Qantas Airways Ltd. was served with a class-action lawsuit by lawyers who allege the airline failed to refund passengers for flights cancelled during the pandemic and illegally benefited by retaining billion of dollars of customer funds.

By instead issuing flight credits with strict conditions of travel, the Australian airline enriched itself with interest-free financing at customers’ expense, according to a lawsuit filed in Federal Court last week by Echo Law and served on Qantas on Monday. Qantas said in a statement that it rejects the claims.

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Fares have soared since Covid travel restrictions eased, forcing customers to pay more than the value of their credits for fresh flights, said Echo law partner Andrew Paull. The airline has pressured passengers to redeem their vouchers or lose the credits entirely, Paull said. The lawsuit is seeking refunds for all remaining credits and compensation for the years that customers have been out of pocket.

The claim raise questions about the function “- and legality “- of travel credits lingering on airline balance sheets around the world. Qantas is this week set to report record annual profit after demand for travel jumped following the pandemic.

Qantas racked up some $1.3 billion in Covid-related travel credits. Last month it encouraged passengers to use up the remaining A$400 million of credits, offering double the normal number of loyalty points for bookings made with the vouchers before the end of July.

In its statement, Qantas said most customers with Covid-era credits can get their money back and the value of these refunds has surpassed A$1 billion. “Qantas has one of the most flexible Covid credit policies of any airline, including among our global peers, and we’ve extended the expiry dates three times,” it said.

For the year to 30 June, the Australian carrier forecasted an underlying pre-tax profit of between $1.6-1.65 billion, a significant swing from the A$1.86 billion underlying loss in the 2022 fiscal year.

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