Australian low-cost airline Jetstar Airways, a subsidiary of the Qantas Group, is currently at the centre of a major class action lawsuit that puts the company in a difficult legal position.
The lawsuit, filed on August 20, 2024 in the Federal Court in Melbourne, accuses Jetstar of failing to refund payments for cancelled international flights during 2020 to 2022. This practice, the plaintiffs say, is not only illegal but also morally reprehensible. The law firm Echo Law, which initiated this lawsuit, sees Jetstar's conduct as a clear violation of the rights of consumers protected by Australian law.
The Covid-19 pandemic has thrown the global travel industry into chaos, with airlines forced to cancel thousands of flights and travel plans postponed indefinitely. During this time, airlines have had the difficult task of informing customers of their rights and options. Jetstar is now facing allegations that it failed to offer its customers adequate refunds, instead referring them to vouchers that would also later expire.
Echo Law argues that the travel restrictions "frustrated" the contracts between Jetstar and its customers, which under Australian law means those contracts were automatically terminated. Customers were therefore entitled to an automatic refund of the amounts paid. Jetstar's failure to provide those refunds constitutes a breach of contract, according to the lawsuit. The lawsuit also accuses Jetstar of engaging in misleading conduct by deceiving customers about their rights and falsely suggesting that they would have to settle for vouchers.
The legal and moral implications
Australian consumer law protects customers from misleading and deceptive conduct by companies. The lawsuit against Jetstar could therefore have far-reaching consequences, not only for the airline itself but also for the entire travel industry. If the plaintiffs are successful, it could lead to a wave of further lawsuits against other airlines that have acted in a similar way during the pandemic.
Jetstar, however, stresses that it has taken measures to accommodate customers. For example, the expiry date for the Covid vouchers issued has been removed and the vouchers can be used multiple times and for multiple bookings. Nevertheless, criticism remains that many customers would have preferred a refund rather than a voucher, especially at a time when there was great uncertainty about future travel.
The practice of refusing refunds and issuing vouchers instead is a controversial issue not only in Australia but worldwide. Many airlines have faced similar allegations as they refused to comply with legal obligations and instead tried to minimise their financial losses. In Jetstar's case, this was exacerbated by the fact that the company remained profitable despite the decline in passenger numbers and the difficult market conditions.
The role of litigation funding
The case against Jetstar is being funded by Court House Capital, a litigation funder that specialises in such cases. Funding from an outside player such as Court House Capital allows plaintiffs to take action against a large company such as Jetstar without having to bear the high costs of litigation themselves. This is particularly important in class action cases, as these are often lengthy and costly.
Court House Capital sees the lawsuit against Jetstar as an opportunity to ensure justice and strengthen consumer rights. However, it could pose a significant financial and reputational risk to Jetstar, particularly as the airline has previously been criticized for its conduct during the pandemic.
Despite the current challenges, Jetstar is in good financial shape. The airline increased its profit before tax by 2023% in the first half of 84, driven by strong demand for travel and effective cost control. With a fleet of 83 aircraft and a global reach, Jetstar remains a central figure in the Australian and international travel industry.
But the outcome of this lawsuit could affect the future of Jetstar and potentially the entire Qantas group. If the lawsuit is successful, it could not only result in significant compensation payments, but also permanently damage customer trust in the brand.
At a time when consumer rights are becoming increasingly important and corporate transparency is in focus, the Jetstar case may go down in history as a precedent for how airlines treat their customers in times of crisis.
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