Australia’s competition watchdog puts airlines on notice over fees

Australia’s competition watchdog says the “excessive” fees airlines impose when passengers cancel flights is a major cause of complaint among the travelling public and a potential breach of the nation’s consumer laws.

The findings were part of an Australian Competition and Consumer Commission’s (ACCC) report, Airline: Terms and Conditions, published on Wednesday.

ACCC chairman Rod Sims said the 1,400 complaints by consumers with the ACCC about airlines between the start of 2016 and December 2017 had “some very consistent themes and bugbears”, including no refund statements, excessive fees for cancelling or changing flights, and issues relating to consumer guarantees.

“Like any business selling to local customers, airlines must comply with consumer law. We are concerned that some airlines’ policies appear inconsistent with consumers’ rights under the law,” Sims said in a statement.

“A major issue for consumers is excessive fees for flight cancellations. While airlines are free to differentiate their fares based on flexibility, they should not impose fees that are disproportionate to the original fare.”

Sims noted travellers, like all consumers, were protected under the Australian Consumer Law (ACL) from “unfair contract terms where they have little or no opportunity to negotiate with businesses”.

“It is completely inadequate to have ‘no refund’ statements qualified in obscure fine print. These blanket statements can wrongly lead consumers to think they can never get a refund, in circumstances where they can,” Sims said.

“Airlines must deliver on remedies their customers are entitled to without delay or excuse. The ACCC will engage with the airlines about the concerns raised in our report to discuss our expectations for change. Where consumer issues continue, the ACCC will likely look to take action,” Mr Sims said.

The ACCC report noted that while airlines often had “no refund” conditions for certain sale or discount fares, it was not correct for consumers to believe that they were not entitled to a refund under any circumstance.

And while the conditions where a refund could be obtained was included in the airlines’ conditions of carriage, the ACCC said it was “concerned that these qualifications are not sufficient to clarify the initial and prominent no refund representation”.

“The Airlines’ Conditions of Carriage are lengthy, often in fine print, and it can be difficult for consumers to find the relevant information,” the report said.

“The ACCC will continue to monitor how information about refunds is conveyed by the Airlines, and take enforcement steps where broad and misleading ‘no refund’ claims are made.”

On excessive fees for cancellations and changes, the ACCC report noted a consumer who bought four return tickets from Los Angeles to Sydney for a total cost of $3,500 was charged a fee of $500 per person when they cancelled the flights 35 days prior to departure. This represented 57 per cent of the total fare.

The ACCC said it recognised airlines did differentiate fares with different levels of flexibility, adding “this is not problematic in itself”.

“However, 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,” the ACCC said.

“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.”

“Another example of a term that may amount to an unfair contract term is one which enables the airline to penalise a consumer for breaching or terminating the contract, but does not penalise the airline for breaching or terminating the contract.

“From the complaint data, there appears to be an imbalance in rights between consumers and the Airlines, and the Airlines are entitled to make unlimited changes whereas the consumer is financially penalised for making even minor adjustments.

“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.”

Comments

  1. Ash says

    I’m in two minds about this.

    You do have the option of buying a fully flexible fare where you can change your flight with very short notice.

    I once booked a flight to NZ with Virgin and had to change it. I needed an 0600 flight home from Auckland (so I could get back to work on time) and accidentally booked an 1800 flight home because they didn’t use 24hr time on the booking system, and my 1845 flight home was presented as ‘0645pm’, with the ‘pm’ bit in small font. I only realised a day or so before the flight and had to pay an expensive fee to change it to the 0600 flight.

    I filed a complaint with Virgin but they seemed unable to process my complaint in their Philippine call centre, it was too hard. I gave up after many phonecalls and several long emails.

    I will never fly with them again. And fancy an airline not using 24hr time!

  2. Patrickk says

    The other one I notice is if you need to change the only alternative is a fully flexible fare on top of the fee even when lower fares are available.

  3. Scott says

    The choices at purchase are pretty clear, want flexible tickets, purchase the dearer choice and you can change as you desire.
    Want the lowest cost, comes with restrictions.
    These terms are pretty clear in fare title.
    On another note about 20 years ago one way 1hr flights on the east coast were frequently $200-400.
    Virgin launched 15 years ago $76-99 one way.
    JQ and tiger 6 years later $29-49 one way.
    All my other bills have risen SIGNIFICANTLY over those last 20years, to say customers are getting a raw deal is an extremely long bow.

  4. Pontius the pilot says

    Another way to look at cancellation policy is the real cost to the airline.. The systems are good enough now to determine if that seat is sold again: then the original cancellation fee should be refunded and only a minor administrative charge incurred? This is the way some accommodation booking systems work.

    Also, I often drive a fair distance in unpredictable traffic to MEL. In earlier times when you turned up early at an airport the airline was happy to put you on an earlier flight that had empty seats, this created an empty seat for a later peak hour flight for go shows. But no, this is too hard now unless the pax is prepared to fork out!