Australia’s major airlines are resisting a push for mandatory compensation schemes in the country’s commercial aviation sector. Yesterday, representatives from Virgin Australia and flag carrier Qantas argued that such initiatives would do nothing to improve performance, and, in fact, run the risk of having increased costs passed on to passengers in the form of higher ticket prices to cover the financial outlay.
Would a reworked compensation scheme restore customer trust?
As reported yesterday by the Australian Associated Press, March 17th saw a parliamentary hearing take place concerning the so-called ‘Pay on Delay’ bill that has been proposed by the country’s Liberal-National Coalition. The coalition serves as the main opposition to the nation’s current Labor government, and National Party Senator Bridget McKenzie is the main sponsor of the compensation bill.
The intention is to improve customer protection and restore trust by forcing airlines to pay out compensation to those impacted by delays or cancelations to scheduled commercial flights. According to the Sydney Morning Herald, Australian airlines currently face little to no penal action when their flights are canceled, with 2.4% of Qantas services suffering this fate in January. Virgin Australia
‘s figure was 0.9%.
Photo: Vincenzo Pace | Simple Flying
As such, McKenzie feels that the Australian public has lost trust in the country’s major airlines. Indeed, SBS News quotes her as saying that the nation’s leading carriers “have to be dragged kicking and screaming to do the right thing under the law,” while the Pay on Delay bill would ensure that they are properly held to this obligation. However, the likes of Virgin Australia and Qantas have opposed it.
Fears of higher ticket prices
As a passenger, being delayed or having your flight canceled is a considerable and understandable source of annoyance. However, while the Pay on Delay bill looks to mitigate the impact of such inconveniences by ensuring timely and fair compensation, Australia’s major airlines have argued that such legislation could create further annoyance in the form of higher ticket prices as costs are passed on.
Speaking at yesterday’s hearing about a review of European compensation schemes, Qantas Domestic Chief Executive Officer Markus Svensson argued that such initiatives actually “led to the cost being passed through the consumer, which is not a good outcome.” He added that, by forcing airlines to compensate, “you create this industry of ambulance chasers, (…) this side industry that’s no good for anyone.”
Simple Flying has reached out to Qantas for further comment on the matter. We will update this article if and when a relevant statement is received.
Photo: Tom Boon | Simple Flying
In short, Svensson’s concern is that any goodwill provided to guests with compensation paid out could risk being outweighed down the line by higher prices as a result of the costs being passed on to passengers. He said that the bill would “not deliver better outcomes for consumers” in terms of reduced cancelations, adding that Qantas is “not supportive of any compensation-based scheme.”

Qantas
- IATA/ICAO Code
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QF/QFA
- Year Founded
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1920
Stephen Beckett, who serves as Virgin Australia’s General Manager of Government and Industry Affairs, backed up Svensson’s position regarding a lack of performance improvement in markets with mandatory compensation schemes. He argued that, during a period when $9 billion of EU compensation has been made available to delayed and canceled passengers, “we’ve seen, at the same time, almost a doubling in the number of cancellations.” Speaking yesterday, he went on to add that:
“The type of performance that you’re looking to improve is not connected to what is paid and what’s not paid.”
Photo: Vincenzo Pace | Simple Flying
Virgin Australia’s position regarding the proposed compensation was less concrete, with SBS News noting that “Beckett did not explicitly endorse or oppose the bill,” compared to Svensson’s outright rejection on the part of Qantas. Still, Beckett was keen to highlight that his airline “has agreed and supported a strengthening of the complaints handling body,” as well as investing in customer service.