Air NZ’s refund problem

Tourism in New Zealand has quickly gone from 100 per cent ‘‘pure’’ to 100 per cent local. In a variation on the long-forgotten TV ad campaign asking New Zealanders not to leave home before they saw the country, the post-Covid 19 airline and tourism industries asked Kiwis to back their backyard.

Who could argue with that? Everyone is aware of the massive financial hit taken by airlines after the

Covid-19 lockdowns. There were gloomy warnings that many global airlines may not survive.

Air New Zealand was supported by a Government offer of a $900 million loan before we even went into level 4 lockdown in late March. But the public goodwill shown towards our national carrier is starting to fray. Part of the problem is that the airline has been offering credit rather than refunds to those who booked flights before the lockdown.

It has been explained that the airline uses a legal loophole to avoid refunds, which are usually required under the Consumer Guarantees Act. But under our Civil Aviation Act, airlines are exempt from refunds if the cancellation is not its own fault. And obviously noone blames Air New Zealand for Covid-19.

Some flights that transited through the US, including to London, were refunded only because Consumer NZ complained to the Commerce Commission. Those refunds were paid because they fell under US regulations.

The airline continued to defend its position as recently as Wednesday. Chief revenue officer Cam Wallace said that the airline would have to dip into its

$900m Government loan earlier if it offered cash refunds to all customers. Those same customers, and many observers, might wonder about the sense or even fairness of refusing to pay back the public with the public’s own money.

While claiming that many customers would prefer credit to cash, Wallace conceded that ‘‘a segment of the customers’’ would rather have the money. He has also agreed that the process for those who want to access credits ‘‘has not been smooth’’. Customers will have to wait at least another month for a better system.

Again there is no question that the airline is doing it tough. Friday saw an update from CEO Greg Foran who warned that the airline may have to cut another $150m from its wage bill. But his longer-term view is optimistic. ‘‘The good news is that Air New Zealand could be more profitable in the future than before,’’ he said in the email. Customers who are out of pocket will hope that their good news arrives more quickly. RNZ reported on the story of customer Alexa Bell, who was unable to spend her

$2000 in credit on flights to Queenstown for a family holiday. Bell explained that only she could use the credit; everyone else had to be paid for in cash.

It has been said that, by offering credit, which will not be redeemed immediately, rather than refunds, the airline is essentially getting an interest-free loan from its customers. How many of us are in a position to be so generous at the moment?

Consumer NZ’s chief executive, Jon Duffy, may have put it best late last month when he urged the airline to offer refunds to all customers who wanted or needed their money back. ‘‘We’ve heard from a lot of people who really need their money because they’ve lost jobs or income as a result of the fallout from

Covid-19,’’ Duffy said. ‘‘While it’s a tough time to be an airline, it’s also a pretty tough time for many consumers.’’

Consumer Affairs Minister Kris Faafoi has asked the public to be ‘‘sympathetic’’ to Air New Zealand. But as well as calling for sympathy, the Government might also want to speed up a law change that closes the loophole.

... customers might wonder about the fairness of refusing to pay back the public with the public’s own money.