Memo to Airlines: It’s time
to review refund policies, cancellation and change fees to
comply with the Australian Consumer Law
The Australian consumer law regulator has served notice
on airlines operating in Australia that:
In 2018 we will engage with the Airlines to discuss
our expectations for change regarding:
- ‘no refund’ statements on the Airlines’ websites;
- excessive fees for flight cancellations and changes;
- consumer guarantees … where flights have been
cancelled or delayed;
to ensure they comply with the Australian Consumer Law
Refer Airlines: Terms and conditions – a Report by the
Australian Competition & Consumer Commission (the ACCC)
dated 20 December 2017
In this article, we will examine six examples of
complaints given by the ACCC in the Report, the ACCC’s
concerns and provide our comments. The six examples are
selected from over 1,400 complaints against airlines
received by the ACCC between 1 January 2016 and 14 December
1. ‘No refund’ statements
A number of airline websites state that sale, low cost
and non-flexible economy fares are non-refundable. These
statements most commonly appear in sections outlining the
‘No refund’ statements may lead consumers to believe they
are not entitled to a refund under any circumstance.
In most instances the ‘no refund’ statement is qualified
in the Airlines’ Conditions of Carriage, which explain when
a refund can be obtained and refer to the ACL obligations.
However, the ACCC is concerned that these qualifications
are not sufficient to clarify the initial and prominent no
For example, Jetstar has a statement on its website:
Unless otherwise stated fares are non-refundable, limited
changed are permitted and charges apply. It appears on
the page where the fare is displayed.
The ACCC’s concerns that the consumer may be misled are
the same as for ‘drip pricing’ where it successfully
prosecuted Jetstar and Virgin for failing to disclose
additional booking fees and charges early in the online
booking process when the headline price was disclosed. For
more, see my article: There’s to be no more drip pricing of
booking fees since the Jetstar decision.
2. Excessive fees for
cancellation and changes
Consumer A purchased return flights from Los Angeles
to Sydney for four people with an Australian airline, for a
total cost of $3,500. Approximately 35 days prior to
departure, Consumer A cancelled the flights. The airline
charged a cancellation fee of $500 per person. This equated
to a total fee of $2,000 for fares totalling $3,500
The cancellation fee is excessive and therefore unfair
- the amount of the fee does not take into account how
far in advance the cancellation or change occurs, such
as when the airline might have sufficient time to resell
the seat; and
- the fee represents a significant proportion of the
The ACCC considers conditions which impose cancellation
fees to be unfair contract terms: “where the size of the fee
imposed by the airline to cancel or change a flight is
disproportionate to the cost of the original fare, or is
unrelated to costs, then concerns may arise.”
Having said that: “The ACCC recognises that the Airlines
differentiate fares with different levels of flexibility.
This means that a consumer often has less flexibility to
cancel or change their flight details when they have
purchased a cheaper fare. This is not problematic in
Consumer B booked a flight from Melbourne to Gladstone
via Brisbane. The airline cancelled the Melbourne to
Brisbane flight and rescheduled it to a time which clashed
with the Gladstone to Brisbane leg. The airline advised
consumer B that they could be placed on an earlier
originating flight, but to make this change consumer B would
have to pay an $80 change fee.
The cancellation or the change was caused by the actions
of the airline, which provided alternatives not acceptable
to the consumer, yet it charged a change fee.
The ACCC is particularly concerned with fees imposed by
airlines where the charges are the result of decisions or
circumstances within the control of the airline rather than
the consumer. A contract term that allows for the
application of a change fee in circumstances where the
airline has cancelled the flight is, in the ACCC’s view,
likely to be unfair.
The ACCC will be engaging with the Airlines to understand
exactly how, when and why these fees are charged, and is
likely to take action where unfair contract term provisions
are identified and not addressed.
The ACCC’s view is clear – change fees should be limited
to circumstances where the consumer changes their mind
through no action by the airline.
3. Consumer Guarantees:
Changes and cancellations by the airline
Consumer C booked return flights from Brisbane to
Canberra. The airline cancelled the return flight so
consumer C sought a refund for his return flight. The
airline refused to provide a refund unless Consumer C paid
an $80 fee.
In this example, the concern is that the consumer is
“receiving only a partial remedy or no remedy where they may
be entitled to one” without payment of a fee.
Consumer D purchased two tickets for his family
members. At the gate, the airline said that the flight was
overbooked. The airline offered to place the two passengers
on a flight the next morning but required a $50 change fee
per person. The fee was later refunded as a ‘gesture of
goodwill’ by the airline.
In this example, the concern is that “when consumers do
receive a remedy, the airline represents that it is
providing the remedy out of ‘goodwill’, in circumstances
where the consumer was entitled to a remedy under the ACL”.
A related concern is “the Airlines appear to offer
remedies to consumers on an ad hoc basis, rather than
through a consistent and reasoned application of their
policies and procedures”.
Consumer E booked a same day return flight from Sydney
to Canberra. Prior to take off, the flight was cancelled due
to a mechanical fault. The delay extended beyond the
departure time for Consumer E’s return flight from Canberra
back to Sydney. Consumer E sought a refund from the airline,
but was advised that the airline does not provide refunds,
and was provided with a flight credit instead.
In this example, the concern is that airlines are issuing
a travel voucher or credit with the airline instead of
offering a cash refund or compensation. “These travel
vouchers or credits often contain conditions on how to use
it and when it needs to be redeemed. The ACCC’s view is that
these travel vouchers or credits are not equivalent to a
refund, and should not be used as a substitute when a
consumer is entitled to a refund under the ACL”.
Consumer F booked a flight from Sydney to Melbourne.
The flight was cancelled prior to take off. Consumer F was
informed there would not be a replacement flight and that
she would only be entitled to a refund. After booking a
flight with another airline for the next day, Consumer F was
informed that the original airline had rescheduled her
flight for the next day. Consumer F was provided with a
refund for the original fare but was denied a refund for the
additional cost of rebooking her flight with another
In this example, the concern is that when “an airline
cancels or delays a flight and the consumer has to book an
alternative flight, either with the same or a different
airline, and the airline refuses to refund or compensate the
consumer for this additional cost.”
Is the airline’s reason
for cancellation within its control?
The ACCC’s concern is that while the conditions provide
“More generous remedies for cancellations and delays for
events within the Airline’s control”, there is no common
definition for the terms “events within the Airlines’
control” and “events outside the Airlines’ control”.
The ACCC’s concern is that the absence of a common
detailed definition can lead to speculation that “an
airline’s decision to cancel a flight due to low passenger
numbers has been presented as being cancelled for a
The ACCC should seriously consider adopting a standard
definition of ‘extraordinary circumstances’ and the notion
of ‘an airline taking reasonable measures to avoid
extraordinary circumstances’ as is found in European Union
Regulation (EC) No 261/2004 to determine if an event is
outside the Airlines’ control.
European case law has established that:
- Mechanical failure leading to a cancellation is not
outside the actual control of the air carrier, because
the maintenance and proper functioning of the aircraft
is the carrier’s responsibility;
- Natural disasters such as volcanic ash clouds are
outside of the actual control of the air carrier.
- Bird strike damage leading to a cancellation is
outside of the actual control of the air carrier, if it
has taken the necessary preventative measures;
The EU’s fixed compensation entitlements are not
advocated. They are punitive and defective because of their
‘one size fits all’ nature.
All airlines operating in Australia, particularly
domestic but also international airlines offering air
services to Australian consumers, need to take heed of the
Report and review their conditions for refund policies,
cancellation and change fees, to ensure they comply with the
Australian Consumer Law.
The ACCC has overcome its reluctance to intervene in
complaints by consumers against airlines, and is in fact
inviting consumer complaints. It ended the Report by warning
it may bring test cases against airlines which fail to
change their conditions:
While we do not ordinarily pursue individual consumer
matters, in this area, where steps are not taken, the ACCC
may need to action a number of individual matters to effect