Australia’s leading low-cost carrier, Jetstar, is in trouble on both sides of the Tasman and facing court action in Australia and New Zealand for allegedly misleading customers about their rights to refunds and compensation. The airline is facing serious allegations that may be tested in court, but it is more likely that some form of settlement will be reached before it gets that far.

More post-COVID fallout for Jetstar

In Australia, Jetstar is in strife over travel vouchers it issued to hundreds of thousands of customers whose flights were canceled during the pandemic. A Melbourne law firm, Echo Law, has put together a class action on behalf of disgruntled customers who received travel vouchers rather than full cash refunds.

A Jetstar Airbus A321 flying in the sky.

Photo: Ryan Fletcher | Shutterstock

Echo Law said the class action is based on allegations that between 2020 and 2022, Jetstar failed to refund customers’ payments for canceled flights when it was legally obliged to do so. It claims that Jetstar issued vouchers that carried significant restrictions, meaning they were of much lower value to customers than the refunds to which they were entitled.

The direct claim is that Jetstar, a member of the Qantas Group, enjoyed significant financial benefits at its customers’ expense by acting in this way. The class action also claims that even if affected customers had used the travel vouchers, they may still be entitled to compensation, which presumably is the difference between the original ticket value and the reduced real value of the voucher, plus interest.

Qantas Jetstar Aircraft Sydney Airport Shutterstock

Photo: Ryan Fletcher | Shutterstock

Echo Law said the contract passengers had with Jetstar was legally frustrated and terminated, meaning customers had an automatic right to recover money paid. Echo Law Partner Andrew Paull said that the right thing to do when it canceled all those flights was to return its customers’ money without delay, adding:

“Jetstar customers were pushed into holding hundreds of millions of dollars in restricted travel credits, even though this wasn’t what those customers had agreed to as part of the airline’s terms and conditions.”

What about New Zealand customers?

New Zealand’s Commerce Commission (NZCC), the nation’s competition regulator, is set to file charges against Jetstar in Auckland for misleading customers about their rights to compensation when flights were canceled or delayed for reasons within the airline’s control. The NZCC also believes that Jetstar may have denied legitimate claims for compensation between 2022 and 2023.

Airbus A321LR Jetstar

Photo: Kevin Hackert | Shutterstock

In a statement published on September 18, 2024, the NZCC said that airlines have a responsibility not to mislead consumers about their rights in the event of cancellations or delays. The commission’s general manager of competition, Vanessa Horne, added that communications from Jetstar to customers “likely discouraged them from seeking compensation.”

“Airlines have a responsibility to not mislead consumers about their rights in the event of cancelation or delays. The Civil Aviation Act is clear that airlines have a responsibility to reimburse customers for loss caused by cancelations or delays on New Zealand domestic flights that are within the airline’s control.”

Jetstar has reached out to customers and apologized for making errors in assessing some compensation claims when it restarted operations post-pandemic. On Jetstar’s website, customers can resubmit compensation claims for reasonable costs from canceled or delayed flights, which may have been incorrectly handled at the time.

Customers who have not made claims can also use the website to seek compensation for reasonable costs when a flight was delayed or canceled for reasons within Jetstar’s control. The Commerce Commission said it would be filing charges in the Auckland District Court shortly and is unable to provide any further information at this time.

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