Airline Failures: A Banking Perspective

Airline failures can cause significant distress for consumers and pose challenges for the banking sector, particularly in managing chargebacks. Such failures often result from declining revenues and rising costs. 

A notable example is the 2019 collapse of Thomas Cook, which left 600,000 travellers stranded, including 150,000 from the UK. While efforts were made to repatriate those under the UK Financial Protection Scheme, banks faced a surge in claims, placing pressure on frontline staff and operational managers. Effective strategic planning was crucial to managing the increased workload.

Challenges in Chargeback Operations

Banks must be prepared for the inevitable rise in activity following airline failures. Key challenges include:

• Surge in Call Center Volume: A sudden increase in customer service calls can be expected. Securing additional man-hours and using adaptable telephone systems with pre-recorded messages can help manage this influx.
• Extended Waiting Times: Long wait times can frustrate cardholders. Operators should be given adequate time to listen and respond empathetically to avoid errors and dissatisfaction.
• Friendly Fraud: Some consumers may incorrectly report transactions as unauthorised to expedite refunds. Well-trained agents are essential to asking the right questions and preventing such fraud.
• Intentional Fraud (“Double Dipping”): Customers might seek refunds from their bank and an insurance scheme. Banks should require proof of denied claims to support chargeback requests.
• Inconsistent Chargeback Timeframes: With a contingency plan, banks can avoid losing chargebacks due to processing delays. Adequate staffing is necessary to meet the required timeframes.

Chargeback Claim Checklist

Card schemes aim to ensure fair treatment of cardholders during airline failures. A checklist for chargeback eligibility includes:

• Verify Insurance Protection: Determine if the travel company was registered with schemes like ABTA or ATOL, or if flight cancellation insurance was in place. Some policies may exclude airline failures, so cardholders should check the terms carefully.
• Check for Refunds: Cardholders should contact ABTA, ATOL, or their insurance provider for refunds. If directed to the bank, proof of denied insurance claims is necessary.
• Initiate the chargeback: If insurance claims are denied and other conditions are met, banks can initiate a chargeback.
• Consider Alternatives: If a chargeback is unavailable, credit card users might be protected under Section 75 of the Consumer Credit Act 1974 for purchases between £100 and £30,000. Debit card users may need help from local trading standards or the Citizens Advice Bureau.

Preparing for Future Airline Failures

Airline failures present complex challenges for consumers and the banking sector, particularly in managing the surge in chargeback claims. These failures often stem from financial instability, such as declining revenues and rising costs.

For banks, the key to successfully navigating these crises lies in strategic planning and robust operational responses. Implementing a comprehensive chargeback claim checklist and preparing for future airline failures through adequate staffing and efficient claim processing are essential steps. By doing so, banks can not only support affected consumers more effectively, but also maintain trust and confidence in their services during such turbulent times.