It was around last Diwali when the Jains stumbled on their eureka moment. The travel buffs were stuck at San Francisco airport when a flight to Delhi was delayed due to a technical problem for over six hours. Result: the duo couldn’t reach home on time to join the family for the festive celebration.
“Instead of providing help, the airline was not responsive at all,” recounts Pallavi. A hunt for alternative options to reach Delhi proved futile as all flights were already booked due to the festive rush. “It was a frustrating experience,” she recalls, adding that what aggravated the misery was the realisation that the duo was legally entitled to get compensation but were not informed by the airline. After an exasperating month of filing documents, the gritty duo got compensation of €600.
“The agonising wait resulted in a tantalising business idea,” grins Pallavi who cofounded Instalocate with her husband in April this year. An artificial intelligence powered travel assistant, the Instalocate app enables disgruntled flyers to get compensation from airlines in case of flight delay, cancellation or denied boarding. In a little under five months, the fledgling startup has processed over $3,00,000 (Rs 1.95 crore) worth of compensation, has seen over 3 lakh people using its services and over 1.1 million messages exchanged over its instant messanger, claims Ankur, cofounder and CEO.
Instalocate, which raised funding from angel investors in Silicon Valley such as Venky Hari, founder of Junglee, and Gokul Rajaram, works on a simple business model: a neat 25% commission when the aggrieved passengers get compensated by airlines. It’s a win-win for the passengers, lets on Ankur, as they don’t have to pay anything upfront. “We are putting money back into their pockets,” he says.
Lack of awareness among the Indian flyers about their legal rights, and minimal interest in claiming compensation, gives Instalocate a unique opportunity to mould its business model. Between May and August this year, over 3.6 lakh passengers were affected due to delay in flights. While 59,000 suffered due to cancellation, another 7,000 were denied boarding, according to data from DGCA (Directorate General of Civil Aviation). How many Indians, asks Ankur, know that they are entitled to get a compensation up to Rs 10,000 for a cancelled flight and up to Rs 20,000 in case of overbooking.
A look at the gross mismatch between instances of flights cancelled and denied boarding and the compensation claimed makes it clear why Jains reckon business of compensation makes sense. Consider: Since August 2016, while there have been 1,85,000 cases of flight cancellations and denied boarding till September this year, total compensation awarded was just Rs 16.35 crore. For cancellations, the average compensation was just a mere Rs 368 per passenger. In Europe, in contrast, stranded passengers can get up to $650 ( Rs 42,000) for their delayed or cancelled flights. Since passengers don’t want to go through the complicated process of filing claims, more than $10 billion goes unclaimed every year, points out Ankur. In India alone, around $25 million (Rs 163 crore) every year is unclaimed for international flights, he estimates.
What made the Jains even more hopeful about the future of their venture was the global crisis that hit British Airways on May 27 this year. A computer system failure resulted in massive flight delays and cancellations. More than 75,000 people from all over the world were stranded, most of them at London’s Heathrow and Gatwick airports.
“We saw a 10x surge in our usage,” claims Pallavi. While passengers were calling and asking for helpline numbers and flight status, they were also informed about their rights. In just two days, Instalocate received compensation requests worth almost $2,00,000 (Rs 1.3 crore). “This incident validated our hypothesis and gave us a strong momentum,” she says, adding that the first problem the startup is solving is around flight delays. Millions of passengers who get stranded are not aware that they can get compensation. “This has to change,” she says. “Flyers have to exert their rights.”
The pace at which people become aware of their right to claim compensation could be the biggest challenge for Instalocate. “The faster that happens, the better for us,” grins Pallavi, as the couple gear up for more compensation fireworks during this festive season.