and the taxpayer. For the owners it remains high risk, high rewards.

Having a system in place now that takes care of most risk I still agree that ticket sale should be limited to two months.
I hereby assume that two months is long enough to enable airlines to sell cheap tickets for private travellers to generate demand/ to profit from economies of scale (A321 instead of A319, regional jet instead of no flights at all) and at the same time be able to sell to the business travellers at higher rates. Somebody correct me if I'm wrong.

Why I support a two months limit:
-If economy goes down, it isn't useful not to reduce capacity. Why to offer five connections on a city pair if four are enough? By reducing to four one can achieve better pricing.
-If oil price goes up, ticket prices should go up as well. A high oil price means a shortage of oil. Why to exclude aviation from the possibility to react to price signals?
-Airlines need not waste money on fuel hedging.
-Unless there is a black swan, risk is shifted to equity or bank credit. Banks are in a better position to asses risk than airline customers or suppliers.
Obviously that argument makes most sense if banks are proper regulated. It doesn't make much difference if banks or airlines have to be bailed out.

That two months rule makes far more sense if work contracts enable variable work hours.
I believe variable work hours are really what is most needed in this industry/ any roller coaster industry.
Maybe seniority could reduce work time instead of increasing salaries? With the possibility to work 42 instead of 30 hours during demand peaks?

I disagree with people's anger about airlines not refunding tickets. If airlines and suppliers could fire their employees on two weeks notice one could discuss it.
I do find it immoral if an airline whose future is in doubt sells tickets months in advance.
But that is not the case here. The airlines were committed to deliver the service, but government interfered.
There will be injustice, but statistically speaking who should pay the losses, taxpayers or those who fly a lot?
I assume the real interest of those who regularly fly is that the industry is still in place when the crisis is over. Getting back pilots should be easy, but what about mechanics, people working in offices...
Train new employees?

There was no bad intention on the side of the airlines. It's a black swan of huge proportions. Airline employees will loose their jobs, so how bad is it not to get a ticket refund?
Why can't the world be a little bit more autistic?
 
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lightsaber
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Re: Large German Corporations Lobbying Against Advance Payments for Airline Tickets

Sat Aug 08, 2020 1:41 pm

MIflyer12 wrote:
davidjohnson6 wrote:
Consider a world with just 2 airports - one called CityPort and BeachPort. People want to go to the beach only when it is sunny. Weather forecasts are accurate no more than 10 days ahead. If everyone waits until the last minute, then on rainy days, almost nobody buys a ticket but the airline still has to pay salaries and lease costs. The airline chooses to offer 2 fares... HighFare which costs more but bookable until last minute, and LowFare which is cheaper but is nonrefundable, paid at the time of purchase and must be booked 2 weeks or more in advance. Pax see the cheaper fare, and decide to take the risk of bad weather in return for the cash saving.

Airlines need to charge for the optionality embedded in a refundable ticket. It might be held in an escrow account (as happens with credit card purchases in many countries) but the money absolutely has to leave the passenger's account so the airline can be certain of receiving funds if the passenger is transported. Forcing airlines to put funds for all tickets (not just from a credit card) into an escrow account instead of an airline's general funds might be an idea to consider


That's an interesting construct but doesn't very well describe reality. Carriers set schedules months in advance. They don't cancel flights on 'cloudy days'. They don't send 6x the flights on a sunny day.

You say they need to charge for optionality. It's more correct to say that they have found a way they CAN charge for optionality. The idea of the hotel credit card guarantee shows your assertion that funds need to leave the passenger's account is false. Do you perhaps work for an airline and have an interest in maintaining the status quo?

To get lowest hotel rates, I must prepay. That is normal now.

I prepaid for two family trips this summer I chose not to take. I'm ok with the airline holding the money.

Large business negotiate anyway. This is unlikely to trickle down to consumers.

Lightsaber
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