Australian airlines are pushing back against calls for new laws that would force them to pay cash compensation to passengers whose flights are delayed or cancelled, with claims it would force carriers to preemptively raise air fares to fund payouts.
The resistance follows the Australian Competition and Consumer Commission, consumer advocate Choice and the Australian Lawyers Alliance all separately raising the prospect of a compensation scheme to rein in airlines arbitrarily changing their schedules, as the government considers its aviation white paper.
Advocates of such a scheme claim Australian laws are “lagging behind the rest of the world”, and point to the EU’s air passenger compensation scheme as a solution.
The EU scheme includes set amounts of between €250 and €600 in compensation per passenger when a flight’s arrival is delayed more than three hours, with the amount dependent on the distance of the trip.
For longer delays and cancellations, passengers can opt to be refunded, which must be repaid within seven days. The scheme only covers delays caused by the airline, and does not apply to causes outside their control such as weather.
However, Qantas, Jetstar, Virgin Australia, Bonza and Rex Airlines have not supported calls for such a scheme in Australia.
Rex’s deputy chairman, John Sharp, told Guardian Australia a compensation scheme could force airlines to increase their air fares.
“For airlines to pay compensation if they cancel or cause a flight delay – to some people it might have an appeal, but like all things in life, nothing is as simple as it looks,” he said.
“My concern with all of these things is, having watched what’s happened in Europe, if you’re not careful you can drive up the cost of air travel, and you penalise consumers, because airlines factor in the cost of compensation into their standard tickets,” Sharp said.
Responding to Sharp’s claim, Choice’s travel expert, Jodi Bird, told Guardian Australia: “When they say they’d have to pass on price increases – if we had something like the EU scheme here, well, under that scheme you don’t pay compensation until there’s been a three-hour delay.
“So what airlines are implying is that if you want flights to arrive within three hours of when they’re scheduled, you need to pay more money, and I think Australians are already paying enough for their air fares to arrive within three hours of when they’re scheduled,” Bird said.
Bird had previously suggested such a compensation scheme could help smaller airlines including Rex and Bonza, who have complained that larger airlines are hoarding slots at airports such as Sydney, where legislation caps the number of take-offs and landings.
By scheduling more flights than they intend to run and cancelling some at the last minute, airlines still retain slots under the “use it or lose it” system and can prevent competitors from accessing them.
However, Sharp said a compensation scheme might not be enough to deter larger airlines from their alleged behaviour.
“Sometimes a compensation scheme for passengers may be something that an airline like Qantas would think is a fair price to pay for keeping the competition out,” Sharp said.
Bonza chief executive, Tim Jordan, said: “We are not in favour of this scheme making its way to Australia as a solution to the Sydney slot challenge – but rather, we are in favour of changing the current ‘use it or lose it’ approach.”
When asked if Qantas supported a passenger compensation scheme, a spokesperson said: “Australia has strong consumer laws and a detailed framework for consumer protection, and the ACCC has considerable powers under these laws which it does not hesitate to use when it has concerns.”
The spokesperson said Qantas already offered refunds and flight credits for cancelled flights, and added: “We are a customer-focused organisation operating in a highly competitive environment and we look to go above and beyond our contractual and regulatory obligations to assist customers.”
For its part, the ACCC, in its aviation white paper submission in which it raised the EU’s air passenger compensation scheme, noted that while the Australian Consumer Law requires airlines to supply services within a reasonable time and offer a refund or replacement service if they don’t, stronger laws are needed.
“At present, there are little to no incentives in the ACL for businesses to comply with their consumer guarantee obligations,” the ACCC said.
When asked if Jetstar supported a compensation scheme, a spokesperson did not directly address the question, but said the airline takes its obligations and compliance under the ACL extremely seriously.
A Virgin Australia spokesperson also declined to directly address the question, but told Guardian Australia the airline has a policy which sets out the compensation it offers passengers whose flights are delayed or cancelled.
