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All flights dropped during lockdown phase and even subsequently must offer compensation to ticket holders, India's Supreme Court states. Image Credit: AP

New Delhi: India's Supreme Court ordered local airlines to refund tickets booked for travel during a nationwide lockdown earlier this year, dealing a blow to an industry already strapped for cash. The court's verdict also mandated airlines to issue credit vouchers even for tickets booked for travel outside the lockdown period, if the flights were later canceled due to virus-related restrictions.

Passengers must also be allowed to use those vouchers until March 31 on any route, and carriers must refund with a monthly interest if those remain unused by then. 

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Many airlines around the world have issued so-called 'credit notes', instead of cash refunds, to passengers whose flights were canceled due to the coronavirus pandemic, providing carriers with a temporary revenue source to tide over the slump, even as disgruntled flyers demand their money back. India's verdict - which was earlier estimated to cost local airlines more than $500 million - may a precedent for such disputes elsewhere, and make the road to recovery even steeper.

While the nation has indefinitely banned scheduled international flights, local airlines are allowed to operate domestically with a limited schedule. Still, most airlines struggled to fill even 70 per cent of seats in August, and more than two-thirds of passenger complaints were related to refunds, data from the aviation regulator showed.

The top court verdict also asked the Directorate General of Civil Aviation to ensure that airlines comply with the order. Indian carriers have already sought at least $1.5 billion as an interest-free credit line and deferred loan repayments from the government, and one or more are expected to fail in absence of any help from the government or airline owners.

The local aviation market in India flew 144 million passengers last year.