Airline Chargebacks: Fraud and Consumer Dispute Trends

How airlines address chargebacks has changed in recent years due to an altered landscape...
by Ronen Shnidman
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Published: September 4, 2022
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Airline Chargebacks - Fraud and Consumer Dispute Trends - By Justt
The aviation industry has undergone extensive change in the last few years, altering how airlines address and mitigate chargebacks. Discover the three future trends that will shape airline chargeback strategy. 

Chargebacks have always caused significant problems for the air transport industry. Airlines are a frequent target for online fraud, with reports stating aviation owns a 46% share of all fraudulent transactions. The exposed nature of travel-based payments (remote, high value, card-not-present) attract fraudsters and contributes to a high volume of repudiated charges. Add in a digital-first, margin-tight, multi-party business model – aspects that encourage disputes and friendly fraud - and it's clear why airline chargebacks present a pertinent threat to profitability.

But the aviation industry experienced sizable change over the past few years. As travel restrictions lift and consumers feel comfortable with extended flights again, airlines face a new set of challenges — fraud and consumer disputes now take on a whole new range of complexity.

Let’s explore how the economic, consumer, and fraud trends in 2022 could affect the travel industry’s airline chargeback strategy.


Trend #1: Changes in Consumer Sentiment Towards Airline Chargebacks

Consumer perceptions toward the use and viability of chargebacks changed rapidly over the past two years.

Pre and mid pandemic

During the pandemic, consumers relied on (or discovered) chargebacks as a method to recoup losses for mass cancellations. Government regulations forced airlines to ground operations, causing an immense ticket backlog. Customer service teams had to scramble issuing vouchers, refunds, or ticket extensions. With such unexpected circumstances, it became difficult to maintain a positive customer-to-business relationship, and consumers turned to chargebacks.

As expected, chargeback reason codes exemplified consumer sentiment. “Credit Not Processed,” the reason code for unreceived refunds, accounted for 12% of consumer disputes at the height of the pandemic. “Goods Not Received” also jumped to 9% of repudiated transactions as customers attempted to recoup losses for canceled flights.

Post pandemic

Fast forward to an open economy and the growing need for flights, and reason codes have now changed. "Misrepresentation" or "Service Not As Described" achieve more prevalence as airlines battle tight economic conditions with limited resources. Supply is nowhere near the demand levels, and hiring continues to lag behind open employment positions — consumers are expressing dissatisfaction through disputes.

To compound the matter, post-pandemic service expectations are high. Consumers want enhanced safety, health checks, access to refunds, and insurance from new cancellations. It will take effort for airlines to win back the good faith of travelers.

In summation, consumers appear far more open to leveraging chargebacks for personal gain when dealing with airlines. According to data compiled by Justt, 36% of U.S. consumers stated they filed a travel chargeback since the start of the pandemic, a massive dispute rate for such a debt-forward business model. Consumers have negative perceptions of air travel as a slow recovery overwhelms the industry.

Service expectations are high. And if not met, a chargeback is a ready weapon for the consumer.

Trend #2: True Fraud Attacks Continue To Increase

True fraud has long since plagued the aviation industry. Reporting shows that airlines lost 6.5 billion euros to fraud in 2021 alone – or roughly 1.5 percent of total global airline revenue. The heavy reliance on digital sales channels and the high value of airline tickets mean the industry is highly susceptible to criminal activity. By extension, the largest share of chargebacks result from fraud (surveys from the start of the pandemic note that 71% of all chargebacks stated “Fraud” as the reason code).

And while fraud-labeled chargebacks decreased during the pandemic in place of other reason codes, it is expected that the share of repudiated charges due to fraud as compared to service charges will return to at least pre-pandemic ratios as air travel slowly returns to normal.

Unfortunately, fraud attack trends continue to grow, especially as the pandemic led to an even greater reliance on digital applications. Consumers want a sanitary, touchless, and convenient experience. That experience must be facilitated by technology. But online methods, while useful, create a larger attack surface as fraudsters hack into airline accounts and point-of-sale terminals.

As the industry reopens and recovers, bad actors have introduced or brought back several scams that will likely impact airlines with fraud losses and a spike in chargebacks:

  • Double dipping: Customers with malicious intentions can request both a refund and a chargeback, allowing them to siphon off revenues. Since airline tickets have high resale value via numerous third-party suppliers (travel aggregators, agents, etc), it is an all too convenient method for fraudsters to steal profits.
  • Stolen credit cards: Cybercriminals now leverage the dark web to sell and obtain personal identification information such as vaccination records or credit card numbers. With enough data, they can execute account hacks or purchase fraudulent tickets that result in repudiated charges by the victimized cardholder.  
  • Loyalty account fraud: Complex secondary accounting systems with referral and sign-on programs related to loyalty points remain vulnerable to scams. With increased digital reliance, bad actors use reward miles connected to credit cards to initiate fraudulent purchases, once again leading to repudiated charges by cardholders. 

  • Employee fraud/account phishing: With the current need for employees, security and onboarding protocols can fall by the wayside. Criminals are exploiting such industry risk exposure by hacking through employee accounts or engaging in phishing schemes. 
  • False third-party sales (triangulation schemes): Numerous third-party services mistakenly engage in triangulation fraud, where a legitimate merchant resells tickets delivered by a fraudster. To complicate the issue, criminals themselves are now using eCommerce channels to create fake travel agencies where they employ fake arbitrage or credit card scams. Such acts will continue to impact the aviation industry and result in immediate customer disputes.

With the return of fraudulent activity, airlines need fraud solutions that can help catch travel chargebacks

Trend #3: Customer Service and Personnel Challenges

The turmoil related to the current labor-supply issues further compounds airlines' chargeback volume. The industry is understaffed and cannot meet demand. Not only does this result in supplier-side security flaws, additional cancellations, and unexpected service errors that instigate further customer disputes, but customer service representatives cannot adequately repair the consumer-to-business relationship.

Typically, good customer service is the first line of defense to limiting chargebacks. Justt data reports that 63% of consumers will contact a store for a refund before filing a chargeback, with another 55% stating that a generous returns policy would make them less likely to pursue a chargeback. Simply put, service reps who communicate with a consumer can defend against the costs related to chargebacks.

But with pandemic-based layoffs and sluggish employment growth as the economy reopens, service teams are overwhelmed. The economic impact of COVID-19 squeezes budgets within tight margins, making it infeasible to rapidly fix supply-side issues — hiring takes time, capital, and resources that may not be available to many airlines. In many ways, the industry hopes to weather the storm. In the interim, hiring trends could have an impact on airline chargeback ratios and overall airline chargeback volume.

Possible Action Steps

While the recovery continues, the following action steps may support airlines and their chargeback strategy:

  • Introduce positive security system friction: While security measures limit user convenience, enhanced security protocols that reduce true fraud will provide a worthwhile return on investment. Choose a high-quality fraud solution to establish presale protection.   
  • Airline-first customer communication: When possible, airlines should invest resources into customer service. Booking aggregators and travel agencies can help, but the onus should fall on the airline to help repair consumer relationships and limit customer disputes. 
  • Introduce chargeback management: For such a complex, digital-based business vertical, chargeback mitigation services can handle the entire chargeback lifecycle, a simple and efficient way to reduce the chargeback issues for airlines. Outsourcing chargeback management also has the benefit of limiting or reducing additional manpower needs during a period of hiring difficulties.

Want more information about how chargeback mitigation can recover lost revenues for merchants in the aviation industry? Contact us to learn more about creating a custom chargeback strategy for your business.

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Written by
Ronen Shnidman
Ex-journalist and major fan of fintech and OSINT, I write regularly for leading industry outlets in finance and fraud prevention. Outlets I contribute to include Payments Dive, Finextra, and Merchant Fraud Journal, and I have been cited by
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