Qantas has warned a Senate committee that any passenger refund law brought into Australia could result in higher prices for tickets.
Qantas domestic CEO Markus Svensson told an inquiry into passenger rights on Monday that an European Union-style compensation-based scheme would not help consumers in terms of reduced delays or cancellations.
Seeking answers on airline competition: Senator Bridget McKenzie.Credit: Alex Ellinghausen
“Compensation-based regimes such as those in Europe and Canada have shown these schemes do not deliver better outcomes for consumers in terms of reduced delays and cancellations, and they increase the cost of travel,” he said.
“The potential effect on fares, implications for low-cost carriers and the likely negative effect on economically marginal routes – particularly on Australia’s regional network – should all be closely considered.”
Qantas domestic CEO Markus Svensson.Credit: AAPIMAGE
Svensson said that when delays or cancellations were “within our control”, Qantas already provided a refund, rebooking or any other remedies required by law.
The inquiry into the airline passenger protections bill, designed to ensure “concrete protections” for passengers, follows a series of Qantas scandals that have infuriated the travelling public.
In 2024, Qantas was ordered to pay $120 million in fines and compensation for booking customers on already scrapped services. Qantas also forced passengers to accept flight credits for pandemic disruptions rather than the refunds they were entitled to.
The so-called “pay on delay” legislation, introduced last year by the Coalition and separate from a planned Ombuds Scheme supported by the Albanese government, would establish penalties for Australia’s airlines in the event of flight delays, cancellations or denials of boarding.
Virgin Australia government affairs spokesman Stephen Beckett said his airline supported a “beefed-up” complaint-handling body with the ability to make binding decisions, as well as “building greater awareness” of consumer law to “make remedies more accessible to the travelling public”.
Profits taking off: Qantas Airways.Credit: Bloomberg
Nationals senator Bridget McKenzie, sponsor of the “pay on delay” bill, cited Qantas’ sale of tickets for already cancelled flights – so-called “ghost flights” – as a reason for creating a mandatory compensation system.
“That was an explicit breach of consumer trust,” McKenzie said. “If Qantas was willing to knowingly sell those ‘ghost tickets’, why should passengers trust that the voluntary consumer protections that you offer in your own policies are enough?”
The ability for Australian airlines to cancel flights with little or no penalty has emerged as a feature of the industry.
Monthly airline statistics showed Qantas cancelling 2.4 per cent of flights in January, compared with 0.9 per cent for Virgin.
Consumer advocate Adam Glezer told the inquiry: “We’ve got a duopoly of Qantas and Virgin, and we’ve got no consequences if they delay, cancel flights, whatever it might be.”
A spokesperson for Qantas said it didn’t cancel for commercial reasons at short notice.
Qantas and its budget carrier, Jetstar, have emerged from the uncertainty of pandemic lockdowns in a stronger financial position, but they are not short of controversies, including former chief executive Alan Joyce’s jumbo payout and the sacking of 1700 ground crew workers that was later ruled illegal by a court.
Even with the prospect of a Virgin-Qatar tie-up increasing long-haul international competition, the domestic market remains a cash cow for airlines.
Qantas notched up $1.39 billion, a rise of 11 per cent, in the half-year to December 31, with a 35 per cent surge in Jetstar’s earnings in the period.
Australian Lawyers Alliance solicitor Victoria Roy, who covers travel law, noted a 2023 submission to the aviation green paper showed that “on a given day, cancellation rates vary significantly between airlines despite flights being subject to the same weather conditions and air traffic control”.
The legal group “is concerned that this suggests that some cancellations are due to operational reasons”, she said.
Dean Long, of the Australian Travel Industry Association, said reform would require “an economic cost” for the airlines to offset the current incentive to provide poor services.
The opening to a Senate hearing got off to a jarring start with Qantas’ domestic boss coming under fire for not attending in person.
“I thought things were going to be different under the new leadership,” McKenzie said, in a reference to Vanessa Hudson replacing Alan Joyce as chief executive in 2023.
Qantas’ submission to the inquiry wasn’t on time, McKenzie said, a “bit similar to your flight schedule, it seems”.
Svensson said he didn’t travel to Canberra because of a “personal matter”. Other witnesses to the inquiry, including at least one based in Canberra, also provided testimony by video link.
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