Air New Zealand is again under fire from a consumer watchdog that claims the airline's reluctance to issue refunds means it has locked away millions of dollars.

Consumer NZ says customers are being "short-changed" by the national carrier's preference to provide credits rather than to return money.

A survey by the watchdog found 80 per cent of passengers on cancelled Air NZ flights have been left stuck with credits - allowing the airline to sit on "millions of dollars of customers' money".

"The majority of customers have only been given credits and many didn't know if or when they'd be able to use them," chief executive Jon Duffy said.


Consumer NZ surveyed more than 2000 Air NZ customers and found that only six per cent had been given refunds after flights were cancelled due to Covid-19 lockdown.

"More than $3.8 million had been paid for flights by the 1700 people in the survey who had been given credits."

Fifty-four per cent had paid more than $1000 for their tickets, Duffy said.

"This money was locked up in Air New Zealand's bank account. The average amount held by the airline per passenger was $2234."

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Consumer NZ had previously threatened to lodge a formal complaint with the Commerce Comission against Air NZ's policy to not pay refunds to customers flying through the United States. The airline promptly changed its stance.

Under US regulations, passengers on flights to or from the United States, including transiting passengers, are entitled to refunds where flights are cancelled, regardless of the reason.

This added pressure comes at a time when Air New Zealand is burning through the cash.


Air New Zealand confirmed this week it expects to report an underlying loss for the 2020 financial year.

Through levels 3 and 4, the airline was able to earn very little revenue and had to dip into its cash stockpile.

Air New Zealand currently has $640 million of short-term liquidity, versus $1 billion prior to the outbreak.

Air New Zealand also has access to a $900 million loan facility, which it is yet to tap into.