Qantas has been hit with a class action lawsuit over COVID-19 flight credits, with the airline accused of “misleading or deceptive conduct” for not refunding cancelled flights.

Echo Law, supported by litigation funder CASL, has lodged proceedings in the Federal Court against the Flying Kangaroo on behalf of what it said are “hundreds of thousands” of Qantas passengers, accusing the airline of “misleading or deceptive conduct” for not refunding cancelled flights.

The suit claims that Qantas engaged in “unlawful actions”, including failing to refund the customers in line with its conditions of carriage.

Andrew Paull, partner at Echo Law, said the carrier is now one of the most profitable airlines in the world and that this profit “has been built, in part, on funds it unlawfully retained from its customers”.

“While COVID posed major disruption to air travel and resulted in cancellations that no airline wished to make, that is no excuse for Qantas to take advantage of its own customers and effectively treat them as providers of over $1 billion in interest-free loans,” he said.

“We allege Qantas breached the law by failing to be transparent and immediately issue refunds to customers when flights were cancelled. Instead, Qantas held onto its customers’ money and pushed out travel credits with strict conditions, which we allege it was not entitled to do. It now needs to be held accountable and refund that money with interest.”

Echo Law has also alleged it was unlawful for Qantas to hold customers’ money for flights that could not proceed and that those looking to use their flight credits have been pressured to pay more than their original fares to use the credits on new bookings or lose them.

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“In addition, there are many customers who, for various reasons, will not use their flight credits before they expire at the conclusion of calendar 2023, at which point the credits will ‘expire’ and their value will reduce to $0,” said Mr Paull.

“While Qantas has talked in recent weeks of giving customers the ‘option’ of requesting a refund, this is both too little and too late. That money ought to have been automatically returned to customers, in most cases more than three years ago, and we are seeking both refunds of all remaining credits as well as compensation for the time customers have been out of pocket.”

In a forceful statement, the Flying Kangaroo said it “completely rejects” the allegations in the suit filed by Echo Law and that it had not yet been served a claim as of midday Monday (21 August). Around $400 million in unclaimed COVID-19 credits remained as of June, most ranging between $100 and $500.

A Qantas spokesperson said that the carrier had lost more than $25 billion in revenue and posted $7 billion in statutory losses during COVID-19, contrary to claims by Echo Law that it had enjoyed a significant financial benefit during the pandemic.

“We have already processed well in excess of $1 billion in refunds from COVID credits for customers who were impacted by lockdowns and border closures. The majority of customers with COVID credits can get a refund, and we’ve been running full-page ads and sending emails to encourage customers who want a refund to contact us directly,” the spokesperson said.

“Qantas has one of the most flexible COVID credit policies of any airline, including among our global peers, and we’ve extended the expiry dates three times.

“We’ve made a number of improvements to our systems along the way, including simplifying the process for a refund and making the credits easier to use, and that’s clear from the amount of credit that has already been claimed.”

The national carrier has faced criticism and accusations over the last several years for how it has handled COVID-19 flight credits during and after the pandemic, including a formal complaint to the Australian Competition and Consumer Commission (ACCC) about the “many obstacles” customers faced when trying to redeem their credits.

The airline last extended its credit expiry deadline in March after pressure from consumer advocacy group Choice, with credits now available for use until the end of 2023 for flights departing before 31 December 2024.

Additionally, Qantas’ “Find My Credit” tool, launched in June, can track bookings up to three years old that may have changed several times due to the pandemic, and last month, it rolled out an ad campaign reminding customers to use their credits.