Key Points
- Bridget McKenzie is pushing for a mandatory compensation scheme for the aviation industry.
- Qantas and Virgin executives did not endorse the scheme during a Senate committee hearing.
- Similar schemes exist in some parts of the world, but there's debate over whether they increase flight costs.
National Party senator Bridget McKenzie has accused major airlines of failing to prioritise customers and lacking transparency while advocating for a mandatory compensation scheme for Australian passengers.
The Airline Passenger Protection Bill aims to require airlines to provide refunds or compensation for cancelled or delayed flights, denied boarding for a purchased flight, or lost or damaged luggage.
The government is consulting on an aviation customer rights charter, but there are currently no penalties in Australia for airlines that cancel or delay flights.
McKenzie told a Senate committee hearing on Monday the pay on delay scheme is needed as the Australian public has lost trust in Virgin Australia and Qantas.
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"You have to be dragged kicking and screaming to do the right thing under the law," she said, referring to for misleading consumers in October 2024.
The airline was found to have misled consumers by selling tickets to already cancelled flights, that were labelled as 'ghost flights'.
'Nobody wants to cancel a flight'
McKenzie questioned Qantas domestic chief executive Markus Svensson about why customers should trust the airline to voluntarily ensure proper treatment of passengers following the ghost flights incident.
In response, Svensson said the airline has several incentives to avoid cancelling or delaying flights, as it is also in the best interest of the passengers.
"That's not true, Mr Svensson," McKenzie said.
"Qantas has been taken to court and been found to knowingly sell tickets for flights that don't exist."
Svensson said Qantas "always puts the customers first" and, in response to McKenzie's push on ghost flights, reiterated the airline is incentivised to look after customers.
"Nobody wants to cancel a flight, it's not good for the customer, it's not good for operations," he said.
Stephen Beckett, general manager of government and industry affairs at Virgin Australia, said it had made significant investments in customer service and complaints handling.
"We need to make remedies more accessible to the travelling public," he said, adding his support for "strengthening" the complaint handling body.
While Beckett did not explicitly endorse or oppose the bill, Svensson said Qantas is "not supportive of any compensation-based scheme".
'We'd like to see regional airlines excluded'
Rob Walker, CEO of Regional Aviation Association of Australia, told the committee any legislation should have exemptions for regional airlines that have much tighter profit margins.
"We'd like to see regional airlines excluded from a pay on delay system," he said.
He, however, expressed support for an exemption to "protect services" in regional Australia, noting that delays can be beyond any airline's control, such as issues with the airport, weather, or even passengers.
Consumer laws are an 'embarrassment'
Adam Glezer, a consumer advocate, told the committee airlines are "reluctant" to give anything in compensation to customers.
"I was dealing with some pretty disturbing situations, people with stage 4 cancer, for example, where they were owed 10, 15, 20 thousand dollars and airlines went 'sorry we're giving you a credit', because we don't have to refund you," he said.
"Something has to change because we're an embarrassment to other jurisdictions."
Ashley de Silva, CEO of consumer advocacy group CHOICE, said they would support an ombudsman to oversee compensation.
There are no ombudsman schemes in Australia for aviation, leaving no central body for people to file complaints or seek advice.
"We know that even when there are mandatory protections in place, that what's critical is that consumers have an easy right and independent pathway to actually seek any compensation or refunds," he said.
Mandatory compensation schemes for flyers exist in regions like Europe and Canada, where there are minimum guidelines for refunds and compensation for flight delays and cancellations.
Would flights get more expensive?
McKenzie asked if Australian flyers would benefit from one of these systems.
Svensson said compulsory payment schemes, like the European Union's (EU) 261 system — which establishes common rules for compensation and assistance in cases of denied boarding, flight cancellations, or long delays — increase costs.
"These schemes do not deliver better outcomes for the consumer in terms of reduced delays or cancellations, and they increase cost of travel," he said.
However, Glezer told the Senate committee that a mandatory compensation bill would not increase costs, adding: "We do need a 261-like system."
"The estimated cost of compensation per passenger across the EU and UK was between 60 US cents (95 cents) and US$1.20 ($1.89)," he said quoting 2022 data from Eurocontrol, a civil-military organisation dedicated to supporting European aviation.
"There is absolutely no evidence it would lead to a price rise of any note to consumers. Look over at Europe, the prices are extraordinarily competitive."
