Photo: AFP
Jetstar has been fined $2.25 million over misleading customers about what compensation they were entitled to after cancelled or delayed flights.
The Australian low cost airline, owned by Qantas, was sentenced over 20 charges at the Auckland District Court on Monday, relating to breaches under the Fair Trading Act over a two year period between January 2022 and March 2024.
The charges were filed by the Commerce Commission in January this year, after the company failed to comply following compliance advice from commission in 2015 and 2021.
The company had faced similar charges by the Australian Competition and Consumer Commission in 2018.
The repeat offending is why the Commerce Commission sought a fine on the higher end - with a starting point of $2.5 million, which Judge Brooke Gibson agreed with.
Judge Gibson gave Jetstar a 25 percent discount on the fine for its early guilty plea in April, and another 10 percent discount for not having any previous convictions in New Zealand.
He acknowledged that the airline has remediated over 2600 affected customers, and has paid over $1.3 million to them, as well as a $860,000 donation to a New Zealand charity.
However, the Commerce Commission sought an uplift for an increased fine by 25 percent, based on the size and financial capacity of the company.
Judge Gibson said the Court of Appeal had indicated that such uplifts can be done so that the fine has the effect of deterrence and denunciation - and he has agreed with the uplift, which takes the discount on the fine to 10 percent, resulting in a total fine of $2.25 million.
The Judge said about 98,000 customers were affected by Jetstar's misleading representations.
Jetstar had told customers that there was a monetary cap on claims to accommodation, meals, transport and compensation in the event of cancellations or delays due to reasons within the airline's control.
Customers were also told they were only entitled to compensation or accommodation if the airport wasn't their home airport, or more than 15 kilometres from their home.
They were not entitled to compensation beyond the refund of the original ticket, if they haven't taken a recovery flight.
If customers bought a more expensive replacement flight with another airline, they were told they wouldn't be entitled to compensation for the fare difference.
Judge Gibson said those limitations didn't meet the requirements under the law for refunding customers for delays within the airline's control.
The Commerce Commission said in a statement that Jetstar's conduct was serious, widespread, and deserving of one of the biggest penalties ever imposed under the Fair Trading Act.
"Our investigation found that the misleading practices were the result of embedded shortcomings in Jetstar's internal policies and instructions, which enabled staff to decline legitimate claims to compensation," Commerce Commission's general manager of competition, fair trading and credit Vanessa Horne said.
"The Civil Aviation Act is clear that airlines have a responsibility to reimburse customers for loss caused by cancellations or delays on New Zealand domestic flights that are within the airline's control," she added.
Jetstar said in an earlier statement last month that its deeply sorry for letting its New Zealand customers down during their "Covid restart".
"Over the past two years, we've reviewed thousands of past claims and contacted customers impacted by these errors to ensure they receive the compensation they're entitled to.
"For anyone who still feels they may not have received the correct compensation for a past flight disruption in Aotearoa, please get in touch with us here so we can review your case."
The company said its made significant changes to prevent the same from happening again.
Jetstar declined RNZ's request for an interview.
It said it accepted the court's sentencing decision.
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