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JULY 31, 2019

SERNAC to require airlines to refund boarding taxes for flights not taken

The measure seeks restitution of boarding taxes for those who have not received the refund stipulated in the Aeronautic Code. The law states that airlines must refund boarding taxes when passengers do not take a flight regardless of whether the reason is personal, safety-related or due to force majeure.

Chile's National Consumer Service (SERNAC) instructed LATAM, Sky, JetSmart, Aerolíneas Argentinas, American Airlines, Copa, Avianca and Iberia to initiate a collective voluntary procedure to issue boarding tax refunds for passengers who did not take flights.

The Aeronautic Code (Article 133 C) requires airlines to refund boarding taxes when passengers do not use the air travel service they purchased regardless of whether the cause is attributable to the airline, the passenger, safety or force majeure.

However, SERNAC determined that, in practice, this refund is not given because airlines do not adequately communicate this right and consumers are not aware that they are entitled to the refund.

The number of complaints SERNAC receives also supports the idea that customers are unaware of this right. Between January and March of this year, SERNAC received only about 30 cases in which consumers mention problems securing boarding tax refunds. For the most part, these cases refer to unclear deadlines and extended refund periods – other loopholes that are detrimental to the consumer.

SERNAC National Director Lucas Del Villar explained that the procedure seeks a boarding tax refund in representation of all consumers who purchased but did not take a flight, “so that amount does not revert to the airline just because consumers did not know about this right”, said Del Villar.

These eight airlines account for about 99% of domestic flights and nearly 80% of international flights.

Importantly, the number of passengers taking domestic flights reached 13.4 million in 2018 and that number increased to 11 million for international flights.

The SERNAC Director explained that this extra judicial procedure will seek to identify who is owed a refund and the amount involved.

He explained that “while the law says that this amount must be refunded at the request of the consumer, people cannot request something of which they are unaware. No company should keep money that belongs to consumers”.

He also noted that SERNAC will encourage airlines to modify their practices and the terms and conditions of air transportation contracts to reflect current aeronautical reality so that consumers who do not take a flight receive proper and timely information regarding their right to a boarding tax refund. Expeditious refund mechanisms will also be established.

The SERNAC National Director emphasized that while the airlines’ participation in this process is voluntary, he hopes that they will provide consumers with a proper and timely response and that they see the need to modify current practice, which is based on a lack of information. If this does not occur, SERNAC will analyze the actions to be taken in light of its new authority.


Voluntary Collective Proceedings

Voluntary Collective Proceedings (PVC) is a tool that has been available to SERNAC since March under a new law that strengthens consumer rights protection.

PVC seeks to reach a proposal that establishes certain standards, like requiring that a business cease to engage in or modify the behavior or practice in question; pay the appropriate refund, compensation or indemnities; provide a solution that is proportionate to the damages caused and reaches all impacted consumers; and commit to implementing the solution in an expeditious manner.

Furthermore, in contrast to the SERNAC Collective Mediations conducted prior to enactment of Law No. 21,081, there is now a preset time limit. A PVC may last up to three months, with an extension of up to three months available for cases that require complex negotiations or analysis of background information or proposals.