One of the largest airlines operating in New Zealand, Jetstar, has been fined $2.25 million after misleading consumers about their rights to compensation when flights were delayed or cancelled for reasons within its control, breaching the Fair Trading Act.
Commerce Commission General Manager, Competition, Fair Trading and Credit, Vanessa Horne says it is disappointing that an airline promoting itself as 'low cost' has acted in a way that resulted in thousands of consumers being left out of pocket after their claims were unfairly denied, especially when people often had to spend extra on last minute flights and accommodation.
"Jetstar's conduct was serious, widespread and deserving of one of the biggest penalties ever imposed under the Fair Trading Act," Ms Horne says.
"Our investigation found that the misleading practices were the result of embedded shortcomings in Jetstar's internal policies and instructions, which enabled staff to decline legitimate claims to compensation," Ms Horne says.
Jetstar misled tens of thousands of consumers about their rights under the Civil Aviation Act to compensation, and their rights to make a claim in the first place.
"The Civil Aviation Act is clear that airlines have a responsibility to reimburse customers for loss caused by cancellations or delays on New Zealand domestic flights that are within the airline's control," Ms Horne says.
This includes delays or cancellations that are due to staffing or mechanical issues.
In these circumstances consumers are entitled to reimbursement of the reasonable costs caused by the delay, which may include the cost of meals, accommodation, and other costs consumers had to pay to get to their destination, up to 10 times the cost of the ticket.
Following the Commission's enforcement action, Jetstar has paid out over $1million in compensation to thousands of affected passengers.
"The Commission's action has prompted Jetstar to put money back in the pockets of affected consumers and, crucially, secured a record penalty, which should serve as a strong deterrent to other large businesses," Ms Horne says.
"Airline travel is an essential service and given the lack of options in NZ, it's crucial that airlines act fairly and responsibly."
"It can be incredibly stressful having your travel plans cancelled in these situations and it's essential that transport providers give consumers clear and accurate information about their rights if delays and cancellations happen," Ms Horne says.
Background
Jetstar has now remediated 2,692 affected customers and has paid a total of NZ $1,039,390 to them.
The charge period is for misleading claims made between 1 January 2022 and 22 March 2024.
Prior to the charge period, the Commission issued compliance advice to Jetstar for similar alleged conduct, for misleading consumers about their rights under the Civil Aviation Act.
A framework of domestic and international laws governs New Zealand's civil aviation system (New Zealand Aviation law). Airlines, such as Jetstar, are subject to that regime, which establishes that airlines are liable for damage caused by delay in the carriage of passengers.
That liability is broad and applies unless the airline can prove that the delay was caused by certain reasons outside of its control, or it had taken measures to avoid the damage.
Similar rules apply under the Montreal Convention for international flights.
Situations where Jetstar should have taken responsibility and compensated affected consumers included (but are not limited to) engineering issues, internal IT outages, staffing issues.
Jetstar is a wholly-owned subsidiary of the Qantas Group.
To apply for compensation visit Jetstar's website.
