Virgin flight refund rights, Velocity points freeze: What you need to know

As Virgin is handed over to administrators, many consumers want to know whether they can get a refund or credit note on their flights and what happens to frequent flyer points. HERE IS WHAT YOU NEED TO KNOW.

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As Virgin enters into voluntary administration, many consumers are wondering what happens with their flights, frequent flyer points and credit notes with the airline as well as their refund rights.

The company on Tuesday confirmed it has appointed law firm Deloitte as administrators and is looking at ways to keep the company afloat amid the fallout from COVID-19.

The fate of the airline will now rest with administrators, who in coming months will decide whether the company can be handed a lifeline and restructured or whether it has to be wound up.

The airline is, however, optimistic it will be able to save itself from troubled waters and emerge from the other side after private equity firms expressed interest in the company.

So what does the news mean for your right to a refund and what happens to your credit notes or frequent flyer points?

We spoke with an expert to get the low down.

Customers may still be able to get a refund from the company despite it entering administration. Photo by Jono Searle/Getty Images

What happens to flights with Virgin?

Virgin Australia has cancelled all flight operations as a result of COVID-19 - with the exception of a Sydney to Melbourne weekly flight, domestic flights underwritten by the government and repatriation flights.

It is possible more flights will be cancelled as a result of the company going into administration but the above flights are still operating.

For travellers whose flight has not been cancelled yet and who wish to cancel, the airline’s standard cancellation policy for COVID-19 will apply - with some cancellation fees potentially applying.

The company’s insolvency does not change this and customers should still contact Virgin to request a refund.

Will I be able to get my money back on cancelled flights or credit notes?

If you have tickets for a flight that has been cancelled or a credit note with Virgin Australia, you can still request a refund through the Virgin contact centre and their standard terms for COVID-19 will apply.

Otherwise, you may also be able to recover the full cost of the flights through the bank if you paid with a credit card or selected debit cards and the company cancelled the flight. This also applies if you have a credit note which cannot be used.

Shine Lawyers’ Insolvency Practice Leader, Michael Lalji said consumers who paid by credit card can call their banks and ask for a charge-back.

“If you paid for your ticket with a credit card you may be able to request a charge-back from your bank,” he said.

Time limits apply on charge-backs so consumers should call their bank sooner rather than later.

What if the company gets liquidated?

If the administrators decide to wind up the company instead of restructuring, customers who paid by other means are unlikely to be able to get their money back.

“Customers who purchased tickets prior to the administration are unsecured creditors of the company and the company is not required to honour those tickets, provide a refund, or provide a credit note,” he said.

If the administrators decide to place the company into liquidation, customers can try to claw back some money from administrators when it offers dividends- but any return for customers is unlikely.

“Customers will have the right to lodge a claim in the administration of the company and participate in a dividend in the course of the liquidation of the company or as part of a deed of company arrangement of the company,” he said.

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What if I have a credit note?

The above rights still apply for those who have a credit note with the company, however, the company does not have to honour the credit note if administrators liquidate it.

Otherwise, consumers can use the credit to fly on one of the airlines selected domestic routes.

The airline is operating a range of domestic flights subsidised by the government until June 7, 2020 despite entering administration.

These flights are, however, only permitted for essential travel.

It is also possible the airline may offer more flights in the future if administrators restructure it. In this case, the airline may honour previously issued credit notes.

What happens to my Velocity Frequent Flyer points?

Although the airline has paused Velocity points redemption for four weeks, It is advisable that you redeem your frequent flyer Velocity points if you are concerned about losing them.

While Virgin says the points are still valid, consumers who do not claim points may risk losing them if the company is liquidated, according to Lalji.

“The Velocity Frequent Flyer Pty Limited, the company that operates the frequent flyer business, is technically not in administration at this stage (its parent company is). However, without the support of its parent company, it is difficult to see points held with Velocity Frequent Flyer Pty Limited having any future value,” he said.

What if I booked with Virgin but the flight is operated by another airline?

Your rights to a refund if you booked with Virgin but your flight is operated by another airline will still remain the same.

However, there is a possibility the airline will cancel your flight, according to Lalji. In this case, you can request a refund including cancellation fees from the operating carrier, who will liaise with Virgin.

“The customer’s relationship with the other airline would depend on the agreement between Virgin and the other airline.

“If Virgin is in breach of its obligations to the other airline due to its voluntary administration the other airline may have the right to refuse to honour a Virgin ticket that a customer is holding.”

Will travel insurance cover voluntary administration?

Most travel insurance policies do not cover companies who fall into administration, however, consumers should be able to claim a refund or other recourse for flights cancelled due to COVID-19.

What will happen to flight costs if the airline goes under?

There are concerns that Virgin’s insolvency will result in an airline monopoly in Australia. The fear is that Qantas could hike prices in the absence of a competitor.

Mr Lalji said there is a real risk of “significantly higher” airfares if the carrier folds, leaving a lack of competition in the market.

For this reason, it is hoped administrators will be able to restructure the company so it can continue to operate.

Originally published as Virgin flight refund rights, Velocity points freeze: What you need to know