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Uncovering current trends in chargeback behaviour for air travel

When analyzing the current situation in the payments ecosystem, it’s key to have access to historical data to fully understand where the industry is. The pandemic has reshaped the payments world and caused significant changes in both customer behaviour and the way online transactions are perceived.

Up until March this year, around half of all chargeback-related tickets were flown and nearly 10% of all chargeback-related tickets were refunded, based on data from transactions processed for Accelya customers.

This trend changed from March to July 2020, with the percentage of flown tickets decreasing, accounting for only 20% of all tickets, while refunded tickets rose to about 30%.

Even if airlines take all the best precautions and follow the recommendations for fraud protection, chargebacks tend to be inevitable and as such, it´s important to keep in mind the complexity of post-purchase behaviour to prevent further losses.

What is the true cost of chargebacks to the airline?

Chargebacks normally account for 0.5% of all sales, but the COVID effect has skyrocketed disputes and, in some cases, caused the chargeback ratio to increase to more than 2% of all sales transactions.

Direct cost = Losses

To put this in perspective, if an airline made 10 million US dollars in sales in 2019, around $50,000 came in as chargebacks in that same year. If this airline makes the same 10 million in 2020, assuming that the current trend in chargebacks continues, $200,000 will come in as chargebacks over the year. This is just the loss of the actual sale, but when we talk about the true cost of a chargeback, it ends up being up to 2 to 3 times the sales price, depending on the specifics and the outcome.

Indirect cost

Airlines need to consider the administrative fees that acquirers charge, as well as the operational costs of managing and fighting each claim. The time spent by the customer support team in their correspondence with customers, prior to the decision to raise a chargeback claim, should also be factored into the final cost. Even if an airline wins the chargeback claim, banks and card schemes still hold the airline liable for penalties.

Airlines also need to examine whether they were able to block the ticket prior to being flown by the customer, because a flown ticket adds a myriad of operational costs to the actual sale price. If we dig a bit deeper, there are a series of hidden costs that are not immediately considered, such as the investments in marketing, advertising or webpage maintenance, that go into achieving every sale.

Other impacts

The monetary ramifications are significant, especially now with the increase in chargebacks, but the reputational ramifications can also be catastrophic. Above all, there is a high risk of reaching certain chargeback ratios that cause card schemes to limit the acceptance of credit cards, which, in most cases, means the end of business with an airline. To prevent chargebacks from happening we first must understand why customers are filing chargeback claims.

What are the reasons behind chargeback requests?

When any chargeback is filed, the dispute is given an official reason code. Below you will find the 5 most common reason codes received in 2019 and 2020. At Accelya, we process 5 billion transactions a year from airline customers and these are the trends that we have seen as a result of the Covid pandemic:


The fraud reason code is fairly self-explanatory but can be tricky when customers file a chargeback claim as if it were fraud, when in reality, they have buyer’s remorse and want a refund. From January to March this year, fraud accounted for 71% of all chargebacks, but over these past months we´ve seen a drastic decrease in fraud driven chargebacks from 71% before COVID to 56% since the beginning of the COVID pandemic.

At the same time, we´ve identified a significant increase in most general cardholder disputes. The following categories can be considered as general non-fraud, cardholder disputes.

Credit not processed

credit not processed chargeback is motivated by a customer who is expecting a credit from the merchant, essentially a refund, that has not yet been received. This category accounted for 4.5% of all chargebacks from January to March this year and it reached 12% during the height of the COVID pandemic.

Defective Merchandise

Defective merchandise chargebacks are quite common in eCommerce and may even sound familiar if you´ve ever ordered something online that ends up looking nothing like the advertisement. They represented 9% of all chargebacks from January to March this year and, in the airline industry, it generally means the customer is unhappy with the service provided. During the COVID pandemic they accounted for 17% of all chargebacks, which means nearly a 100% increase.

Goods and services not received

Goods and services not received generally apply to cancelled flights or tickets for future flights that have not yet been received. 2% of all chargebacks fell into the category of goods and services not received from January to March 2020, and during the COVID pandemic increased up to 9% of the total number of chargeback disputes.

Duplicate processing

This category refers to claims that the client was either charged twice or issued two identical tickets instead of one, and accounts for 13,5% of all chargebacks. During the COVID pandemic, this number decreased to 6% of all chargeback claims.

How to address these trends in chargebacks?

The first and best line of defence against chargebacks is customer service, and the best way to provide a good customer experience is by thinking like a customer. To improve communication with customers, an airline should be the absolute first point of contact regarding any changes, be it via email, phone call or SMS.

Airlines can improve communication by providing as much information as possible, regarding why the flight was cancelled and what alternatives the customer has now that their original reservation has changed. The objective is to make the customer feel heard and cared for instead of overwhelmed and feeling the need to resort to a chargeback.

Many airlines are extending the time frame for using travel vouchers and some airlines have an extensive COVID update center where customers can track which airports and destinations are still accepting flights, as well as country specific government regulations. Offering several flight alternatives as well as letting passengers rebook through the website could be a positive way to please customers without having to process a travel voucher.

If this is not an option, airlines could try to make accepting a travel voucher truly worth the customer´s while. Whether it´s free access to the VIP Airport Lounge or credit for on-board purchases, getting creative will help, because a few perks can go a long way. If despite best efforts the customer still wants a refund, it is always best to be honest and consider making refund requests available, even if it seems that the customer is not eligible. The objective here is to not lose the customer´s trust and to avoid chargebacks and the hidden costs that come with it.

Fraudulent payments transactions are expected to rise

Since early August this year, we´ve seen one trend change: a steady increase in fraud-based chargebacks while refund requests plummet. If travel restrictions continue to ease up, we expect fraud-based chargebacks to continue to rise. A new wave of chargebacks entails hidden costs for airlines, which can be avoided if the right measures are put in place. Airlines need to be resourceful and make sure that a specialized team helps them handle chargebacks in order to avoid losses.

Efficient management of chargebacks can help airlines move to a healthier cash position, so it´s important to take into consideration several key elements when designing an effective chargeback approach. Most of our airline customers consider chargeback management to be a major challenge and therefore have opted for an outsourced managed solution to increase chargeback recovery rates.

An outsourced managed solution will help airlines achieve an increased recovery rate and save costs through prioritization and fraud prevention measures, among others. Now is a good time to consider fortifying fraud prevention measures and improving chargeback management processes.

At Accelya, we help airlines reduce costs and tackle the areas that are key to the payments ecosystem by outsourcing the chargebacks process. If you are interested in learning more about how to efficiently manage chargebacks, please contact us or visit our site to learn more about chargebacks outsourcing.

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