Airberlin Retroactively Makes Refundable Tickets Non-Refundable

A couple of days ago I wrote about how airberlin filed for insolvency, after Etihad withdrew its financial support. There’s no need to panic immediately, as the German government is giving the airline an emergency loan of 150 million Euros, which is expected to last them for a few months. Hopefully they are able to restructure and continue to operate in one form or another after that date.

However, it looks like there’s an interesting side effect to this for passengers who were already booked on the airline — airberlin tickets issued through August 11, 2017, are no longer refundable, even if you booked a refundable ticket. Per a notice sent out to travel agents:

WILL TICKETS ALREADY ISSUED BE REIMBURSED?
All tickets issued until August 11th 2017 are no longer refundable. Tickets valid from August 12th 2017 will be subject to the applicable tariff conditions.

CAN TICKETS BE REBOOKED?
The tariff conditions valid at ticket issuance are still actual. Issued tickets can be rebooked on the basis of the valid tariff conditions, if these include the possibility to change a booking. If fees apply, they must be paid by the passenger.

WILL AGREED TARIFF CONDITIONS (FOR EXAMPLE, COMPANY RATES, TOUR OPERATOR FARES OR CONSOLIDATOR RATES) REMAIN?
All tickets issued until August 11, 2017 are not refundable. Tickets valid from 12 August 2017 will be subject to the applicable tariff conditions.

Logically you’d think this would be illegal. You pay extra for a refundable ticket, but then they retroactively change the rules on you. FlyerTalk member ralfkrippner has a great explanation about why this restriction is being put in place:

German insolvency law distinguishes “old debt” from before the filing date from “new debt.” New debt has a higher status und thus the management would violate insolvency law and be personally liable if they pay out funds to creditors with “old debt” before the final liquidation of the company and its assets with a quota part payment. And tickets issued before filing date Aug. 11 are definitely old debt. Besides from that the acceptance of such tix for transport is also a violation but it probably was the first decision of the official insolvency procurator to honour old tix for transportation as otherwise the company would shut down immediately without any potential for continuation and therefore chance of upholding value of assets.

I guess that sort of kind of makes sense in a backwards way.

However, I suspect if you use a credit card with decent protection then you should be able to dispute the charge, given the terms based on which you bought a ticket. Furthermore, you should have no issue refunding a partner award ticket for travel on airberlin that was booked through another program.

What a strange situation…

(Tip of the hat to @FlyingDutchBlog)

Comments

  1. It’s sad that this applies to all tickets and therefore, business class tickets too.

    I bet a lot of passengers would be pissed.

    Also can’t Air Berlin in some way make up for this or reimburse those passengers, say, by giving away extra miles or lounge access?

  2. And of what use are miles in such a situation? Currently you can’t do anything with them as the accounts are frozen. Only time will tell where this is going, and I suspect it won’t be going out well for the most of us…

  3. No way this stands with credit card companies at the very least. Any time I have disputed a charge they always ask if I knew the terms and conditions when I bought the ticket and what those t&cs were, so I abided by those terms, I will be fine.

    I don’t know if this is still true or not, but it used to be (when airlines were failing miserably after 9/11) that credit card companies don’t actually give all of the money to the airline when you book. They kept losing so much that they send say 20% to the airline when you book and the rest when you have completed your flight.

  4. @RCB
    You know t&c of the ticket. But you don’t know german insolvency law or probability of air berlin filing for insolvency proceeding. You need to filter whatever bullshit the credit card company said to you in order for you to waive your legal rights to get protection from them.

  5. Not an expert on German bankruptcy law but I really don’t think airline tickets should count as “old debt.” The proceeds from tickets sold would show up on the liabilities section of the balance sheet as “unearned revenue.” Only when the service is delivered (i.e. Flight complete) does it hit the income statement as revenue. I would look at it more as a prepaid contract where a party has the ability to cancel in the future. But again not an expert on bankruptcy law in Germany.

  6. Insolvency, not bankruptcy.

    And Ralf Krippners explanation above is correct. The tickets booked before Aug 11th are part of the insolvency estate and can’t be refunded.

  7. Here’s a small clarification on the old-vs.-new debt issue.

    US insolvency law (and I’m almost tempted to say all insolvency law) works the same way. New unsecured money just about always gets preference over old.

    But, at least in the US, that’s not the end of the story. Because that situation, as Lucky’s post outlines clearly, can produce really absurd results, in US insolvencies there’s typically a series of “first day” orders signed by the bankruptcy judge that helps facilitate whatever needs to happen to keep the company going. (And I’m obviously talking Chapter 11 here.) Letting retail operations continue more-or-less normally, for example, is key. The key, in fact.

    Historically, though, European bankruptcy law has always been both stricter and less flexible than US law. Maybe someone more versed in German law than I can chime in?

  8. @Raheem The “old debt” is the delivery of services to the value of tix against the monies already paid. The problem in this situation is that the company is insolvent – so it is unable to simply

    Please also note that even in the “old debt” there is a number of debts that are higher in priority to be paid off than the debt to the customers due to the issued tickets (who would be classified as unsecured creditors). We should all be glad that the reform of the insolvency law enacted earlier this year did not restore the fiscal privilege, though.

  9. @James My answer doesn’t depend on German insolvency law at all, it depends on credit card warranties, which nearly ALL of them have. You’d file a claim under your credit card warranty, not as a refund from Air Berlin (that’s between AB and your CC company), but as a credit from your CC issuer. Same thing happened when my dry cleaner went belly up, I had pre-paid an entire year and I got the unused portion back. I don’t think my CC company got any money back from the drycleaners, they ate it as part of the cost of business and offering warranties.

  10. @RCB

    Air Berlin is saying that they will honor the ticket, that is to deliver you from point A to point B on a given date and time. The CC insurer should refuse the claim (though some won’t, as they may want to retain you as a customer), especially as they have zero chance of reclaiming the cost from the airline as it is now under insolvency law shield.

  11. @RCB: That might be working for cards issused outside of Germany,but not for German CC’s since there is no such warranties against insolvency.

    @Tom: German insolvency law was not very flexible a few years ago – and there was no sort of chapter 11 filing- which changed (and its called in German “Schutzschirmverfahren or ESUG”).

    @Raheem: The ticket price will shop up as deposit and is part of the insolvency. And just to keep it simply,insolvency mean there is a usually a shortage of cash which simply means they can’t pay back the deposit since its not longer sitting as cash in the bank account. Just like an unsecured bank loan for exampl

  12. @Debit
    Precisely!!!! Tough sometimes you may hear something about justice, equality, humanity, human rights, etc. since stupid people loved sugarcoated words….

  13. Why are these refundable tickets, debts?

    These money cannot be recognised as revenue yet and should held in trust accounts? How could it suddenly become a debt?

    This is no different from snatching deposits then?

    (not an accountant, but i thought the view that this is “debt” is very strange).

    Maybe some accountants can chip in their views.

  14. @flyingfish

    It’s not yet revenue as the service (moving a person X from place A to place B on date T) has not yet been fulfilled. Until then it is unearned, and is considered a form of debt.

    The airline can’t return the money as a) it is insolvent, so it does not have the money to cover all obligations and b) it is formally under the special protections and obligations as a consequence of a).

    Side note: in almost all jurisdiction any money you deposit into an account at your is not considered to be yours at all; instead the bank has obligation to pay you back the amount in full, on demand: it has a debt with you as the creditor. You no longer own the money, but you do own the debt that the bank has promised to pay you back (along with any interest charges). If it is insolvent, it can’t do so. It’s the risk you take.

  15. So, I bought a ticket on Airberlin in May for a flight at the end of November. Should I be worried about my tickets? Is it possible to go to my credit card company now to get a refund since I cant cancel my flight?

  16. Just to clarify that as far as I know bankruptcy protection is only a feature of US credit cards. As Tina pointed out, German credit cards don’t have this feature. As a matter of fact, I’m not aware of any European credit card that does …

    On insolvency law: I’m not an expert on the German particularities, but in general, the assumption of The US chapter 11 is that the company and its debt can somehow be restructured and continues to operate. The European “equivalents” are not really the same, as they follow the assumption that an operating company will result in a higher sales price (as a whole or sliced&diced), which then is used to pay some of the old debt, as compared to a company which ceased operation. So the current AB, by the end of the day, will cease to exist and their old debt in part paid back – even if a buyer is actually continuing to operate as “New AB” (which is unlikely in this case).

  17. I’m getting a kick out of this as I work for a company which handles bankruptcies and restructuring, including airlines.

    @Wolf has is correct — the airline has taken the cash in and it owes the passenger a flight. Since it “owes” a service to someone else, it’s booked as debt.

    Travelers are actually lucky — their airline is still flying and honoring the tickets. The conversion of refundable to non-refundable status is regrettable, but it beats the airline completely abandoning all of the tickets, which has happened in the past.

  18. The date changed to 15 August – tickets that has been issued before can’t be refunded.

    @Andy: A german insolvency doesn’t mean that the company will stop to exist. There are cases someone buys the shares. Which means the debts, contracts etc. are still valid – which means that in tht cases there is sometimes a deal with the creditors in terms of a “hair cut”.

    With Air Berlin’s financal situation, a huge debt with two banks, aircraft lease and the bonds –
    there is just no way a share deal is possible – to complicated in the short amount of time they have.

  19. @James, I got your point, it just doesn’t matter to this. Your credit card warranty covers you regardless of what the issue is on the other end, as long as you are abiding by the terms and conditions when you bought the ticket. You’re wrong, it’s okay, you’ll survive.

    @Wolf If you still want to take the flight then there is no issue here. I’m saying that if you can’t take the flight and bought refundable tickets, then that’s where your CC warranty takes over.

    You do you. Go ahead and eat those tickets if you can’t use them, I’ll be over here with my refund from the credit card company spending it on other things.

  20. Hello, I purchased my ticket in July. Recently received an email stating my flight is cancelled and they wont be refunding my money, and I was suppose to fly out this Saturday. I don’t understand why I cant get my money back. Can any attorney sue them? Its pretty much stealing from people. I’m worried and hopeless.

  21. @Paulina – Same thing happened to me and my boyfriend, bought tickets to fly this month and just received an email stating basically your flight is cancelled, you will not get your money back . We filed a claim through an online form which, i worry, will stay unheard… We are now wondering if there is anything that we can do to try to get our money back. We got our vacation spoiled, we have been waiting for this trip for so long!!!

    I read the thread with interest but I worry that in Europe we do not have credit card warranties like the ones specified. I am going to check with the CC but I never really heard of it.

    I wonder if we will ever get our money back, which seems quite unlikely at this point. I just wonder if we can get at least some kind of compensation? Do customers and travellers have any kind of right in this situation or are we just considered numbers (or better said, money)?

  22. I purchased my fully refundable ticket in July. After Air Berlin announced their insolvency issues, it seems that they cancelled a number of flights and rebooked those travellers on other flights (different date/time). These cancellations and subsequent rebookings occurred AFTER the 15 August (e.g. 18 August). Would this constitute as a newly issued ticket? If I had a fully refundable ticket, would it now be refundable?

    In the notice telling me of the cancellation/rebooking, there is an interesting small print, “We hereby wish to inform you that pursuant to Regulation (EC) 261/2004 you are entitled to request a re-routing at a later date, subject to the availability of seats, or a reimbursement of the ticket cost, instead of transportation pursuant to the flight data mentioned above.”

    I’m not sure if I’m in the clear and now eligible for a refund, but it sounds like it. However, upon calling the service agent to cancel my flight, they said this might have been a mistake. Does anyone have any thoughts or ideas on this?

  23. @RCB – I filed a claim with CC (Amex) and at first it was resolved in my favor. But last week, I received a new letter with a copy of airberlin’s conditions of carriage and invoice they had sent me, and Amex put the charge back on my card. Did this happen to you?

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