Airline customers big winners in aviation white paper with new reforms to fast track refunds

The government is set to take a tougher approach to airlines and airports over flight delays under changes outlined in the aviation white paper.

Airlines and airports will be made to pay for unreasonable flight delays and cancellations under sweeping changes outlined in the federal government’s long-awaited aviation white paper, to be released on Monday.

The largely ineffective Airline Customer Advocate will be replaced by an aviation industry “ombuds” (ombudsman) scheme which will enforce a charter of customer rights.

These include the right to refunds across all fare types in the event of an unreasonable flight delay or cancellation, the right to prompt payment of refunds, and a minimum standard of customer service.

The paper, considered a policy blueprint for aviation reforms, acknowledged airlines and airports needed to lift their game to support customers, handle complaints and provide refunds.

It was noted the airline-funded Customer Advocate had largely failed to fix such problems, with fewer than 40 per cent of complaints resolved in the last year.

Transport Minister Catherine King said too many Australians had been left out to dry when flights were cancelled or disrupted. “It’s impossibly complex to get a refund or even contact a company representative,” said Ms King.

“Customers deserve to get their money back if they are owed it. Full stop. It is time to take strong action to protect consumer rights with an aviation industry ombuds scheme and charter of customer rights.”

Transport Minister Catherine King during Question Time. Picture: Martin Ollman

The customer rights charter would set out what length of time was “an unreasonable delay” and what amounted to appropriate treatment of customers in circumstances such as when flights were disrupted.

This included entitlements to refunds rather than travel vouchers, no matter what the fare type, for excessively delayed or cancelled flights, and appropriate time frames and methods for providing refunds.

Airlines would also be expected to be transparent about the cause of flight delays and cancellations as part of regular reporting to the government.

Carriers are currently not required to pay refunds for delayed flights, with some providing food vouchers to affected customers or overnight accommodation if required. An ombudsman would oversee airlines’ and airports’ compliance with the customer rights charter, and deliver an external dispute resolution ­service.

Supported by legislation, the ombudsman scheme would have the power to direct airlines and airports to provide remedies to consumers including refunds, and refer instances of misconduct for investigation and enforcement.

The changes followed an extended period of disrupted travel for customers, with on-time performance data showing airlines continued to lag pre-Covid levels of reliability.

In July only 71.1 per cent of domestic flights arrived within 15 minutes of schedule, compared to the long term average of 80.9 per cent. Cancellation rates also remained higher at 3 per cent versus 2.2 per cent.

The Australian Competition & Consumer Commission and Australian Airports Association were among those to call for an airline ombudsman scheme in submissions to the white paper, pointing out consumer dissatisfaction with the industry was rising even before the pandemic.

The ACCC noted external dispute resolution was an “essential escalation pathway” for consumers, and the Airline Customer Advocate (ACA) was “generally ineffective” in that role.

“The ACA should be replaced with a truly independent external dispute resolution ombuds scheme which has the ability to make binding decisions to resolve consumer complaints,” said the watchdog’s submission.

Qantas and Virgin Australia face more scrutiny over flight delays under changes outlined in the aviation white paper. Picture: David Gray/AFP

Airlines were less enthusiastic about the prospect of an ombudsman scheme, with Qantas warning “current ombudsman models were notoriously ineffective at delivering timely resolution of consumer complaints.

“Any consideration of an ­ombudsman model requires more work and comprehensive industry consultation to assess the net benefit, and should closely consider cost implications,” said the airline’s submission.

Virgin Australia’s submission also emphasised the need for a “robust consultation process” and examination of whether the costs of such a scheme were proportionate to the benefits for consumers.

Legislation for the scheme is intended to go before parliament next year, with the expectation a formal indep­endent ombudsman would be in place by 2026.

In the meantime, an interim ombudsman would be appointed to lead the drafting of the charter of customer rights in consultation with industry and consumer groups.

The move will see the length of “unreasonable flight delays” defined, and determine in exactly what circumstances airlines are required to refund a customer’s money.

The changes appear to stop short of the “pay on delay” approach outlined in a private bill introduced by Liberal senator Dean Smith and Nationals senator Bridget McKenzie to force airlines to compensate passengers for disrupted travel.

Under their Airline Passenger Protections bill, carriers would have to pay hundreds of dollars to passengers for delays of three hours or more, similar to a European Union scheme.

The proposed legislation is currently before the Rural and Regional Affairs and Transport committee, which is due to deliver its report in November.