Air New Zealand has been ordered to refund a customer for flights cancelled when the airline chose to cut its own services because of the Covid-19 pandemic.
The case could have implications for thousands of other travellers who were refused refunds by the carrier due to the pandemic.
Demand for the airline’s services dropped dramatically as the pandemic hit, with Air New Zealand forced to slash its flights to save money.
The airline has staunchly refused to refund disgruntled customers for their grounded flights, saying that refunding every disrupted passenger would further threaten its already shaky financial position.
But a Northland customer has managed to get his money back after taking the issue to the Disputes Tribunal.
In a recently released decision, tribunal referee Nicholas Blake found the airline in breach of its own customer guarantee after it cancelled the customer’s flights as Covid hit.
The customer, who did not want to be named, had four Air New Zealand flights between Auckland and Kerikeri in June and a return trip to Nuie in July cancelled or re-arranged as the airline cut services to save money.
The airline cited “operational requirements” as the reason for cancelling his first flight in early June, while the second two flights, scheduled for takeoff in late June and July, were simply “changed”.
He was given the option to fly on a different service at each cancellation, but rejected the airline’s offer.
Under Air New Zealand’s conditions of carriage, a passenger is entitled to a refund if they have purchased a ticket and the airline cancelled the flight because of something within New Zealand’s control, or if the airline was unable to book the customer on another flight.
Blake found that the customer’s flights weren’t delayed – they were either cancelled or proceeded but no passengers were allowed to fly the service (as was the case with one of the man’s flights to Nuie), or the flight proceeded but he couldn’t board it because his first flight had been cancelled.
The customer was entitled to a refund because the changes were operational decisions which were within Air New Zealand’s control and the airline wasn’t able to transfer his flight to another service, because he wasn’t satisfied with the alternative flights offered and didn’t accept them.
A lawyer representing Air New Zealand argued the customer’s flights were cancelled because of Government-imposed travel bans (for instance, domestic flights during the level 4 lockdown) and border restrictions.
But Blake found it proven that the Covid-linked travel bans and restrictions didn’t impact the ability to travel.
“The flights could have proceeded,” Blake wrote in his decision.
“The reason why they did not proceed is that Air New Zealand made significant operational changes after March 2020 to respond to the drastic drop in demand for flights.
“Those changes were essential for the financial survival of Air New Zealand, and the direct cause of the drop was the Covid-19 pandemic.
“However, it would not be accurate to state that those flights were cancelled due to circumstances beyond Air New Zealand’s control. They were cancelled because of operational decisions made by Air New Zealand in response to market conditions.”
On October 23 Blake ordered Air New Zealand to pay a refund of $1699 for the flights.
Air New Zealand has 28 days to appeal the decision and a spokesperson said it was still reviewing their options.
The spokesperson said Covid-19 had caused enormous disruption and the company was still only operating 5 per cent of its international passenger flights because border restrictions remained in place.
“This is why we proactively placed all airfares on cancelled flights, including non-refundable airfares that would normally be forfeited, into credit. We have also enabled customers who did not have their flights cancelled to opt in for a credit.
“More recently, we adjusted our flexibility to give customers the ability to change their flight to a new date or time free of charge, or put their fare in credit for a later trip until March 30, 2021. Customers who choose to put their fare in credit before the end of March 2021 on both our international and domestic network will have until the end of December 2021 to book using their credit and a further 12 months to fly after the date of booking.”
The spokesperson said travel to Niue was restricted with flights cut back to once a fortnight for Niuean residents and essential services people (who had a letter from the government) only.
The customer said he took his case to the disputes tribunal on principle as much as to re-coup the money.
“They shouldn’t take people’s money and decide, of their own volition, to cancel events,” he said. “I don’t think they have a leg to stand on. They are cancelling flights because of a lack of demand not because of Covid.”
In June, Air New Zealand chief revenue officer Cam Wallace told the Herald it was “not in the financial position to offer full refunds on non-refundable fares”.
”Providing credits is in line with almost all other airlines and similar businesses and helps ensure that over the longer term, Air New Zealand has sufficient resources to allow us to continue operating.”
The airline warned that in spite of being able to tap into a $900 million loan from the Government which was agreed to in March, its financial future would be jeopardised by refunding tens of millions of dollars in non-refundable fares.
Consumer New Zealand head of research Jessica Wilson said while the decision was good news for this customer, Disputes Tribunal orders were not precedent-setting so there was no obligation for other referees or courts to rule the same way.
Wilson also said that in this case, the tribunal found that the flight changes were within the airline’s control, not caused by the Covid-19 lockdowns, and so the airline was bound to provide a refund rather than a credit.
“In cases where it’s the airline that has pulled the plug you have the right to a refund and you don’t have to accept the [alternative flight],” she said.
Wilson said taking a case to the Disputes Tribunal was certainly something for people to consider if they believed they had a strong case where the flight change or cancellation was a decision made by the airline rather than caused by a Covid-19 lockdown.
Wilson said the massive disruption to airlines caused by Covid-19 added weight to the organisation’s call for New Zealand law to be brought into line with far more consumer-friendly rules in the Europe Union and the United States, where airlines are obliged to offer refunds rather than credits if they cannot provide a service.
In a submission to the proposed changes to the Civil Aviation Act last year, Consumer recommended that domestic airline passenger rights be better aligned with consumer protection provisions in EU regulations where flight cancellations, no matter the cause, result in a rescheduled fare or refund as well as compensation when it is within the airline’s control.
”These requirements ensure passengers are provided for when unforeseen cancellations occur, encourage airlines to avoid delays and discourage airlines from cancelling flights due to factors under their control,” Consumer said.
Because of more stringent US laws, anyone flying to that country, or even just in transit, is entitled to refunds from airlines operating those flights.
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