In the Name of Allah, Most Gracious, Most Merciful.
All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.
In this fatwa:
Both individual Muslims and travel agencies should consider the circumstances of the other, even if there is a contract, to decide who should suffer the loss from the cancellation of Hajj and to what extent. If a travel agency can meet its basic expenses, then it should return the remaining portion back to their clients.
Answering your question, Sheikh Mustafa Umar, President of California Islamic University, states:
Saudi authorities have cancelled Hajj for the year 2020 for pilgrims outside of Saudi Arabia due to the Coronavirus (COVID-19) pandemic. Millions of people who have paid for the trip, either partially or fully, will not be able to go. This may result in a significant financial loss to either the agency or the individuals who prepaid for Hajj.
It is natural that some agencies will claim they should not be responsible for financial loss due to the cancellation of Hajj. Likewise, many would-be pilgrims will make the same claim that they should not be responsible for the financial loss either. If there are any losses that cannot be recovered; the question arises as to who has the obligation to bear such loss?
Islamic Law respects contracts
From a very technical point of view, Islamic Law respects the contracts made between two parties. If the contract specified what would happen in the event of an unforeseen cancellation of the trip; then that should be the default rule. However, sometimes a contract may be considered unethical. There are organizations within society that protect consumers and decide whether the terms of a contract are fair or not.
Depending on the area you live in, these ethical bodies should be consulted to see whether the terms of the contract were fair or not.
Custom is Authoritative
In case there is no such clause, then in Islamic Law, this comes under the category of `urf [custom/culture]. There is a legal maxim in the science of Islamic Jurisprudence which states “Al-ʿAdah Muhakkamah” [translation: Custom is Authoritative].
The principle means that whatever is the normal way in which travel agencies deal with their clients will be the default rule on who bears the loss in cases like the cancellation of Hajj.
Despite the travel industry being hit hard during this pandemic, several tour operators are giving full refunds to their clients. Others are giving partial refunds while waiting for their own refunds to arrive from their supply chain such as air lines and hoteliers.
In such cases, Muslims should wait patiently until the money can be recovered, so it can be returned to the client. Lastly, some are giving a credit with the company to book other trips or a rebooking for Hajj 2021. All of these alternatives appear to be just and fair.
Circumstances Should Be Considered
Both companies and individuals are hurting financially due to the Covid-19 pandemic and it is a great test from Allah for them. Beyond the technical legal ruling, it is important for Muslims to practice excellence [ihsan] with each other. This means that each one should consider the circumstance of the other before demanding that one or the other suffer a loss.
The Prophet Muhammad (peace be upon him) praised a man who once employed a worker and promised to pay him in crops. The man did not take the money on the spot but left. The employer planted his portion into the ground and from its yield he purchased many cows and sheep. Much later, the former employee returned to collect his money. The employer told him that all of the animals he sees across the field belong to him and he can take them, since his money was invested. (Al-Bukhari)
This story is quite revealing. From a technical perspective, the employer did not have to give the profit from the original investment back to the former employee, but he chose to anyway, because he thought it was better and more just in the sight of Allah.
Likewise, both individual Muslims and travel agencies should consider the circumstances of the other, even if there is a contract, to decide who should suffer the loss from the cancellation of Hajj and to what extent. If a travel agency can meet its basic expenses, then it should return the remaining portion back to their clients.
Almighty Allah knows best.