Thousands of passengers have had plans disrupted by Covid-19. Photo / Marty Melville
ANALYSIS:
Air New Zealand's refund policy is back in the spotlight after a Disputes Tribunal ruling in which it was ordered to repay a passenger for domestic flights that were cancelled.
The referee found the cancellations were due to operational reasons, rather than due to pandemic border restrictions.
It doesn't mean it's up for a mass of refunds as the tribunal's rulings are case by case rather than precedent setting and can be overturned by a higher authority. The airline says it is considering an appeal or applying for a rehearing in the latest case.
It also points out it has won three out of four Disputes Tribunal cases so far which have decided that no refund is available and that Air New Zealand was within its contractual rights to issue credit.
But the latest case does put heat back on the airline, its handling of refunds and credits and could encourage more customers to go to the tribunal whose referees can rule on cases where sums involved are less than $30,000.
Air New Zealand has not divulged how much is at stake but at the end of the 2018-19 financial year its revenue in advance stood at $1.37 billion for tickets for which travel had not been provided.
By June 30 this year that had fallen to $828 million, meaning it had provided more than $500m in travel - but there's a huge chunk of flights still to be taken.
In June chief executive Greg Foran said if it refunded all the flights the cash-strapped company would cease to operate.
But it has gone further than the fine print on non-refundable tickets and offered credits to fly at a later date. Non-refundable tickets are typically the cheaper ones that many leisure travellers buy whereas refundable tickets provide more flexibility but are generally much more expensive.
The airline's overloaded customer service systems earlier this year didn't help public sentiment towards it and the campaign to try to soothe anger came too late for many. Customers are now using a newly developed online flight booking tool to redeem 95 per cent of credits.
General counsel Jennifer Page said as at the end of last month $47m worth of credits have been redeemed on new flight bookings
The impact of Covid-19 had ''unfortunately'' resulted in the cancellation and disruption of flights for thousands of customers.
''In response, we proactively placed all airfares on cancelled flights, including non-refundable airfares into credit. We have also enabled customers who did not have their flights cancelled, but decided to change their plans, to opt in for a credit.''
The airline remained of the view that its Conditions of Carriage allow credits to be issued where a flight is changed or cancelled because of circumstances outside of their control - including impacts of Covid-19 and travel restrictions in place in New Zealand and abroad.
Page says this position was supported by guidance issued by the Commerce Commission, and had been canvassed at length with regulators and external advisers in New Zealand and overseas.
But this rumble could have largely been avoided if the rules here had been in line with many jurisdictions overseas.
Consumer New Zealand has been pushing for changes to law covering airline passenger rights to refunds since last year.
Head of research Jessica Wilson said massive disruption to airlines caused by Covid-19 added weight to the organisation's call for New Zealand law to brought into line with far more consumer friendly rules in the European Union and United States.
Airlines there are obliged to offer refunds rather than credits if they cannot provide a service.
In a submission to the proposed changes to the Civil Aviation Act last year, Consumer NZ recommended that domestic airline passenger rights be better aligned with consumer protection provisions in EU regulations.
These provide: where a flight is cancelled due to circumstances beyond an airline's control, passengers must be offered a rescheduled flight or refund as well as assistance including refreshments and accommodation.
Where a flight is cancelled due to factors within an airline's control, passengers must be offered a rescheduled flight or refund plus assistance and set amounts of compensation.
''These requirements ensure passengers are provided for when unforeseen cancellations occur, encourage airlines to avoid delays (for example, offering available seats on earlier as well as later flights if bad weather is approaching) and discourage airlines from cancelling flights due to factors under their control,'' Consumer said in its submission on changes to the law, now delayed because of the pandemic.
Because of more stringent US laws anyone flying to that country, or even just transiting, were entitled to refunds from Air New Zealand, no matter where they lived.
The same went for flights departing from the EU or Britain (although those arriving there were limited to European carriers).
Air New Zealand says a refund ''may'' be available in South Korea, Argentina, Brazil, Taipei and China provided the passenger is resident in the applicable jurisdiction and the travel commences or ends in that jurisdiction.
Travellers in Australia also have stronger rights to refunds rather than credits although the Australian Competition and Consumer Commission needed to prompt Qantas to act in June.
The Australian Competition and Consumer Commission has a Covid-19 taskforce which raised concerns with the airline after receiving hundreds of complaints from passengers whose flights were suspended or cancelled due to travel restrictions, but who were given credits by Qantas instead of the refunds they were entitled to.
Qantas' terms and conditions state that customers with fares booked on any of its domestic and international flights are entitled to have their fare refunded if Qantas makes a significant change to their flight, and Qantas cannot offer another booking which is acceptable to the customer, the commission said.
And airlines in Britain needed a prod with up to $14b owing at one stage around the middle of the year.
Other airlines have released details of how much they have refunded. Early last month Emirates said it had processed 90 per cent of requests from around the world up to the end of June and paid back about $2b.
Consumer Affairs Minister Kris Faafoi said in June he wanted to provide more protections to consumers who have their airline flights cancelled as part of changes to the Civil Aviation Act.
What that may mean for airfares is unknown but Air New Zealand's Page says: ''We are also happy to engage with the Government on any future legislation.''
The airline sold its last slots at Heathrow in 2020.