An airline can cancel your flight in certain situations. One such situation is when the airport experienced adverse weather conditions. It can also cancel your flight due to air traffic congestion at the airport.
If the reason for the flight cancellation is out of the airline’s control, you might not receive cancellation compensation. That means you’re only eligible for compensation for cancellations resulting from situations within the airline’s control.
However, paying out cancellation compensations impacts airline profits. A classic example would be when Ryanair Airlines had to pay out over €20 million to passengers as cancellation compensation. This article will look at how flight cancellations impact airlines and passengers alike.
The Cost of Flight Cancellation Compensation to Airlines
When airlines have to settle flight cancellation claims, they suffer various consequences. Some consequences are money-related, while others taint the airline’s image. While canceling passengers’ flight inconvenience the passengers, the compensation for cancelled flight hurts the airlines in these ways:
- The Airlines Reputation
Flight cancellation inconveniences you, especially when you intend to arrive at your destination on time. An airline that cancels your flight may lose you as a customer and damage their reputation in your view. If more passengers have the same view, the airline will see its profits decline.
- Loss of Revenue
An airline will usually charge you a change or flight cancellation fee. They still make some profits even if you cancel your flight. But if they cancel your flight, they will compensate for the inconvenience, thus losing revenue. And the revenue loss could be even greater if more passengers claim flight cancellation compensation.
- Reduced Customer Loyalty
You will not purchase a boarding pass from an airline that frequently cancels flights. Such an airline will repel passengers to its competitors. More passengers may abandon the airline company in favor of its competitors.
How Flight Cancellation Compensation Affects Airline Profits?
When you claim compensation because your airline canceled your flight, the airline should process your claim. Regulations require airlines to pay you for canceling your flight due to operation and maintenance routines and factors in their control. An airline usually suffers the following financial consequences when processing these claims:
- Airlines Loses Fees
An airline will charge you a flight cancellation fee if you cancel your flight. But when the airline cancels your flight due to a factor in their control, they will not charge the cancellation fee. On the contrary, they will pay your air ticket back, losing even more money!
- Incur Operation Cost
An airline still has to pay some operation costs even after canceling your flight. Those payments will reduce the airline profits further. The airline must still pay the crew’s wages and maintain its planes. The airport may also levy fees. Sometimes, the airline has to fuel the plane.
- Payouts to Passengers
The airline’s profits will plummet by a significant margin when it has to compensate passengers. The profit loss can even be devastating for smaller airlines. For example, Ryanair Airlines had to pay out €25 million to passengers despite being a small company. The payout was 1.7% of the airline’s profits in 2018, yet it was compensation for a single flight.
Strategies for Minimizing the Impact of Compensation on Profits
The airline industry has compensation policies spelling out passenger rights in the event of flight cancellation. While compensations stretch an airline’s resources, airlines can minimize the impact. The airline can use these strategies to minimize the impact of paying out compensations to passengers:
- They Can Improve Operational Efficiency
The airline can repair its planes on time to ensure they’re ready to take to the sky as passenger demand rises. Also, the company can use Artificial Intelligence to analyze weather for potential scheduled flight disruptions. The airline can fuel its planes on time to minimize flight delays.
- Improve Customer Service
Additionally, airlines can use various platforms to communicate with passengers about flight cancellations. The airline should let the passengers know their options, too. Social media platforms, like Facebook and Twitter, are an excellent communication channel.
- Offer Booking Flexibility
If an airline allows you to cancel your flight without charging the cancellation fee, they will keep you as an esteemed customer. They can also let you change your travel date to accommodate unplanned occurrences. These booking options will keep passengers, and the airline will continue serving a solid market share.
Balancing Passenger Rights and Profitability
Passengers have various rights. One of those rights is the flight cancellations compensation. Of course, they have other rights, such as care and assistance. The airline has to make profits amidst these passenger rights. The airline can balance the passenger rights and profitability if it does the following:
- Offer lower fares
- Maintaining the planes on time
- Presenting passengers with flexible booking
- Establishing efficient communication with passengers
Airline policies spell out passenger rights. Flight cancellation compensation is one of the passengers’ rights. Usually, these compensations impact an airline’s profits. With a balance between passenger rights and airline profits, airlines stand a better chance of handling compensation claims unscathed.
If your airline cancels your flight, check to see if you’re eligible for compensation, and let us know your experience in the comment section below.