Air New Zealand can't afford to refund all passengers
Sunday, 14 June 2020
OPINION: Air New Zealand's handling of refunds to Kiwi travellers and its communication with them has brought strong criticism.
One commentator used the memorable line: 'Domino’s Pizza does a way better job of updating me on my $5 pizza than Air New Zealand does on a $5000 airfare.'
Is it fair that some passengers on cancelled flights can't get money back and have to put up with flight credits that could be useless to them? Critics say average Kiwis are being forced to subsidize a state owned airline out of their own pockets.
Are our laws on airline refunds due an upgrade to fall in step with European Union and United States rules?
An MP from each side of the house gives their views.
Stuart Smith
National MP Kaikōura
The Covid-19 pandemic has had a significant impact on the aviation industry due to travel restrictions and a major slump in demand for travel.
Flight cancellations have been widespread, with many airlines laying off large amounts of staff or declaring bankruptcy.
In jurisdictions across the world, many airlines have also been legally required to refund passengers for these cancellations.
**READ MORE:
* Air NZ 'dug in heels' over refunds during meeting, consumer watchdog says
* Coronavirus: Air NZ sitting on millions of dollars for cancelled flights, Consumer NZ says
**
Airlines here aren’t required to provide refunds when flights are cancelled for reasons outside their control.
Despite having no obligation to do so under current law, pressure has been mounting on Air New Zealand to offer refunds to customers whose flights were cancelled due to border closures.
Airlines all around the world have now made requests for their respective governments to suspend laws requiring refunds to be paid for cancelled flights.
They prefer to offer travel credit, in order to avoid bankruptcy and also to encourage travel again in the near future. It’s fair to say that when governments across the world introduced these consumer protection laws for airline customers, a global pandemic that would close borders would not have been predicted.
It’s totally understandable though why customers are upset at not having their money refunded. Many people would view the prospects of travelling overseas in the near future as low, and would rather use the money elsewhere until international borders open again.
Others are experiencing financial hardship and need the money now to support their day to day activities.
It’s a positive announcement that Air New Zealand will look to refund money on a case by case basis when customers have experienced financial hardship.
Updating our current law to require airlines to provide refunds for any cancellations is something we could look at in the future.
We should always be looking at ways in which we can remain on equal footing with our OECD counterparts. This isn’t a change that could be made overnight though. It would require extensive consultation with the industry and any changes made also would not apply retrospectively.
Right now, refunding passengers isn’t financially viable if Air New Zealand is to continue operating and remain competitive.
There are currently many active competitors with cash stored away seeking to capitalise on the turmoil in the aviation sector.
Although it’s unlikely the Government would allow Air New Zealand to fail given the vital role they play in supporting the economy, simply surviving the crisis would be not a successful outcome for the business.
They need to be strong enough to maintain their reputation as a world-leading airline and to play a major role in New Zealand’s economic recovery.
Priyanca Radhakrishnan
Labour List MP based in Maungakiekie
Air New Zealand has been offering credits rather than refunds to passengers whose flights were cancelled due to Covid-19. For people who are struggling financially or cannot make use of these credits, I know this has been tough.
The Civil Aviation Act sets out the liability of airlines to passengers in the event of flight delays, but it doesn’t apply where an airline is acting under lawful directions or there’s an external event that stops flights.
That means a passenger’s right to a refund depends on the terms of their contract with the airline, and most of these contracts allow airlines to offer credits rather than refunds when events beyond their control lead to flight cancellations.
I understand that Air New Zealand is refunding some passengers whose flights were cancelled due to Covid-19.
The airline suspended its Buenos Aires route in March, so they’re refunding customers who would’ve been flying to Argentina.
Under foreign regulations, passengers on flights to or from the Unites States are entitled to refunds where flights are cancelled. Therefore, Air New Zealand is also refunding customers who would’ve been transiting through the US.
Customers in financial hardship can seek a refund on compassionate grounds, too. I understand around 15,000 such cases have been refunded.
There are still many people who want a refund but cannot get one, and Air New Zealand insists its financial position makes refunding all of these people unworkable.
No surprise then that people are asking questions of our rules on air travel refunds.
The Ministers of Transport and Consumer Affairs have discussed the possibility of incorporating this issue into a current review of the Civil Aviation Act, and they’ve requested that officials look into aligning our regulations with other jurisdictions, like the European Union and United States where refunds are available in certain circumstances.
Any changes would not be retrospective though, and we must keep in mind that it is possible a cash refund regime would see airlines raise ticket prices in New Zealand.
Rules and regulations aside, I do think Air New Zealand could have handled this better. Anyone travelling with our national carrier should be well looked after, but communication around refund issues has been poor, and the airline has apologised for this.
We all have a stake in Air New Zealand, and ordinarily we take pride in it. Our national carrier has a bit of work to do now to earn back the trust of New Zealanders, but I’m confident they will.