Double-whammy for Despegar: Faces lawsuit and suspends ops in Córdoba

Contxto – The travel industry has been one of the most hard-hit by the coronavirus pandemic. The recent troubles of Argentina’s Despegar only illustrate this further. In mid-May it announced its billing had hit zero and cancellations were still rolling in.

By the end of that same month, a class action lawsuit had emerged on behalf of consumers against the travel platform. 

• Related article: Why Mercado Libre & Despegar are destined to opposite fates

Last week it also announced that it would temporarily suspend its operations in Córdoba (Argentina). Despegar had hired a local team of around 30 people mainly for software development.

Layoffs and lawsuits with Despegar

In April, Despegar had already stated that 400 people would be losing their jobs. Though it pointed out that these changes in its ops in Córdoba weren’t firings per se. Rather a temporary suspension “until the market kicks up again,” according to local media. 

Who knows when that’ll be.

Staff at Córdoba were welcome to find new employment, work part-time, or relocate to Buenos Aires.

Simultaneously, Despegar is facing a class-action lawsuit through the Consumers’, Users’, Customers’, and Contributors’ Association (UCUCC) of Argentina. According to this long-named organization, around 100,000 people have been affected by Despegar who hasn’t returned their money after they changed their travel plans.

“At the Association we’ve inferred that due to the lack of income, the company [Despegar] decided to finance its operations with consumers’ money,” stated Juan Ignacio Cruz Matteri the UCUCC’s legal rep.

“Despegar argues that some reservations weren’t ‘liable for cancellation’ but it’s still returning a part. But it’s important to emphasize that no person actually canceled their trip. The pandemic led to the suspensions and so no cancellation policy should apply.”

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Hospitality and travel startups’ strife

Many travel-related businesses and startups throughout Latin America have announced layoffs courtesy of Covid-19. 

In early May, Mexican Best Day had announced a 20 percent cut in its 2,800 person-team. It’s also facing claims from hoteliers that they’re owed money for bookings that were made through its platform. Although its deal to be acquired by Despegar is reportedly still on the table.

Meanwhile, MaxMilhas cut 42 percent of its 167 person-team after flights to and from Brazil stopped.

But perhaps the worst has passed as some countries are slowly (ever so slowly) reopening.

Related articles: Tech and startups from Argentina!

-ML