Can trips bought with bonus points be refunded in a different currency?

Several air carriers offer their passengers to join loyalty programs where members can earn bonus points by travelling or buying different items. Points can be redeemed to travels, discounts and other benefits.

In a recent case, a passenger has claimed that he, against repayment of his bonus points to the carrier, was entitled to get a cash refund equal to the price of a trip he had bought from the carrier. The case was filed with the City Court of Copenhagen and later appealed to the Eastern High Court of Denmark which had to determine if the passenger had the right to receive a cash refund, even though, the tickets concerned were purchased with bonus points

A short summary of the case

A passenger had bought a trip with carrier B from carrier A. The trip was purchased with 70.000 bonus points and approximately 3.500 DKK for taxes and fees. On the day of departure, the passenger is informed that his flight has been cancelled. He was not informed earlier because there had been a problem with carrier B’s communication system. The passenger terminated the contract and carrier A refunded the 70.000 bonus points and 3.500 DKK. On the same day, the passenger buys a similar trip with the same destination for approximately 10.000 DKK from carrier C.

So, what’s the problem?

After the passengers return, he claims that carrier A is obliged to pay him 10.000 DKK for the price of the new trip, against repayment of the 70.000 bonus points to carrier A. The question was, therefore, whether a passenger is entitled to a refund in a certain currency that is different from the original payment, and whether bonus points can be converted into a different currency.

As for the refund, carrier A had regulated this in their general conditions, where it was stated that refunds always are made in the same way and in the same currency that was used to pay for the ticket. For example, if the passenger paid for the ticket in DKK with credit card, the refund will be made in DKK to the passenger’s credit card. In this case, because carrier A has clearly stated how refunds are made in their general conditions, it seems clear that a refund cannot happen in DKK because the ticket was bought with bonus points through a loyalty program.

If the carrier had not had this condition, it is not obvious how the case should be handled. Generally, when a buyer terminates a contract, both parties must return the received service – in this case, the passenger is to give up the flight with the carrier, and the carrier refund the traveller.

However, the parties are free to agree to make the return of services in another way, ex. in another currency. Whether a passenger can demand a refund in a certain currency when the matter is not regulated in the general conditions is unclear. If carriers use bonus systems, it is, therefore, important that they have regulated the matter in their general conditions, clarified how bonus points can be used, and how refunds of goods and services bought with the points are handled.

How much are bonus points worth?

Even if a passenger can demand a refund in another currency than bonus points, it is still unclear whether it is possible to estimate the monetary value of bonus points. There is no case practice regarding the matter. In the following we have stated a short summary of different factors that indicate that it is not possible to convert bonus points to a different currency.

As for bonus points that give a certain price reduction – ex 500 bonus points gives the buyer a 50 DKK price reduction – a conversion should be fairly straightforward, since there most often will be a correlation between the bonus points’ worth and the price reduction – in the example 10:1. However, difficulty arises when bonus points do not give a certain monetary reduction, but rather the right to receive services or goods that have a different monetary value or perhaps just the right to certain membership benefits.

One could state that the value of the bonus points must be at least the value of the goods and services that can be purchased for the points. However, it is not clear what value should be appointed to the goods and services. Should it be the cost price? The average market value on a public market?

Additionally, it is difficult to determine the value of the points if several different services or goods can be purchased with the points. In this case, it is unclear whether the value of the points should be estimated to be the average value of the different goods and services or whether it should be based on the good or service with the highest value.

For carriers using bonus points further problems arise since the price for a given travel constantly changes, therefore, a fixed time for valuation must be appointed if one wishes to estimate the worth of a flight journey. The question is whether it should be the price at the time the ticket is bought, the price at the time of departure, or perhaps the price at the time of the refund.

Generally, it can be said that it would be very difficult to precisely valuate bonus points if the valuation is not separately regulated in the conditions.

What was the outcome of the case?

Both the District Count and the High court found that the passenger was not entitled to recover the extra price for the new tickets in the form of a monetary claim. The passenger was left having to accept the refund of the bonus points as sufficient coverage.

IUNO’s opinion

IUNO’s opinion is that all carriers should review their general conditions and ensure that it is clearly defined how refunds are made – especially when the ticket is bought with bonus points. Further, it should be specified whether goods and services bought with bonus points can be refunded in a different currency and if so, how the bonus points are to be converted.

IUNO expects that we will see a larger amount of cases regarding bonus points since the use of loyalty programs and bonus points are still somewhat new and often not very well regulated in the general conditions of the service provider.

[The Eastern High Court’s ruling of 17 June 2019 in case B-2019-17 at department 24]