Virgin Australia in dogfight with frequent flyers over slow refunds

Virgin’s administrator has drawn the ire of some of the airline’s top frequent flyers for withholding refunds of taxes and charges paid for reward tickets on flights that never took to the skies.

They have been waiting more than a month to be refunded almost $450 in flight taxes.

Virgin’s administrator has drawn the ire of some of the airline’s top frequent flyers for withholding refunds of taxes and charges paid for reward tickets on flights that never took to the skies.

The Australian understands Virgin’s frequent flyer scheme, known as Velocity, has temporarily paused some refunds after the airline fell into voluntary administration on April 21 with debts of some $7bn.

It is planning to communicate with affected members on the issue shortly.

The airline’s administrator, Deloitte’s Vaughan Strawbridge, last month temporarily paused issuing new travel credits and refunds on paid fares — including of taxes — after the airline plunged into administration in late April.

Instead Mr Strawbridge secured an order from the Federal Court allowing Deloitte to issue conditional credits to passengers who had their flights cancelled. The credits include the value of the fare and the taxes paid for a ticket.

But Virgin told its frequent flyers last month that those who had their frequent flyer tickets cancelled were entitled to receive a full refund of the Velocity Points used towards the affected flight, without being charged a cancellation fee.

Virgin also told them they would be given refunds for the taxes, fees and charges paid for the ticket, except for any booking fees or credit card fees, which are normally non-refundable.

“Once the administrators authorise us to make payments again, the tax refunds will be processed,” Virgin wrote to one Platinum Frequent Flyer in recent correspondence seen by The Australian.

They have been waiting more than a month to be refunded almost $450 in flight taxes.

A Deloitte spokesman said on Tuesday: “All efforts are being made to process qualifying refunds and applicable taxes as quickly as possible.”

Another couple owed almost $800 in taxes for planned travel at the end of March to Los Angeles were told by their travel agent they had given up on Virgin’s refund process and instead filed a claim for a full refund on their travel insurance.

“The administrators have halted all refunds pending the ‘sale’ of Virgin Australia. They are allowing a ‘conditional credit’ which must be used by 15 August, for domestic travel. However, the entire policy is an absolute joke as you can only use the credit once, and any leftover credit is forfeited. So in effect, they are saying no refunds allowed, even for taxes,’’ the travel agent wrote to their client.

“I have had several arguments with them, and got absolutely nowhere. So, I am processing the documentation for you to claim the entire amount and will have sent to Medibank today.”

Virgin has received about 340,000 requests for refunds after cancelling 65,000 flights between March 1 and April 30 due to the coronavirus pandemic.

Last month in the Federal Court Mr Strawbridge described the conditional credit scheme as “good for customers to retain value”.

“Initially, customers will be able to use credits to book flights once travel is back on the agenda and during the period of administration. We hope a new owner will continue to honour these credits after administration,’’ he said.

Virgin is now in detailed negotiations with two short-listed buyers of the airline, US firms Bain Capital and Cyrus Capital Partners.

Flight taxes are complicated, involving various authorities. For instance on international flights there is a passenger movement tax, which the Department of Home Affairs administers through Border Force.

Separately landing fees payable to individual airports, while the Australian Taxation Office is responsible for GST.

Virgin’s correspondence with passengers has been confusing. In one email, sent on May 12, a company representative said the refunds on cancelled flight taxes would be paid within seven days. The customer is still waiting.

“I understand where you’re coming from and how important this is to you,” a Virgin representative said.

“For us to further assist you, please advise if your card is international-issued or Australian-issued so we can further investigate.”

The representative later said in another email sent on May 14: “I’ve escalated this to the relevant department so that they could investigate your case. I’ll be in touch once I receive a response from them”.

On May 19, the Virgin representative was no closer to finding out why the refunds were still being withheld.

“As a customer oriented loyalty program, we certainly do not want this process to be difficult for you and I’m sorry that you haven’t received your refund and that you’ve had to follow this up. I’ve checked with the relevant team, however no update as of yet.”

Travel refunds have been a thorny issue during the COVID-19 pandemic. From March 13, Flight Centre charged customers $300 who wanted a refund on international flights and $50 on domestic flights that were cancelled before the company bowed to public pressure and scrapped the charges early last month.

Flight Centre’s decision followed weeks of pressure from the Australian Competition and Consumer Commission for the travel agent to improve its treatment of customers during COVID-19 travel restrictions. The ACCC had warned it would have taken court action if Flight Centre did not change its position.