Question

Answer the questions in paragraph home,

DANIELS FUND ETHICS INITIATIVE Case Bank COVID-19 IMPACTS THE AIRLINES CASE The COVID-19 pandemic is increasingly impacting businesses and creating a wide range of ethical issues. Attempts to slow the spread of the coronavirus, like social distancing, have had a profoundly negative impact on the travel and airline industries. Due to a combination of passenger cancellations, route changes, and major cuts in the flights offered, airlines are scrambling to cut losses and denying millions of dollars in refunds owed to customers for canceled flights. The grounds for these decisions are new policies that may be in violation of federal rules. While the government requires giving customers an option to receive a full refund if a flight is cancelled, some U.S. carriers are only offering a voucher or credit towards future travel. International airlines are continuing flights regardless of a lack of passengers. Because the flights are not technically cancelled, the airlines claim they are free to issue vouchers for future flights instead of refunds. Recently, 20 international airlines blocked travel agents from issuing refunds on tickets through global reservation systems. In some cases, no-refund policies appear to violate published airline policies. These actions may cost travelers thousands of dollars for a trip they will never reschedule. Also, like the airlines, many consumers may need their money to get through the pandemic. If airlines are unfair with customers and only concerned about their self-interest, they are likely to lose the trust of their consumers. In the long run, consumers may question the integrity of airlines that are violating their own rules and standard practices. Dr. O.C. Ferrell and Dr. Linda Ferrell with Auburn University wrote this case with the approval and collaboration of the Daniels Fund. ORIGINAL ARTICLE The Airlines Making Refunds More Difficult, The Wall Street Journal (subscription required) https://www.wsj.com/articles/the-airlines-making-refunds-more-difficult-11585747737

What is the issue/conflict in this case? What are the long-term consequences of these decisions? Address your thoughts on this case and what ethical issues this Case addresses. Have you seen any other ethical (or legal) issues related to pricing during the COVID-19?

Answer 1

The current case is of the flight cancellations that have happened as a result of the Covid pandemic over the last few months. Passengers have had to deal with flights that will not take off on the dates they have booked as all global flights have been grounded. In this regard most airlines are offering vouchers or credit for future travel rather than a full refund, this is creating great hassles for passengers as they might not book with the airline in future at all and the recharge voucher would lapse and they would lose the money for no fault of theirs. The airlines on their part claim that they should not suffer as the flights were not cancelled by them. Hence there is a major conflict here with the airlines having to protect their interests as well as the customer. If the decision stands it will create a long term issue for the airlines as customers will choose to fly with others in future and an erosion of lifetime value for the airlines.

The ethical issue is that this is a time of emergency for the individual customer economically and she may be in dire need of the money to see herself through the period of uncertainty as countries are locked down with no economic activity. Even if legally the airlines are not bound to refund the money, they should try to do it with their available resourcessince this is an exceptional scenario and corporates have better access to lower cost funds than individuals do. This would also be good from a long-term customer retention perspective. Also in some cases airlines may be able to invoke clauses with their insurance companies to deal with this matter as it could be treated as Force Majeure.