Air NZ sitting on millions of dollars from cancelled flights

Just six percent of Air New Zealand customers in our survey had been given refunds for cancelled flights.

20may air nz sitting hero

A Consumer NZ survey found 80% of passengers on cancelled Air New Zealand flights have been stuck with credits, leaving the airline sitting on millions of dollars of customers’ money.

Consumer NZ chief executive Jon Duffy said only six percent of the more than 2000 Air New Zealand customers who participated in its survey had been given refunds after flights were cancelled due to the Covid-19 lockdown.

“The majority of customers have only been given credits and many didn’t know if or when they’d be able to use them,” he said.

More than $3.8 million had been paid for flights by the 1700 people in the survey who had been given credits.

Fifty-four percent had paid more than $1000 for their tickets. Mr Duffy said this money was locked up in Air New Zealand’s bank account. The average amount held by the airline per passenger was $2234.

Consumer NZ is calling on the airline to do the right thing and offer refunds to those who want them.

“We’ve heard from a lot of people who really need their money because they’ve lost jobs or income as a result of the fallout from Covid-19. While it’s a tough time to be an airline, it’s also a pretty tough time for many consumers,” Mr Duffy said.

Mr Duffy said passengers were being short-changed by the airline and outdated consumer protection laws.

Some customers had only been able to get refunds by relying on laws in other countries. Last week, as a result of a Consumer NZ complaint to the Commerce Commission, Air New Zealand backed down and agreed to provide refunds to all passengers on cancelled US flights. The US requires airlines flying in or out of the country to refund passengers when flights are cancelled, regardless of the reason.

“Air New Zealand is operating two different refund policies. It’s prepared to provide refunds for cancelled US flights but many other loyal customers are out of luck and only get a credit.”

Consumer NZ has written to Air New Zealand chief executive Greg Foran, asking the airline to change its stance but is yet to receive a response to its request.

Our survey

A total of 2138 people took part in Consumer NZ’s survey on cancelled Air NZ flights:

  • 80% had been given credits
  • 6% had been given refunds
  • 14% were still waiting to hear what they would receive.

The survey was carried out online on Consumer NZ’s website.

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Colin L.
09 Jun 2020
Leave Air New Zealand alone

Jon Duffy should leave Air New Zealand alone regarding 'non refundable' air fares.
Ticket purchasers have options and those who chose cheaper 'non refundable' fares knew the fare was not refundable if the flight did not take place. Purchasers are fortunate Air New Zealand has offered credits towards future bookings.
Even hotel bookings offer cheaper 'non refundable' accommodation and if you can't stay for any reason you don't get a refund. If purchasers expect a refund the choice is purchase the full fare or accommodation option.

Julia B.
09 Jun 2020
Air NZ is delaying refunding refundable tickets too

It would be great if Consumer could ask Air New Zealand about why they are denying people the opportunity to cancel their flights when they have refundable tickets. We have Premium Economy tickets booked to San Francisco in September. When we first went into lock-down I checked on the “manage my booking” part of their website and we could cancel them. Now the button has been disabled and instead we are told to phone them which, as everyone knows, is basically impossible. It feels like they are trying to hold onto our money for as long as possible which makes me feel sick about Air New Zealand and I used to love them and feel proud of our national airline.

Bill
06 Jun 2020
Not just Air NZ

Everyone is making a song and dance about Air NZ not refunding flights but no one is jumping up and down about other airlines doing the same. I have over $4200 "in credit" with Etihad for a trip to Europe that didn't go ahead in May. They will not issue a refund under any circumstances which is totally unfair. I don't know if I want to go to Europe next year now as who knows what the world will be like then but will lose all that money if I don't rebook new flights by the end of this year. It is so wrong that they are able to keep our money for a service they didn't provide.

jane p.
31 May 2020
Our Air NZ experience

We had a few flights that were booked and from the outset (when we were unable to fly on these flights) found it extremely difficult to be able to get in contact with the airline to request/arrange the credit (we booked with airpoints and the website did not enable us to do anything, we had to speak to the callcentre folks). Whe we did finally get through, I asked if the credits had to be used for the same people to fly to the same location, and the person told me that they did not, the credit could be used for anyone to fly anywhere. All of the flights were booked by one person using airpoints, so it made sense that all of the credit would go back to the person who had paid for them in the first place. It has been a very manual process and there does not seem to be a record of my purchases/credits (linked to me), the credits seem to be attached to the booking codes?

Today I called Air NZ to rebook my son on flights to & from home to uni. I had to wait for over an hour to get to speak to someone (there is no way to do it myself online). Then I needed to go through each of the booking references. However, the rules have changed from what I was told at the beginning, and the $730 credits I have (from the different booking references) cannot be used to book flights for my son, only the portion of those bookings that were for flights for him can be used for him - so we have these split up credits, spread across different bookings, that need to be applied to each individual for future bookings. It seems a very strange way to try to run things, extremely confusing for customers, and highly inefficient for the airline callcentre folks to manage. Given the need for Air NZ to focus on cost & efficiency, it would be worthwhile for them to look into coming up with a system to make it easier & quicker for all concerned to be able to release the credits in the system. Or, as a previous person noted, perhaps there is an inbuilt realisation/awareness that some customers will simply give up.

Was it good that Air NZ gave us credits? Yes it was. As shareholders of the airline, the NZ public would expect that they would look after us in the difficult times, just as we look after them in the good times, knowing that on a day to day basis, paying above the odds airfares is in our national interest in order to have a national airline. For those of us of a certain age, we recall that we (the NZ taxpayers) have already bailed them out once almost 20 years ago, so we do expect some leniency in how we are treated in tough times.

Marian G.
30 May 2020
Using credits

Like many others we have credit sitting with Airnz for cancelled flights around New Zealand. However we are still waiting to find out how we can easily use those credits. Currently to book using credits ( and we also haven't been told the exact amount of credit we have) you have to phone AirNZ. I tried that, and after waiting for a considerable time and watching the online price increase as I waited, I gave up trying to use credit and paid as usual. Can't fault the frontline staff we dealt with at the airport and on our flights, as usual they were helpful, professional and pleasant. But it is frustrating to know we have the credit sitting there and can't easily access it. How hard can it be to allocate a credit amount to the passengers name? They can do it with airpoints.....

Jack C.
30 May 2020
Less than a year to use the credits

I was gifted flights to Canada to volunteer as a referee in a rugby tournament. The tournament was cancelled, and rescheduled for August 2022. Air New Zealand cancelled my outbound flight - which was due to depart in August - and told me I had to use the credits by June next year. That's just a 10 month window.

I cannot rebook flights to the tournament since it's 14 months from next June. This means the credit is essentially worthless to me, and I will have to pay back the cost of the flights out of my own pocket. I'm a full-time student who only has access to a student loan as income.

My travel insurance won't cover it because the credit is considered a refund, and they only pay out if you've suffered a loss.

I wouldn't mind only getting flight credit so much if Air New Zealand gave me more time to use it. As it is, I'll essentially be making a $1800 donation to the airline.

Alison
30 May 2020
We received refunds from Air NZ

I have been a member of Consumer NZ most of my married life.
We are very elderly and booked online in July 2019 with Air NZ for what we thought would be our final overseas trip to Hawaii. We also booked accommodation in Hawaii. In December we added extra leg room for which we paid Air NZ $156. We also arranged travel Insurance through our Bank..
Then Covid 19 struck and Air NZ cancelled our flights. They offered us a credit BUT we requested a refund. After several emails to Air NZ none of which were answered and 2 phone calls we received all our refunds.
7.4.2020 Accommodation $1,937.26. 5.5.2020 Air NZ Flights $2,166.00 plus $156.00 12.5.2020 travel Insurance.
Thanks Consumer NZ and Air NZ.

David C.
30 May 2020
Refunds, but...

...will the refunded fares go anywhere near the new cost of flying, given that the price to fly anywhere is likely to stay at the much higher, only-if-you-have-to level for the foreseeable future?

John A.
30 May 2020
Airline Refunds

There are a number of disconcerting features regarding your survey and commentary on ticket refunds from Air NZ. The survey itself is designed to attract complainants, so the resulting data are bound to reflect that fact. There are no controls or comparisons with other airlines, or encouragement for satisfied customers to record their views.

Nor do we have any sense of the fare conditions that applied to the complainants. Were they cheap ‘non-refundable’ fares or more expensive ‘flexi-fares’ which in some cases are refundable? What is it about ‘non-refundable’ that people do not understand? It is a contract entered into on the basis of (often heavily) discounted fares. Cancellation of flights was due to a force majeure event, not of the airline’s making. The survey did not ask if the complainants took out travel insurance or if their insurance claim was rejected. It should have. Not all policies reject force majeure claims – why wouldn’t the airline expect people to go down that route?

Your own data show that 86% of customers were offered either credits or refunds by the airline. That is a reasonable response – if you compared that with some other airlines it would be outstanding. You make little allowance for a company that has a balance sheet in tatters, nearly 4000 of its staff laid off, its fleet virtually grounded, its share price tanked, and its future uncertain. There is a simplistic notion, implied by your lurid headline, that there is a locked up pot of fare money being sat on by the company without any thought or analysis as to how fare money is expended once a booking is made. Nor is there any consideration of the airline’s massive liabilities – do you even know what these are?

That Air NZ was compelled to refund flights to and through the USA is a victory for those using the byzantine and sometimes contradictory American consumer laws and Department of Transport regulations. Does Consumer NZ really think that NZ citizens passing over the USA, not officially entering the country, should be bound by these laws, whether they benefit or not? It could cut both ways.

Much more could be said – including the consequences of loosening refund rules ie higher fares. No doubt there are a number of cases out there deserving of better treatment, but these are challenging times and we are all affected. Consumer NZ should keep a watchful eye on such matters, but at the same time report in a fair and balanced way with a better understanding of the broader picture. I have been an Air New Zealand customer for more than 50 years – yes, there has been the odd complaint, but generally well served.

John. A.

John M.
30 May 2020
A PR disaster!

You have me wondering John, why you are so keen to jump to defend the massive Company that is Air New Zealand. I could make a guess, but I won’t voice it here! One would have to had their head in the sand to not know that there is a huge number of people not happy with the situation regarding the cancelled flights. True, there are some people who are quite happy to have a credit, but I suggest there is a good number of those who will change their opinion somewhat when they realise the limitations that will apply.

The airlines must be the only business operating in New Zealand that are able to charge for a service and then not perform that service and yet keep the money that was paid in expectation of the service.

You say the survey was “designed to attract complainants” and I think that is fair enough; it’s what Consumer do. There was nothing discouraging respondents telling Consumer they were happy with the arrangement, but Consumer had read the public saying that a proportion were not happy and their survey gave them an idea just how many. I’m sure that if they had only a small number of complainants they would not have placed as much emphasis on it.

From your point of view, its probably good that Consumer didn’t include what other airlines have done, because many have given full refunds. Mostly those who are serious of returning to normal business at some time.

You raise the question of what type of fare the customer purchased. I don’t really think that is a factor. Whether you paid full fare or a special, you paid expecting a service in return. Most logical people would read “non- refundable” fare as being one that is not refundable if the CUSTOMER changes their mind. Definitely not if the airline decides not to fly. The logic you follow would put the airlines in the position of being able to book and charge for flights, and then decide to withdraw the service and just keep the money!

The situation could be compared with someone purchasing something in a shop at a reduced figure because the item is defective and both the shop keeper and the customer agree. The purchaser would not be able to return the item for a refund because of the agreed fault but the shop keeper can’t turn round and refuse a refund if he finds there is some reason he is unable to supply that particular item.

So the principle is the same. The customer pays for a service, (the agreed amount being irrelevant); the Company should supply the service or if they can’t, refund the fare OR IF the customer agrees, receive a credit.

I believe that most insurance policies exclude pandemics so that’s no help in this event. But even so, people seem to think that because a customer has an insurance policy, then the perpetrator is absolved of all responsibly. That is not the case. In insurance law there is a word “subrogation” which means by paying out, and insurer takes over the rights and actions of the insured. It would be difficult to prove a case against Air New Zealand in this event although I believe some flights were cancelled as a decision of the airline before borders were closed.

So insurance is there to protect the insured person; not someone they have a contract with!

You say Consumer makes no allowance for the fact that the airline’s balance sheet I in tatters etc etc but neither does Consumer make any allowance for the profits the airline has made in the past. I think we all feel sorry for the position airlines are in at the moment but many of the customers are also in a bad position financially, having lost their jobs or housing. So its OK for the airline to use the cash they received for un-supplied services because they have large liabilities and have let staff go?

Again, compare it to another business; say a builder in this instance that you have paid to build you a house. The builder falls on bad times through no direct fault of his own but you would say that even though he can’t build your house he doesn’t have to give you your money back?

The Government has made available a loan to Air New Zealand should things get too sticky, and the airline hasn’t taken that offer up at the moment. Why? Because it will cost them interest, no doubt, and they will have to pay it back. On the other hand, they have millions paid by their customers for services they never performed and the way their credit system is structured, they will never have to pay most of that back!

“There is a simplistic notion, implied by your lurid headline, that there is a locked up pot of fare money being sat on by the company without any thought or analysis as to how fare money is expended once a booking is made.” It is very bad business practice to go spending money until you have supplied the product or service! That is the cause of a lot of businesses going bankrupt. It shouldn’t have been expended! Take your builder example again. You paid him money to build your house. You would expect him to use that money to buy the materials and pay the wages to build the house, and if he has priced it right, he should be left with a profit which he possibly might use to replace some of the tools and equipment that he originally set his business up with. You shouldn’t expect him to use your money to go out and buy a new ute with no regard as to what would happen if he couldn’t build your house as contracted to, and he had to refund your money.

Let’s not forget that in most cases the airlines have had the use of the capital from these fares for several months before the date of the contracted service. And the exorbitant credit card fees they charge whereas I wouldn’t mind betting, being as large a retailer that they are, they have probably negotiated a much lower percentage of fees with the credit card companies.

Why should Consumer be taking the airlines massive liabilities into consideration. As I said before, Consumer didn’t consider profits made in the past although it was pointed out that during the good times the fat cats at the top were rewarded handsomely but now during the difficult time it is the loyal staff and the customer who are being asked to bear the pain. No. Consumer’s focus is and should be if the public are getting a fair deal and receive value for the money they pay.

I think it is shocking that the US law has gazumped NZ in this case as regards refunds. I always thought we were the leaders in such consumer law.

Despite the precarious position the airline is in at the moment, apart from the credit/refund issue, it is almost as if they have a death wish with the attention they are showing to public relations. There are numerous stories of them at present not answering emailed or other enquiries, and people complaining of having to wait on the phone for several hours to get to speak to a representative. Many of those people are just wanting information about booking flights. Doesn’t sound to me like an airline that hopes to recover rapidly as this Covid thing is resolved.

Glad that you have had good service in the past. Many of us have. But when the going gets tough, we often get to see identities in their true colours. If Air New Zealand want to return with all their loyal customers in due course, then they have to treat customers fairly. I believe your credit allows you to swap one flight for one other flight, and there is no change given. So your $4000 flight to the Continent can be cashed in for a $1000 flight to Aussie. So you decide to revive your flight to the Continent. Oops! Your basic economy fare has increased to $8000 because variations in systems, fuel prices, extra procedures at airports. And maybe you can’t afford a holiday anyway because you no longer have a job and can’t afford your mortgage any more. So you are forced to surrender your credits. Doesn’t sound too fair to me.

When this is over, I hope the Government of the day take steps to bring all airline businesses trading in New Zealand, into line with the consumer law that all other businesses have to follow. And while they are at it, make it illegal to increase their fares by pretending that the amount is recovery of credit card fees!

Janet K.
30 May 2020
Misinformation on Tv 1 seven sharp, Wednesday 27 May 2020

As a member of Consumer NZ I was very disappointed to hear the misinformation on Seven Sharp by the head of Consumer NZ. Qantas are NOT giving us a refund, we are being offered a ONE WAY only credit leaving Sydney, we unfortunately cannot swim to Sydney from NZ! Our original booking was combined with a now cancelled Celebrity Solstice NZ Cruise in May 2020, which ended in Sydney. We had booked this trip before we knew anything about Covid-19 in November 2019 through Flight Centre. This trip was meant to be a once in a lifetime trip for us. We are not 'travelers'. Fight Centre have not been the best to deal with, and our consultant with them has since left their employ. Our Cover More Travel Insurance did not cover 'pandemics', and they took 25% off the refund because our trip was cancelled. We are still waiting for our refund from Celebrity Solstice through Flight Centre. Our return flight through Qantas cost $800 for two adults, to some people this is not a great amount of money, but I stand on principle here, it is OUR money and we have had freedom of choice taken away from us! We paid for all our travel in good faith and on time. We now have NO confidence in any of the travel 'businesses' mentioned above and we would not recommend them!

Patricia M.
30 May 2020
Refund from Qantas

I have had a full refund from Qantas for my trip to Australia. I never book with Flight Centre as they are NOT TAANZ Bonded.
Trish M

Consumer staff
03 Jun 2020
Re: Misinformation on Tv 1 seven sharp, Wednesday 27 May 2020

Hi Janet,

Qantas' conditions of carriage state that where the airline makes a significant change to your flight (due to an event beyond its control), it will either rebook you on the next available flight or, if it can’t do so, it will refund the applicable fare.

If your travel agent didn’t make you aware of this, we recommend going back to the agent and requesting a refund for your flights.

Kind regards,
Frank - Consumer NZ staff

Lynette L.
28 May 2020
Some of us are happy, Consumer please don't use our responses wrongly.

We appreciate that some people are badly caught out and had tickets to places that nobody in NZ will want to visit within the time frame of credits. Maybe some of them have insurance that covers it, maybe not. But some of us are happy with credits and don't want to put Air NZ on the rack. We said this in the survey but it looks like Consumer is using out response to inflate their position. We booked 4 cheap flights to Oz AFTER coronavirus started going global and knew there was risk, that we wouldn'[t have insurance etc. We feel that risk was ours and are thrilled to be getting credits when we could have nothing. Thank you Air NZ, but for others who booked last year please try to show some flexibility

James C.
30 May 2020
All credit to Consumer NZ for their efforts

Most are not happy with their credits. Why? Flights will be very expensive until air travel normalises and planes can again operate at capacity. Until then it is likely flying will be double the price with planes half full. And if customers cannot afford that additional cost then what?

Air NZ knows this and is playing politics with customers money. They have retained thousands of dollars of my money and refuse to refund it. It is they who cancelled the flights and not the customer. While our Government sits on its hands doing nothing, the U.S. Government has made all airlines (including Air NZ) reimburse customers with cancelled flights departing from US airports - as has Europe for European flights.

Air NZ deserves to loose customers and all the goodwill they had in the NZ market. They could have chosen to do the right thing - as others like Qatar Airways have done. And we should applaud Consumer for getting behind this cause.

I had travel insurance but a general exclusion applies, i.e. flights cancelled as a result of Government action. I suspect many will be in the same situation.

Brian S.
28 May 2020
Offered to swap flights to Madrid for flights to Nelson

We had booked and in December paid for trip Palmerston North to Madrid leaving 9 May 2020. We had leave planned that we had to take and on the day NZ entered level 2 we planned a trip to Nelson. We had confirmation of a credit but when I asked about using the credit to fly Wellington to Nelson was told it would completely use up my credit. They credited on a flight for flight basis. It is unlikely we will be able to fly to Europe and this seems very mean spirited. Swapping a $4100 flight to the opposite side of the world for one of the shortest flights in NZ is simply not fair.

Lynette L.
28 May 2020
International vs domestic

Hi Brian,
I got a slightly different story. I was told that I could use international flight credits for domestic but the taxes and fees part was not transferrable to domestic (understandable I thought), and it would be more cost effective for me to keep them for other overseas travel. Fortunately I'll be travelling to Australia sometime and can use them. I never got to the point of seeing whether I could use just part of the credit. It certainly is a bit on the nose that they are using all your credits on one domestic flight. Surely the taxes weren't that big a part of the original fare.

Barry E.
28 May 2020
GRANDMA

Thank you for working on my behalf.
I have become exasperated trying to get verification of credit let alone even trying for a refund!!
I wonder if Air NZ are working on the theory that people will just eventually give up!! Pauline 😤

Diana H.
28 May 2020
Great Support

We have been members of Consumer for most of our married life (58 years) and have always found their information to be reliable and informative. We are particularly pleased that they are taking on Air NZ regarding refunds of air fares paid for flights which were unable to occur. We have been given a credit but, in changed circumstances, it might not he possible to fly at all.

We greatly appreciate your negotiations with Air NZ on our behalf.