The Flight Refund Process for Travel Agencies: Penalties, Taxes, BSP and ARC

Refunds are where flight servicing gets expensive. A refund touches the airline's fare rules, the settlement system, the agency's own fees and the customer's payment method, and a mistake in any of them is real money lost.

This guide walks through the refund process from the agency's side, so your team and your systems handle it the same way every time.

Two Refunds, Not One

Every flight refund is really two linked transactions:

1. Airline to agency: the airline returns the refundable value of the ticket, through BSP or ARC for GDS tickets, or through the airline's own process for NDC orders.
2. Agency to customer: the agency returns money to the traveler, by the method they paid.

These two must be kept separate and in order. Paying the customer first means carrying the risk that the airline refunds less, later, or nothing at all.

What the Airline Refunds

The airline's refund depends on the fare rules of the ticket.

• Fare amount: refundable fares return the fare minus any cancellation penalty; non-refundable fares return nothing of the fare.
• Taxes and fees: many government taxes are refundable for unused flights even on non-refundable fares. Some airline-imposed charges are not.
• Partly used tickets: if part of the trip was flown, only the unused part is valued, and the calculation is more complex.
• Penalty: usually a fixed amount, sometimes a percentage. Confirm which, because entering a percentage where an amount was meant is a classic and costly error.

Always calculate and review the refund total before it is submitted.

GDS Tickets: Refunds Through BSP and ARC

For tickets issued by the agency through the GDS, refunds are processed in the GDS and settled through BSP or, in the United States, ARC.

• The refund record shows the ticket's coupons, the fare, taxes and penalty.
• The agency confirms the penalty and the total, then processes the refund.
• Some refunds need airline approval first, recorded as an authorization code.
• The refunded amount appears in the agency's next settlement.

NDC Orders: Refunds Through the Airline

On NDC, the airline issues and controls the ticket, so the refund is requested from the airline's order.

• The airline may return a refund quote that you confirm.
• Some airlines cannot quote through NDC yet and require a manual request.
• Refunds may come as money or as airline credit, depending on the fare.

The Customer Refund

Once the airline side is known, the agency prepares the customer refund.

• Start from what the airline refunded.
• Subtract the agency's own refund or cancellation fee, if your terms include one.
• Pay back by the original method: to the card, or to the customer's wallet.
• Tell the customer the amount and when to expect it.

Agency fees should be clear before booking and capped where your platform or market requires it.

Timelines

• A void returns money quickly, because the sale is reversed.
• BSP and ARC refunds follow the settlement cycle.
• Card refunds then take the card issuer's normal time to appear.

Be honest with customers about timelines. "Your refund is being processed with the airline" is better than a date you cannot keep.

Common Refund Mistakes

• Paying the customer before the airline refund is confirmed.
• Treating a percentage penalty as an amount, or the other way round.
• Forgetting refundable taxes on non-refundable fares.
• Processing the same refund twice after a timeout.
• Refunding to a different method than the customer paid with.
• No record of who approved the refund and why.

What to Look For in a Refund System

• The fare rules and penalty shown before anyone decides.
• A preview of the refund total, confirmed by a person before processing.
• The airline refund and the customer refund as linked steps.
• The customer refund held until the airline side is done.
• A timeline entry and an owner for every step.
• Alerts when a refund fails or is waiting too long.

Frequently Asked Questions

Can I refund a non-refundable ticket?

Usually the fare is not refunded, but taxes often are. Check the fare rules for the specific ticket.

Who pays the refund, the agency or the airline?

The airline refunds its share to the agency through settlement; the agency then refunds the customer. The agency carries the risk if it pays first.

Should refunds be fully automatic?

Calculation and preparation can be automated. Processing money at the airline is best confirmed by a person, because errors cannot easily be reversed.

How Airhux Can Help

Airhux runs the airline refund through the GDS refund process with the penalty and total confirmed by staff, then handles the customer refund by card or wallet, all tracked on the booking. Read about the Airhux Travel API, or see how servicing compares across flight API providers. Start your project to learn more.