Pressure is mounting for airlines to pay refunds on all tickets and routes.
Consumer NZ says this country's laws are out of step with other nations and need to be changed so that consumers aren't left propping up airlines and carrying all the risk for cancelled flights.
''We think airlines should be required to refund where the cancellation is beyond the control of the consumer,'' said Consumer's chief executive Jon Duffy.
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''With no requirement to refund, consumers are locked in, regardless of how they have been treated by that airline and despite the risk that the airline may not be able to offer a service that suits the consumer in the future. Without the ability to lock customers in, airlines would need to compete on price and service to win back that customer for future travel.''
Air New Zealand yesterday backed down and announced it will refund all passengers on cancelled US flights after Consumer called out the company for its practices.
Flight rules in the US entitle passengers travelling to or from the US to a refund if their flight is cancelled. However, Air New Zealand was telling customers transiting through the US on their way to Britain they could only get a credit.
Consumer had informed the US Department of Transportation of the airline's stance and lodged a complaint with the Commerce Commission, asking it to investigate Air New Zealand's stance.
The airline's backdown means affected customers can now claim a refund rather than a credit it had been offering there and on other routes.
Duffy said New Zealand needed to follow the lead of other countries and a rule that was imposed throughout the European Union.
''While airline credit may suit some travellers, we think the choice should be the consumer's, not the airline's. Other jurisdictions put the consumer first, New Zealand doesn't and that needs to change.''
Consumer Affairs Minister Kris Faafoi has acknowledged previously that this country's rules were out of step with others.
The Travel Agents Association of NZ is also pushing for full refunds, saying agents were increasingly the meat in the sandwich between airlines and customers anxious to get their money back.
"If Air New Zealand would let the consumer off the hook then the rest of market would follow,'' says the association's chief executive Andrew Olsen.
''We're pushing them to do the right thing.''
Olsen's members are fighting to recover an estimated $2 billion in air fares and other travel packages held by overseas suppliers.
Travel agents have been badly hit by Covid-19 with many losing all their revenue and working for nothing to recover funds overseas, which he said needed the specialist industry skills and contacts.
The association was meeting government ministers this week where it would ask for more help for the sector - including a further extension of the wage subsidy to help thousands of agents survive until spring.
An Air New Zealand spokesman today said the airline would not change its policy on refunds and credits. Its website states that a non-refundable ticket remains non-refundable unless local legislation requires a refund to be made available - as in the US.
''We won't be expanding our current refund / credit policy as we're well within the law and are offering a great deal of flexibility for people with non-refundable tickets.''
At the beginning of the year the airline held about $1.4b of revenue in advance although it is not broken down by route or fare type - refundable or non-refundable.
Across the European Commission the law requires airlines to offer refunds as an option, and cannot force passengers to take vouchers instead.
But this is reportedly breaking down with airlines refusing to issue refunds or not offering the option on their websites.
Some member states are pushing for a relaxation in laws to allow time-limited vouchers during the crisis instead, to prevent mass bankruptcies. Airline body the International Air Transport Association is also lobbying for a voucher scheme.
As part of its relaxed rules for refunds, Air New Zealand says that for domestic travel up to June 30 or international travel up to July 31, passengers can make one change to an existing booking and change fees and service fees will be waived, however fare difference may apply. Alternatively, the airline can hold fares in credit until June 31 next year.
Passengers don't have to travel by that date just have the new flights booked. For domestic travel after June 30 or international travel after July 31 this year on a route where it is no longer flying, credits are held for 12 months.
Passengers don't have to travel by that date, just have the new flights booked.
All travel must be completed within a year from the date of booking.
The airline is slowly rebuilding its domestic network, today announcing more flights to Queenstown for Queen's Birthday weekend, and is moving to returning to all 20 centres it flew to before the pandemic hit.
Its international network remains at skeleton levels with just a handful of flights across the Tasman, to Rarotonga, Niue and Norfolk Island and to Los Angeles and Hong Kong.