Nonrefundable tickets will probably be marketed in Russia. Comments made by lawyer Azamat Hagov to an article titled "No right to cancel the ticket".

18 June 2012
Major airlines, including Aeroflot, Transaero, Rossiya, etc. eagerly supported the idea. According to estimates by these airlines, ticket refunds cost them nearly 23 billion rubles a year. The logic of carriers and officials suggests that this money is compensated (overpaid) by bona fide passengers, therefore the bill will allow to reduce air fares by almost one-third and make them affordable for modest income citizens. Moreover, the bill shall give equal rights to Russian and international airlines, including low-cost ones.

Actually, passengers in Europe and many other countries are not guaranteed the right to return air tickets without paying any fines. This being said, customers may choose either to buy a cheap “nonrefundable” ticket or to buy a high-priced open ended or flexible ticket. Many air carriers offer tickets priced differently within the same flight and class. For instance, AirBerlin offers non-return flights from Berlin to London for 98 euros, whereas a returnable ticket will cost 500 euros. Again, the prices offered by Western European carriers may vary depending on diverse options, time of departure and other service attributes.

Russian airlines have considerably less discretion over this matter: the current Air Laws and Regulations of the RF stipulate that, should a passenger notify the carrier of their decision to cancel the flight 24 hours prior to departure, the said passenger shall be entitled to receive the whole amount paid for the flight, and a person which returned their ticket even after completing the registration process shall be entitled for three quarters of its price. Nevertheless, many airlines found a method to bypass such restrictions: Rossiya airline charges their customers 15 euros “for operation of refund, booking cancel, and calculation of sums to be refunded”. Besides, passengers willing to return their tickets are seldom refunded commissions and other fees which they paid in the process of booking, because the Supreme Court of Russia deemed these fees to be “lawful”.

“Air carriers and officials which support them believe that, the Russian legislation does not match up with current market development, and therefore domestic airlines face unequal competitive conditions compared to international carriers. According to our source in the RF Ministry of Transport, “Due to the existence of nonrefundable tickets, international airlines are able to sell a significant amount of seats even for the most demanded dates and destinations at cut prices. Passengers who use price as the dominant factor in a sales negotiation, first of all, vulnerable social groups, can make their bookings in advance at reduced prices”.

It's estimated that major air carriers incur losses up to 8% of their proceeds as a result of passengers’ “wanton” cancelling their booking. “Thus, “bona fide” customers who do comply with the air carriage contract "overpay" 22.7 billion rubles per year”, believe the officials. According to their estimates, introduction of nonrefundable tickets will allow them to reduce rates by nearly one third.

The offered bill stipulates that nonrefundable tickets sold by any air carrier shall not exceed 30 % of all the tickets offered by the latter (i.e., logically, passengers will be able to return over two thirds of tickets with almost full compensation). Passengers shall be informed on existing restrictions at the moment of purchasing the flight.

It will not change for the better
Transaero has supported the proposal advanced by the RF Ministry of Transport. Sergei Bykhal, director of corporate communications at Transaero, believes that “By introducing nonrefundable flights, Russian airlines can increase passenger load by attracting new passengers, and, consequently, increase overall performance. Passengers will be able to purchase the lowest priced nonrefundable flights, which will make air travels within Russia and abroad much more affordable. International carriers with flights to Russia tend to widely sell low priced nonrefundable tickets, while Russian carriers, which are denied such opportunity, currently face unequal conditions compared to international competitors. Thus, should these amendments to Air Laws and Regulations of the RF be adopted, it shall definitely serve the interests of both domestic airlines and the wider population of our country”.

At the same time, on the pretext of protecting trade secrets, Transaero refused to communicate Baltinfo the percentage of returned tickets and financial sanctions applied to passengers (the amount of cancellation fee, etc.). Other respondent airlines also shied away from commenting on the issue.

Experts differed on the introduction of nonrefundable tickets. For instance, Anatoly Golov, co-chair of the Consumers union of Russia, approves of this restriction which is seemingly undesirable for passengers: “It is widely practiced in Europe – in many cases passengers feel it advantageous to purchase cheaper nonrefundable tickets. For instance, when a person buys a ticket at the airport just before the departure and they know it for sure that they will not return the ticket. And when they make a booking one month in advance, they should have a choice”.

Roman Zakharov, chief editor of trade magazine “Liniya Poleta” is rather skeptical of the bill. He believes that one could encourage introduction of nonrefundable tickets if a really competitive air travel market existed in Russia, and customers could freely choose the best price quotations.

Zakharov believes, that “The bill is likely to have a positive impact on civil aviation (i.e., air carriers), whereas passengers should not expect for anything good. How shall information be provided to passengers? Experience shows that clients tend to endorse conditions which they are not informed about. Who and how shall make sure that nonrefundable tickets sold by an air carrier shall not exceed 30 % of all the tickets? Moreover, the sale of such tickets for flights subsidized out of the state budget (i. e., flights to Kaliningrad, domestic traffic, etc.), should be strictly forbidden.

Lawyers were also ambiguous about the bill. After all, subject to the current Civil code of the Russian Federation, customers (passengers) are entitled to terminate the contract at any time and to reclaim the paid amount of money. They are obliged to compensate the contractor (airline) only for actual, effectively incurred costs. In the case with tickets it means deduction of booking fee, etc.

According to Azamat Hagov, the lawyer from consultation of S&K Vertikal, “The proposed norm on “unrefundable” tickets contradicts both the Civil code of the Russian Federation, and the Law on Consumer Protection. Generally, despite the reasons listed in the explanatory note to the bill, interests of airlines are better represented. However, when adopting a law, one should keep in mind that citizens are economically weak party of the transaction. That’s why citizens’ interests should be consulted first of all. As to reduction of prices, it may be achieved using other techniques, and without damaging interests of consumers.”

Maria Kozlova, lawyer of commercial practice, the Rightmark group, does not see any infringement of passengers’ laws: “The tariff should initially contain stipulations as to what sums shall be nonrefundable, including the case of contract cancellation”.

The Ministry of Economic Development and Trade (which is a co-author of the bill) will accept any critical comments made by market players and independent experts within the next week

Pavel Netupsky

Baltiiskoye Informatsionnoye Agentstvo

Back to the list